Keeping the Con in ‘e-CON-omics’

Brexit, as predicted by all experts that ‘Leave’ campaigners urged us to ignore, is pushing the UK into another recession and intensifying financial uncertainty all round.

What was not predicted, but should not come as too much of a surprise, is that the establishment has come out to ensure that in or out of the EU, it is the wealthy elite who will be protected, and everyone else (having been told we would “get our country back”) will bear the consequence.

The priority as ever is to help the banks make money, and promises for more deregulation have quickly been made to enable them to lend more money profitably – allegedly to revive the economy. But in the same speech in which he announced this move, the Governor of the Bank of England remarked that there was already too much debt around. It’s inescapable that when people have borrowed too much money and cannot pay it back, it will lead to a major banking crisis – as happened in 2008, and before that in the 1930s. In fact, it was because of the irresponsibility of the banking sector that was exposed in the 1930s that prompted subsequent banking regulation to stop banks over-lending to borrowers who could not pay the money back. In the 1980s, the banking sector, with the help of free market ideologues, rolled back these regulatory constraints and was able once again to use savers’ money as leverage in lending out to unreliable borrowers. When bad debts piled up, the banks asked governments to bail them out. And now we’re in for more deregulation, more bad debts, and before long, another banking fiasco.

The real reason the economy is stalling has little to do with lending. A mass production-consumption process can only be sustained if there are lots of people producing goods and services, and getting paid enough to purchase those goods and services. When more and more people are not getting paid work, only getting it at below-subsistence rates, or are ‘in work’ in name only because they are made redundant and told to register as ‘self-employed’, then there is a growing surplus of goods and services without the funded demand to match them. Recession thus ensues.

If only the people running corporations will pay their workers better, and support public investment that creates jobs and improves society’s infrastructure, then there will be more commercial transactions and prosperity will be generally enhanced. Unfortunately, most firms think they can leave others to pay workers enough to maintain the demand side. The end result is that the ‘efficiency’ drive of each comes together as the impoverishment of all.

Governments need to step in when individuals pursue options that undermine society. And the new UK Prime Minister, Theresa May, has spoken about her intention to pursue an inclusive approach reminiscent of that of the former Labour leader, Ed Miliband, namely, to run the country “not for the privileged few, but for every one of us”. But we’re all familiar with how politicians on the right use progressive language to mask their divisive policies. It would be a belated, but nonetheless welcome, change if May should prove genuine in seeking to curb corporate powers and put workers on the boards of businesses.

In the meantime, amidst the economic chaos that has been unleashed, we can only assume that when the goings get tough, the con will just keep going.