Saturday, 24 January 2015

QE not the answer

Until recently, it was deemed essential for every pupil attending state schools in the UK to know about the factors leading to the rise of Nazism in Germany, before they decided on their optional examination subjects, whilst those choosing History as one of their GCSE subjects clearly had to be given the choice to study, in more depth of course, the rise of Hitler. As a consequence of this, information about the frenzied printing of paper money in Weimar Germany in 1923 increasing the amount of money in circulation, and the resulting hyper-inflation is now well known. If facts like workers being paid twice a day, prices doubling overnight, entire savings being lost, money becoming entirely worthless and a new currency, the Rentenmark, having to be introduced in 1924, are well remembered in this country, imagine how they must have been drummed into the memories of German children. At least, this is the impression we have, so strong have German objections been to solving European economic problems with the 21st century`s version of keeping the printing presses rolling 24 hours a day, quantitative easing. Instead of sensibly using the idea of "parachuting" money into the economy, a measure which could be much more effectively controlled now than ninety years ago, European politicians have resorted to the harsh measures of austerity, hurting the most vunerable in our societies the most, and punishing those responsible for the economic crash the least. 
      However, faced with the prospect of Europe-wide deflation on the one hand, and the election of left-wing anti-austerity parties like Syriza in Greece, and possibly Podemos in Spain, on the other, the ECB is apparently being allowed, in the words of the Financial Times, to "unveil a programme of mass bond-buying next week". Hopefully, obvious lessons will have been learned from the UK, where the £375bn of QE which went to the banks early on in the coalition`s tenure did nothing to benefit the British economy or change the banking culture, was not loaned out to businesses as intended, and probably contributed instead to obscenely high salaries and bonuses.
       Isn`t it typical of the way the world`s economies are controlled by the politicians` capitalist paymasters that the callous and cruel cuts of austerity are seen as the first step, and QE the second, on the road to what they see as economic recovery? Isn`t it ironic, too, that there is an alternative method in existence, one that has been in practice to some extent at least, in Germany, of all places?
       Rather than running the risk of QE simply filling up the overflowing coffers of banks and big business, the UK would be well advised to follow the example set by post-war Germany, where instead of the government being intent on reducing trade union rights, it allows co-determination, which involves union representation in the running of companies, a role which involves setting pay levels for all employees. In Germany, with an unemployment rate similar to that of the UK, the number of people in work has reached a record high, but unlike here, tax receipts have increased. The federal budget has been balanced, planned borrowing has been cancelled and old debts  paid off. Tax revenues climbed to 270.8bn euros last year, about 2.6bn higher than forecast!
      The need for this country to have a sensible pay structure, starting with a minimum wage sufficiently high as to warrant the payment of more tax, and which enables working families to enjoy life without having to resort to housing and other benefits, is obvious. There is also the requirement for an efficient system whereby employers are properly punished for failing to pay this increased minimum wage, instead of measly fines like the £1400 imposed on H&M and other prosperous firms, recently. The Labour party is pledging an £8 an hour minimum wage by 2020, but that doesn`t deal with the immediate problem. With a large increase now, there would be much less need for the austerity-inspired cuts which most of our political parties have in store for us, especially if allied to these proposals was the restoration of all jobs lost at HMRC under the present government, and the addition of  a thousand more to tackle what Margaret Hodge describes as the tax avoidance "industry", currently costing the country around £35bn a year.
      I`m sure QE could solve most of Europe`s financial problems if used sensibly, but the likelihood of that happening is unlikely. Far better to concentrate on increasing the spending power of those more likely to part company with their money, whilst setting limits on the incomes of those being paid obscene amounts, including CEOs,bankers and private landlords.The result could well be a flourishing economy, and a society well on the way to returning to something at least resembling one based on justice and fairness.
Naturally, I`m not holding my breath!


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