Home > Main Blog - General > How the “Third Way” screwed the World.

How the “Third Way” screwed the World.

After the 1940s when Allied troops won a victory over fascism, with the loss of millions of lives, the capitalist system tself faced a crisis. It was no longer politically acceptable to have Soldiers return home to face abject poverty. In the United Kingdom, the first Labour Government was elected on a promise of homes for heroes. They delivered a National Health Service, unemployment benefits and widespread decent Local Authority Housing. LBJ did the same in America, with benefits for orphans and widows.

Those elements of support saved the capitalist system. It also introduced a mindset into Government. Government was not just there to spend money on war. Government also had to protect the people it served from the deprivations of poverty and ignorance.

That consensus continued throughout the 1960’s and 70’s. It was smashed in the 1980’s.

Public expenditure became bad. Private was good. The Republicans suddenly found Hayek and Friedman and ran with a prostituted bastardised version of their teachings. The Laffer curve, invented on the back of a hankie, produced a mentality that if there was a tax – cut it. The more boring long winded version of there are optimum levels of taxation got ignored. Tax cuts were not a means of running the economy, nor were they any longer a means for redistribution of wealth, they were an end in them self.

Laws affecting business were also deemed bad. Years of laws designed to protect the consumer were sacrificed on the alter of deregulation.

The Republicans were however especially awful at controlling public expenditure. In order to ensure that they would be elected, after alienating many of the Government officials, branded pen pushers, that they would lay waste to, they needed a new audience. They found the Christian right. They set about bankrupting the economies of the USSR by upping the Arms race and the Space race. In addition, after having introduced cocaine in a massive way to the club scenes and crack to the streets, in order to pay for an illegal war in Nicaragua, they then introduced a war on drugs.

These new wars would have bankrupted any previous President. Wall Street was however convinced that fiscal policy no longer mattered, monetary policy was all that counted.

Pay was not rising, but imports were cheap, so those in work felt better off.

When growth started to happen in the US, few Republicans associated that growth with good old Keynes, despite massive increases in expenditure caused by the wars against everything. It was according to them, success on monetary policy.

Everyone could be a part of the new American dream. Those not in work became worthless. They were welfare queens. They did not need to work because we were told, they were better off on benefits. Mums dropped babies to stay on benefits. The men all just smoked weed and crack. Welfare was demonised.

The 1980s did lead to growth in many areas. Mainly the economy acting as a service industry. The Anglo American model was deemed to be dead. It would be far better for the UK and US to specialise in financial services and retail. The great money markets would provide. Old heavy industry could go the way of the dodo. If you questioned this you were a modern day Luddite.

Still there was that little thing of the deficit. Reagan started highlighting the UK, which had adopted much of the monetarist approach to economics. Scotland and the North of England had bene laid waste to massive unemployment as a result of the UK Government allowing whole Industries, especially coal, to die. However the South and South East were in a boom on the back of a newly connected International City.

“Popular capitalism” had arrived in the UK. Anyone and everyone was encouraged to buy shares. Council houses were sold at a heavy discount. Working people felt richer. Pay was also increasing unlike in the US.

The fact that the UK was benefiting from an American boom was of course not relevant to the UK success story. Even today, its economy is tied up, not in Europe, but in the US.

Of course none of that mattered, the small builder, plumber, painter, was making “loadsofmoney”.

It took a small little, unnoticed kick to finally remove the element of opportunity from this new monetarist dream. So small, it was hardly noticed. It also took “softer” less harsh leaders to do it. Quite simply because neither Thatcher or Reagan could have got away with doing it.

Clinton, then Major removed property prices from the inflation index. Of course there was a sensible reason why. You only buy one property.

When the dot com bubble collapsed investment funds transferred to property. In the UK “Buy to Let” was encouraged by the banks as a way of getting a tenant to pay for your pension.

House prices rose at an exponential rate. Unlike the 80s, because they were no longer part of the inflation index, that element of inflation no longer needed to be controlled. Interest rates could be kept low.Of course, that element of pay negotiation was also removed. What did it matter, you could buy a 4×4 on the back of your new found wealth.

It took a Democratic President to cut unemployment insurance in the States. It took the newly elected Labour Government to do it in the UK. The Welfare Queen argument had been adopted by the “left”.

All of those who brought their houses in the early 90s were suddenly feeling richer. The fact that their pay had not gone up did not matter. They could buy their new car on the back of the equity that they had earnt by remortgaging. The debt did not matter. US fiscal policy had become personal fiscal policy.

First time buyers were being excluded from the market. The salary multiples on mortgages no longer worked. So mortgages were repackaged. They were to be sold on how much they cost each month. The 3 x salary calculation become a side issue. The fact it was still on forms – do not worry about that. These loans became known as self certified, or sub-prime. So new people could feed the growing market and those who got on the ladder could feel richer.

Pay on both sides of the Atlantic did not increase. What matter, we all had more equity,

Then the collapse came. No-one knew how many of these loans were valid. The poor became blamed for signing up to them. Despite having been told this was the right thing to do. The banks who encouraged this got the bail out, the people who could not pay got shafted. They were guilty because they lied. It sounds like the welfare queen shit all over again.

Now we have the new model of Social Security being delivered as part of the US health care package. A family on $54,000 will “only” have to find $10,000 to pay their $20,000 insurance bill (plus co-pays etc etc). The family on $54,050 will have to find $20,000. So I would love to give you a pay rise this year, but as it will make you worse off I can not.

It took the “new left”, whoever the fuck they were to shaft working people. And I am sorry if you did not get on the ladder in the 80’s there is no way you are getting on it now. Those rungs have been removed and will never come back.

Nice to know that house prices are starting to go up again, the poor had billions taken from them to pay for shit “affordable housing” and then had their money taken again to keep those house prices unaffordable. Also nice to know Google made $2 billion and is not paying a $1 in tax.

Also nice to know it is a Democratic Government in the US and a Labour Government in the UK proposing savage cuts to Social Security programmes and again, far far more savage than a right wing admin could have got away with. All to pay for the banks that sold us this shit.

Be nice, as google says.

Categories: Main Blog - General
  1. David Lee
    December 22, 2009 at 2:34 pm

    Great post..!!

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