Thursday, November 21, 2013

The English Moneyed-Class Are Just Plain Mean

Another small raise in the UK's minimum-tax threshold is insufficient medicine to be certain, and yet, still there are backbenchers whinging.

I was explaining to my eldest teenage daughter (who is studying IB Econ), why, in my opinion, I thought the UK Upper classes were rather mean-spirited - certainly more than their continental neighbors, case-in-point being the NHS's meagre funding relative to European healthcare systems. Ignoring historical precedents (from Enclosure onwards), my argument was that the roughly 9% of GDP that the UK spends upon healthcare (including "private" spend) reflects NOT some greater efficiency of the NHS, or some more-sensibly-organized structure, nor the superior health of the British population, but the conscious decision by the ruling class to Grinchingly restrict expenditure for the great unwashed, resulting in rationed dubious-quality services, over-stretched insfrastructure, insufficient systemic investment, and the absence of any portability of choice.  It is restricted to such a degree that the differences are palpably visible in the resulting population longevity figures and the elevated UK hospital mortality probabilities (adjusted for all systemic differences) that greatly exceed those within any peer nations, to the point that I am scared witless of getting sick in this country. By cintrast, I explained, the continent is clustered at healthcare GDP spends of 12-14%. All have universal basic coverage. All have - if not single-payor models - models mutuals or not-for-profits in which payor (or payors) essentially just carve-up similar cross-sections of entire risk-pool, resulting in uniform pricing, quality, and access. They share (unlike the NHS, and contrary to US wing-nut belief) reasonably free markets in service provision, do not ration services, and, in what was the keystone of my point, grant the less well-off essentially the same privilege as the better-off. In other words, they eat their own proverbial cooking. While this is paid for by working peoples' own social insurance contributions, there is, inevitably, a financing gap that must be filled by "those who can" paying for "those who can't" - something that the UK ruling class is apparently allergic to, but which the stoic nature of her working peoples accept with apparent  resignation, confirming both the mean-spiritedness of "those who have", and the passive nature of the great majority of Brits who - it must be pointed out - haven't revolted for 900 years, and with ubiquitious Beer and BSKYB, appear as unlikely as ever to take to the street en masse anytime soon.

The following day, my thesis was confirmed again by Nick Clegg's proposal to raise the threshold after which income tax is levied by GBP500 from  it's present GBP10,000 and the uncharitable grumbling from backbenchers.  Not that this gesture is in any way bad, for it is more generous than before, but it resembles throwing a few pennies in a busker's guitar case. My thesis is more confirmed by the presence of any income tax at all levied upon the lower quantile earners at anything remotely like the levels indicated, given the omnipresence of regressive council taxes, regressive VAT, regressive fuel taxes, regressive pecuniary taxes (road tax, TV license etc.) and little to no subsidy upon public transport and regressive implied taxes on electricity and gas via de facto privatisation surcharges masquerading as minimium ROIs - all which must be met through after-tax earnings. Libertarians (as well as high-earners and rentiers) will counter with arguments talking about "skin-in-the-game for everyone", or the top taxpayers already pay most of the tax, and so forth, as if the regressive contributions of the aforementioned were anything but painful skin-in-the-game contributions.  Moreover, National Insurance contributions are already levied directly, and fund, at least partially in proportion to what earns, some of the benefits that might be derived from the State, but what possible argument can there be to lay claim to the few farthings they earn in a world where GINIs are rising inexorably, reflecting an increase in an already skewed distribution of income?

With GDP and aggregate income rising, but the median real incomes stagnating and bottom quantiles falling, income taxes upon the lower quantiles increasingly look like attempts to squeeze proverbial blood from a stone  whilst the upper quantile continues to fatten itself with unprecedented speed and gluttony - BOTH at income AND wealth levels, the latter resulting from accelerating asset-price appreciation windfalls.   The result is exemplified in the Yellow Pages thick "How To Spend It" insert in the Financial Times, at the same time as High Streets across the nation shutter-up reflecting the maldistribution, and Lidl pinches financially-challenged customers from already-downmarket Wm Morrison's. Observers watch the top quantile's tumor-like growth in shares of both income and wealth, and unable or unwilling to respond to that critically threatening the circulation to the national body, as spending power continues to concentrate apace, and wealth eddies similarly thereby starving the economy of monetary circulation that historically resulted from more equal distributions of income. And yet, still, despite the aggregate numbers visible to all regarding the distribution of wealth, the top quantile mean-spiritedly decry higher levels of taxation, or windfall taxes upon their luck of being asset owners in a time of extreme asset-price appreciation.

