Tuesday, August 07, 2012

The economic living dead: misery of the middle earners.


Where is the anger?  Where is the resistance? Five years into the worst economic crisis since the 1930s and earnings – apart from those of the top ten percent - have fallen year on year. A raft of studies has shown that ordinary families in Britain are suffering the longest squeeze in living memory, yet the streets are quiet, there are no barricades, no factory occupations. People have been voting, if they vote at all, for the established political parties. The Left and even the far Right have never been more marginal, at least in Britain..

Ed Miliband isn't offering any radical alternative to austerity, just slightly slower cuts. Francois Hollande, the new socialist President in France, who calls himself “Mr Normal”, is actually promising greater austerity. He says he will legislate for a balanced budget in France by 2017, in a country that hasn't had a balanced budget since the 1960s. Here in Scotland, the Scottish National Party is promising oil-fuelled growth and better public services but its leader, Alex Salmond, is behaving increasingly like an economic conservative.

As for popular resistance, all we have seen so far are token stoppages like the rather damp demonstration by civil service workers in defence of their pensions – pensions which of course are denied to the vast majority of workers in the private sector. But closing a few libraries and museums isn't exactly a red revolution. Last year, the Occupy movement, inspired by the Arab Spring, seemed to be building some kind of international movement against global capitalism, but the tented communities that sprang up in Wall Street, St Paul's and in Edinburgh's financial district have moved on.

But the inequalities of wealth that motivated Occupy – the 99% as they called themselves - are as real as ever. According to the Sunday Times Rich List, published last week, the top 1,000 wealthiest people in Britain now own a combined £414 billion, equal to a third of the National Debt. The top 1% of earners in Britain syphon 15% of national income, a figure that has doubled in 30 years thanks to lower income tax. Down at the other end of the salary scale, the bottom ten percent 10% saw their real earnings fall by 4.1% last year, according to an analysis last week by the TUC. This is because inflation is worse for those on the margins. The rate of inflation in essentials like foods and fuel is around 6%, whereas if you're buying flat screen televisions, computers or air travel prices are actually falling. Whoopee!


Perhaps the lesson from the Great Recession is the extent to which people will simply put up and shut up. We have an astonishing ability to make do, improvise, suck up misfortune and swallow it down. Some have been finding ways to make money on the side. In 2010 the Treasury said that it had “lost” £42 billion in the “black” economy – much of it unpaid VAT from your local cash-in-hand builders, or cleaners or childminders. But it's hard to believe that many people living on Scotland's housing estates are squirrelling away significant cash, apart perhaps from the drug dealers and prostitutes.

Most of the unemployed and very low paid just bump along the bottom in a miserable and debilitating welfare dependency. The average earnings of the bottom 10% in Britain are around £5,000, but with things like housing benefit, tax credits, child support these people are able to survive, just.   In fact, according to the independent Resolution Foundation, it is the low to middle income earners – those with between £13,000 and £29,000 – who have been most seriously hit by the recession and increasingly they don't get significant state support.

Britain hangs together largely because a kind unequal redistribution of wealth – not from the rich to the poor, but from the modest middle classes to those on the very bottom who would be destitute were it not for benefits, free health care, pensions and the rest of the social safety net which costs around $190bn a year. The relatively well off have managed to escape these social costs thanks to low taxation since the Thatcher budgets in the 1980s What is happening instead is the gradual erosion of the relative advantage of the employed lower middle classes who are having to work longer hours for poorer wages.

Instead of expecting year on year improvements in living standards for themselves and their children, the employed classes are now becoming inured to the opposite. Their struggle to maintain a decent standard of living for their families is the real story of this recession. Many are among the so called “zombie” households - the millions who have mortgages they cannot really afford but who cannot afford to sell out because of negative equity. Many are only hanging on to their homes thanks to low interest rates and the forbearance of the mortgage lenders.

It's not the kind of story that creates political campaigns, makes great television or inspires novelists - but it is the story of our times. And things aren't going to change in the medium term. The long boom that burst after Northern Rock collapsed in 2007 was fuelled by debt based on illusory property values.  These debts have to be paid and they will not, of course, be paid by the people who created the debt society: the very rich who can move their money around the world. Nor will it be paid, as in the 1970s, by the manual working class, which has largely ceased to exist in Britain. It will be paid instead by the lower employed classes who typically work in retail, offices, health an service industries. Mostly under forty, these households will pay through income stagnation, through taxation and through inflation, which itself is really a kind of super tax on the savings and earnings of ordinary families.

They are the economic living dead, staggering on without much hope of improvement for themselves or their children. They aren't organised in trades unions, don't take much interest in politics and can't afford to go out on strike because of their mortgages. They have no faith in, or experience of collective action, and look with derision on people who think that sleeping in tents can change the world. They do not rise up, or go to the barricades, they retreat into themselves, conserving energy for the day to day struggle. For the zombie middle classes there will be no cathartic eruption, no big bang – just a very long and miserable whimper.  

1 comment:

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