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The recession is a really good time to increase profits?

Lord Young, one of Thatcher’s Business ministers, got himself sacked 10 years ago when he made a deeply callous and insensitive remark. He has obviously not lost the knack because he’s just been reported making comments again of similar ilk. Reminiscent of Jo Moore sending round an email on the day of 9/11 which said “today might be a good day to bury bad news”, Lord Young circulated his message that a recession was a good time to increase profits.

Apart from the offensive distastefulness of trading profits on other people’s misery, Young has really let the cat out of the bag about the government’s motives for the austerity programme. It has always been difficult to explain why Osborne & co. have persisted with a programme of semi-permanent stagnation when it was manifestly failing. Young has given us a clue that suggests that in the last analysis this is not a deficit reduction policy at all. Its real target is not only shrinking the State and squeezing the public sector into the farthest recesses of a fully privatised regime, it’s also to push down wages so far that it creates a bonanza for profits.

In the era of neoliberal capitalism since the early 1980s the policy has worked well. The share of wages in GDP has steadily fallen from 65% to just 52% in the early 2010s. It is now being taken further: the freeze on public sector pay over the last 3 years has led to a real terms cut in wages of some 7%. But what Lord Young has exposed is that this is not just an unfortunate consequence of fiscal consolidation, it is deliberate government policy now being ruthlessly driven through for a valuable outcome in its own right – soaring profits. Germany did this, it’s argued, to secure its industrial and economic supremacy, so why not impose the same discipline on Britain?

Welfare – to give the social security system the name the Tories have now poisoned – was chosen as an easy, soft target. Osborne has now realised he made a major mistake at the outset in hacking back capital investment. He’s now restoring some of those lost investment opportunities and raiding the welfare budget mercilessly to fund them. Quite apart from the sheer heartlessness in treating the livelihood of the most vulnerable sectors in society as a convenient piggy bank to be raided with impunity, it is also a policy ultimately doomed to failure because it strips demand out of the economy and reinforces stagnation. The policy will end in devouring itself: the problem is, how many millions will it have damaged and victimised in the process?

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