- Owen Thomas Webb
This is not a Financial Crisis —This is a crisis of economics
Illustrations by Megan Le Brocq
We are amid a crisis of economics. To make the first step towards understanding the crisis of our time, we must understand that this is not a financial crisis; it is a crisis of altogether greater proportions. In the UK we are now enduring a crisis in two ways. The first and foremost of these is a crisis of availability of housing, which is scarce and, in many cases, decaying right in front of tenants’ eyes, and the second is a scarcity of useful fuel for heat and transport. These are economic problems, and they cannot be fixed by the technical tweaks around the edges which our government is offering us as an answer.
Beginning with the basics: what is economics? And what defines an economic crisis? Economics refers to the practical, day to day subsistence of a society. Economics can be defined as including matters such as population growth and demographics, the housing and feeding of that population, and the industries which interconnect to do those things – most notably agriculture, trade, construction firms and material suppliers. Crucially, there is also the relationship between these industries and the state, which gives direction and oversight to economics, and in an ideal world prioritizes the public as the primary beneficiary of economics. This is a list of examples with which I intend to show the importance that the word ‘economics’ carries with it, as well as the nature of economics as a practical matter that directly impacts individuals within a society profoundly. The impact of an economic crisis is that a society does not have the means and resources to exist on a given day the same way as it did the day before, and so quality of life is eroded. This is economics.
Finances are a different matter altogether. In this case, finance is only relevant to the extent that it reflects the apparent economic breakdown that occurs in a society. The state of finance in the United Kingdom, with ten per cent inflation and rising interest rates the most notable features of the year so far, is connected to corporations using the crisis of economics overseas to raise prices and create a larger profit margin which is demonstrated to be a fact by the reported record profits of Shell and other energy corporations. It is also connected to state policies which encourage profit at the expense of the public. These policies are technical, such as those recently announced by the new government. They are not practical.
In response to record corporate profit, the present government has offered tweaks and balances in the form of an uncompromising financial policy: taxes are lowered, resulting in a direct cut in funds to the National Health Service of an estimated thirteen billion annually; bankers’ bonuses will no longer be limited; and an estimated one hundred and thirty billion pounds are to be sent direct-debit as tribute to energy companies, to compensate them for their profits being limited by a consumer price cap. This is an insistent affirmation by the government that we are enduring a financial crisis. Furthermore, they believe that the resolution to this is a reduction of the amount of money possessed by the state, achieved through the lowering of taxes and encouraging the public to spend more of their money by limiting the cost of living. In practice, this moves the problem, but it does not resolve it.
With the announcement of the restructured tax policy, the new government implied that the ‘orthodoxy’ of wealth redistribution was no longer financial orthodoxy at all, and that the recovery of the economy would be carried out by wealthy people with more money to spend and plenty of encouragement to spend it. This most certainly is no change in the orthodoxy, but the orthodoxy was never the redistribution of wealth from the top half to the lower half of an unequal society. Instead, it was an orthodoxy of redistributing wealth upwards, benefitting the corporation at the cost of the public and the state, the eventual impact of which is necessities becoming unaffordable to gradually more and more people. This government loves orthodoxy, which is exactly why they are explicitly paying corporations billions of pounds in an offering intended to temporarily placate them, but nothing is being done to permanently subdue their profit motive. On the contrary, now they know that this government is perfectly happy to give them their profit for free.
We are not amid a financial crisis, as per the sub-prime mortgage crisis of fifteen years ago. This is much more serious. The sub-prime mortgage crisis, perhaps better known as the Wall Street crash, occurred because of a speculative bubble in the housing market which raised house prices as a result of too-good-to-be-true mortgages being offered at a higher rate than people or banks could actually pay for them, which resulted in enormous amounts of value in housing being wiped out when the speculative bubble burst, The point that I come to with this comparison, is that a financial crash strictly speaking refers to a crisis of the value of money relative to a product, but an economic crisis refers to a shortage of a product crucial to the workings of society, which materially changes the efficiency and quality of life of a society, and technocratic, financialist solutions will be useless in the long run.
For people who still cannot heat their homes, transport themselves to work, or find a home in the first place, the crises of today are existential crises. In our society, in which it is necessary that one has access to monthly income in order to live at all, these problems demonstrate a complete breakdown of our system and way of life. It is increasingly becoming obvious that it will not work at all a few years from now if the present scarcity, real or unreal, continues to exist, and no amount of tax cuts or bankers’ bonuses will fix that.