What’s Different About Today’s Government Deficit and Debt?
As of today, the U.S. government’s current deficit and debt are indeed currently at unprecedented levels for peacetime—once we account for them appropriately.
3 min read
From the Financial Times:
By John Monks | Published: October 2 2008 18:43
At its congress in Seville in 2007, the European Trade Union Confederation resolved to expose “casino capitalism” and short-termism and press for them to be fought by taxation, regulation and worker involvement. Now, as the subprime crisis unravels around the world, casino capitalism has exposed itself. Everyone is learning that a powerful financial sector has crowded out other industries and made the economy dependent on short-term, fast buck-making deals that are rarely in the interest of sustainable business or improved long-term growth.
Today’s dark economic reality has exposed the financial world’s claims to have increased world liquidity and reduced investment risk. Decision-making has centred on personal enrichment and even now, with honourable exceptions, most of those responsible have ensured that they will not be the ones to suffer the consequences.
There is absolutely no evidence that these huge fortunes have been linked to record levels of company or business performance. Top business leaders have grabbed a larger share of the cake themselves. The “trickle down” effect peters out very quickly as you descend the income ladder. The share of wages and salaries in national income in many countries has fallen sharply in the past 30 years while the already affluent are taking larger shares of the slice that goes to wages and salaries.
This is not a story of trade union success. We have not been able to prevent this transfer of money from the ordinary to the very affluent. We have, in Europe at least (but not in the US), generally improved average living standards. But we are losing the equality battle. Now is the time to expose the titans of the world based in New York, London and other major financial centres, who have patronised us with the message that there is no alternative to a world run by Goldman Sachs and the others.
To express even mild doubts about the way the system was developing was to invite, from City of London financiers and leading UK ministers alike, the accusation of being incorrigibly Old Labour. To question executive pay in Wall Street and the City invited the accusation of stirring the politics of envy. An excellent Trades Union Congress paper answers these points and exposes the Bourbon-style carelessness about others that was on display in City boardrooms and trading floors.
But make no mistake, just as 1979 was a turning point for British trade unions when the accusations of over-mighty unions stuck in the public mind to devastating political effect, so will 2008 be seen as a turning point for those in the banking system who have contributed to the present mess.
In the London declaration on the crisis, issued by European trade union leaders last weekend, we are urging that publicly funded bail-outs should carry with them public influence and, if necessary, control. We want banks to have higher capital requirements and we must end the “off balance sheet practices” that developed to avoid regulation and tax. How was that allowed to happen by the authorities? We are calling, too, for a European-level response to be developed urgently before national rescue plans such as the one announced in Ireland become “beggar thy neighbour” schemes.
From a trade union point of view, we know the risks of inflation as much as anyone else. We have been experiencing cuts in purchasing power due to the rising prices of energy and food. But real wage growth in Europe has been moderate and limited, often lagging behind prices, economic growth and productivity. Germany has been a striking example since 2000.
This is why we will not be deterred by present circumstances from looking for a better deal for the working people of Europe. In the 1930s, wages were cut and reinforced deflation with disastrous consequences. We are now looking for a boost to growth through lower interest rates and public investment. We cannot tolerate rising levels of poverty and inequality.
The golden age for the rich should end. Those who have led us into this mess must pay heavily towards the price of recovery. At the moment, to take one example, the bill for each UK taxpayer for bank rescues is around £5,500 and rising. The message to those taxpayers and those in other countries affected must be “never again”. Our system must be rebalanced towards financial institutions providing capital for productive investments in sustainable development and towards greater equality.
The writer is general secretary of the European Trade Union Confederation.