There are those that will suggest it is the others' fault. They have been lazy. They could have worked harder. That their gains are through the harder-work, study and cunning blah blah blah. And while this may possibly ring true in any individual situation, it is almost certainly the inexorable forces of globalization at the aggregate level which are driving real wages lower at the same time as the cost of living is vaulting higher, just as there are huge elements of luck in the musical chairs of who - mostly by virtue of birth - at this moment so happens to be the larger marginal owner of assets. Certainly there are those that have "risked well" to borrow and buy assets (and who would have been subject to ruin and penury were things to have gone otherwise) just as there are, and will always be lazy shits and dole cheats. But I am talking aggregates, and generally, the problem remains: insufficient spending power  in the lower 50% (mostly through no fault of their own) and increasingly stingy owners of and beneficiaries from wealth at the top, unwilling to part with, or accept responsibility for, the health of the body as a whole. One might argue that the Lord of the Manor today, with dominion over the same estate, has far less obligation and far fewer responsibilities for the less fortunate than dominion over the same would have entailed in times past.  In modernity, it seems, we have truly institutionalized the privatization of the gains while socializing the costs, to such an extent that public discussion to pragmatically address the problem (and make no mistake, it is a problem for the Public Interest) is virtually impossible.

The consensus within the UK's sibling social democracies across northern europe - while not solving the problem - shames Britain by their willingness to look the issues in the proverbial eye, and make attempts to address the problems. Certainly, angst remains across the developed nations, for the stresses upon society resulting from globalization are universal, often resulting in a resurgent right-wing of angry white dudes - who were accustomed to relatively comfortable living wages, and at the very least, some stability, but who have been, or are currently now being sorely squeezed, and it is unsettling. The "angry white dudes" have likely always been present within populations. The risk (for everyone) is that if the problems are not addressed with consensus, demagogic solutions arise that risk inflicting deeper fractures upon the polity with graver economic consequences.  The UK ruling class has chosen to respond to this threat by empty words, hypocrisy, and few pennies to the busker. But more profoundly innovative policy needs to be contemplated on pragmatic and non-partisan levels in order to prevent present and further mal-distribution from killing the patient. Such mortality could occur via several avenues (via continued macroeconomic muddling) that eventually goes ka-boom, via further political shifts to the extreme right, or on the tail of the distribution of outcomes, by ugliness from the increasingly-numerous on the margins. Nine-hundred years, after all, is a very, very, long time to go without some form of revolution...


Anonymous said...

Why you don't consider the events of 1689 when you say there hasn't been a revolution in 900 years? It's normally referred to as a revolution and it would seem to qualify to me.

Patrick Cheenne said...

Dear Oliver,
I fully subscribe to your views on the NHS and the UK's social disconnect - within my limited anglophile empathy - but my continental (Europe) view is more globally pessimistic. I guess there are stages in social collapse, but I guess each social fabric dissolves in ways that are specific to its constitution. Symptoms may seem different, more or less serious, but we globally face the same issues and fate: we burn and destroy resources too quickly to feed spots of double digit growth, and deprive the rest of our species from basic supplies. There is seemingly a non-linear correlation between the two that tends to accelerate over time.

Our ruling class(es) used financial deregulation the way our ancestors would burn bushes to clear and fertilize the ground. The problem, yet again, is that the soil is turning less fertile pretty rapidly and we have to burn more bushes, each time at an unprecedented scale - there is a metaphor on QE here. Until we change that, stock market, debts and derivatives wildfires will push ahead and fertilize more future deserts; we'll see if they get scary enough for our ruling class(es) to evolve or as you noted, if they need see shadows of spears and forks jiggle before it to realize how big that fire is.
Yours truly,

"Cassandra" said...

I am not Historian but it would nonethless seem to me that the ousting of James-2 was halfway between a coup d'etat and a friendly invasion. It appears to have been an elite-engineered swap of one regent for another. It did not (to my reading) appear to be a veritable revolution of the archetypical kind - a rising up of the majority against the tyranny of a minority (be they peasant, workers, or, colonists, as the case may be).

The Newton rebellion of 1607 is perhaps the closest thing to an archetypical revolution that I can find though it too appears little more than an uprising (though I am no expert...)

Anonymous said...

The conditions on which William took the throne were very different from that of James 2. James 2 was an absolute monarch in a country that would no longer accept this, whereas William was very clearly offered the throne only as a constitutional monarch with powers restricted by the Bill of Rights and the Claim of Rights.

There is also the religious aspect as James 2 was close to the French establishment, an fellow subscriber to the absolutist ruler theory and a barely-concealed Catholic who openly favoured Catholics and installed them into senior positions the army where they had been absolutely banned only a few years before. He was overthrown by the majority of the population who were Protestant and feared he was going to use this standing army to pull off something like the St Bartholomew's day massacre which had only recently happened in France.

That's why the revolution is sometimes referred to as the 'Glorious' revolution as there was so much popular support for it outside the elites and it resulted in little bloodshed. Of course, in Ireland where Protestants were in the minority it was very bloody indeed and not at all glorious.

Anonymous said...

Doh! I didn't mean the St Bartholomew’s day massacre. I meant the revocation of the edict of Nantes...