Friday, September 05, 2008

British Social Fabric Threatened by "Credit Crunch".

The term "credit crunch" is used loosely to describe an economic downturn, that might become a full-blown recession, and which indeed is linked in part to a shiftless lending of money to people who can't pay it back. If there is an economic slide, with job-losses from what is now a majority service-economy, this will impact further on the service-sector causing further job-losses. If people have less spare cash to spend, on retail and other "services", workers in these industries will begin to be laid-off. There will be less people working and thereby contributing tax to the government's coffers and more drawing benefits from them. It has been said that the anticipated level of public-sector (i.e those who work for the state) pensions is such that it could bankrupt the nation - add too the burden of increased welfare payments to a swelling number out of work, with fewer working shoulders to bear that load, and we are in trouble indeed.

The French have similar problems in respect to pensioning their state-workers, who were promised very generous deals after the second world war, for instance to run the transport infrastructure, fire-service, postal-service etc., but which are no longer affordable within their present situation. There has been a certain level of industrial action over all of this, and I have little doubt there will be similar in Britain too. However, the bottom line is no matter how loudly the unions or anyone else may shout for more, if the money to prop-up these various systems is not there, they will fail, and money taken from elsewhere, as must be necessary to do so, merely shifts the hardship somewhere else. There seems to be a case for economic efficiency as for energy-efficiency along the lines that you can't squeeze blood from a stone. "Agreement" must prevail in the longer run but for now it will be the "boss-class", "them and us" politics that tries its hand, and which in the 1970's brought Britain to such a state of discontent with the Labour party and the trade unions, that Margaret Thatcher's government were elected in a land-slide majority, to much regret afterwards, since she destroyed the recalcitrant and militant trade-unions by crippling the industries without whom they had no power. Hence much of our present industrial weakness and dependence upon the above referred to "service-sector".

Whatever the subtle rhetoric of industry and pension arrangements, there are emerging dire (but unsurprising, really) predictions about the consequences of the "credit crunch". Now arguably Britain is on a social knife-edge (forgive the unintentional pun in the face of rising violent crime among young people who have been "parented" to have little actual sense of belonging, purpose or self-esteem), and it is only the benefits "giro" that keeps things in some semblance of order rather than anarchy. This may change, however, once the government can no longer maintain the "keep them quiet" payments.

Here are some thoughts inspired by a couple of recent articles [1,2]. A crime-wave is expected, as times get hard, with increasing intolerance toward immigrants. The latter notion follows presumably the lines of the "them taking our jobs" antipathy, but ironically "they" are apparently needed "to do the jobs our own people won't do". This does strike me as paradoxical, to pay people to do nothing so they are in the position of choice of "won't do", while we bring in foreign labour and pay them on top. Surely there is some compromise system possible, i.e not to pay anyone slave-wages, but rather to ensure that all who are "British" make a constructive contribution to society, by topping-up when necessary (and the employer is not simply trying to behave like a slave-master) the wage to a reasonable amount.

This approach would strike at the heart of the pernicious "benefits culture", and save the government an awful lot of money. When energy, particularly fuel is hugely expensive we will have plenty of work to do (much of it manual, on farms and in other crafts) and it will not be practical or cost-effective to simply bring-in labour from abroad whose taxes pay to support our own unemployed people. This is the beckoning age of national self sufficiency which it would be laudable to anticipate rather than pretend that our current way of life can be continued so wastefully.

Family breakdown [2] is another aspect expected to be "triggered" by the impending economic crisis. This has already happened to such as degree in Britain that it sounds hollow and false to refer to it as some forthcoming event. Half of all marriages end in divorce and many do not get formally married. That is of course a matter of personal choice, but it makes it impossible to quantify the degree of "family breakdown". At one time we talked about "broken homes" in the implication that the home was the stable norm and the breaking of it an infliction on the national social fabric. More likely the "non-nuclear family" (to be PC) is now the norm and a major contribution to why kids are left without a sense of belonging, purpose or self-esteem. It then becomes the state or the gang that surrogates the vital role of parent. Will more families break-up, in the face of bankruptcies, home repossessions, unemployment and a generalised struggle to pay household bills? Perhaps; but underpinning this potential strife is a safety-net that has become a device; a culture that does not allow for improvement and which condemns those entrapped in it.

Whatever happens to our personal finances, we must begin the restructuring of society to foster a sense of social integrity and the opportunity for all to contribute to the land that will be ours in both five years and five generations. This is surely the age of the transition-town: toward a community that is sustainable both in energy and in all other needs, as human beings, believing ourselves and each other worthwhile.

Related Reading.
[1] "Credit crunch could lead to crime wave, Home Office warns Downing Street." By Andrew Porter.
[2] "Deepening economic crisis 'may trigger family breakdown'.By Becky Barrow. "


Yorkshireminer said...

Personally on this point Chris I think that you right to point the finger at the credit crunch but what caused this credit crunch is the real problem. We have had credit crunches before We had a contraction of credit which cause the 1929 Crash it didn't cause a break down in society. What we didn't have at the time was a way of generating the credit which could be justified by the economic philosophy of the time. Keynes supplied that philosophy in his famous 1935 book The General Theory of Employment, Interest and Money. What sustained the world economies was the fact that we still had vast energy reserves and America especially was opening up its oil reserves. It is energy that maintains an economy not its ability to generate credit. The world economy ticked along at low revs without any fatal stress apart from Germany until the world war forced the Western powers into deficit spending (generating credit). Keynes's masterly fine tuning of the British economy during the war (post war credits) saved Britain from the runaway inflation of the first world war. After the war everybody was a Keynesian and the classical economics that was taught took a back seat. What every Politician likes is full employment, full employment means satisfied votes which means you stay in power. The problem is that Keynesian economics tend to generate inflation. What the people in power didn't realize is that moderate inflation can be a good thing as it destroys the debts incurred generating the credit to drive the system. It Brings the system into balance but is not very good for the people with liquid assets. Maggie tried to drive out inflation out of the system with using Milton Friedman's monetary philosophy, it worked at the expense of high unemployment. Not good, what saved Maggie and the rest of that crew was that the sale North sea oil pumped millions into the system. If North sea oil hadn't have been there she would not have lasted long in office. North sea oil was nothing more than selling off the countries silver to provide purchasing power. Her policies were deflationary while North Sea Oil was inflationary they canceled each other out and it made her look good. I wont go into Ronald Reagan and his Keynesian deficit spending and his stupid tax policies or to be correct no tax policies. Taxes are needed to pay for the credit debt incurred to drive the system. This is the reason that America is so much in debt. Credit is really not the problem, the real problem is that Peak Oil has made it impossible to support the Credit system for credit to expand, and credit needs to expand in a fractional banking system to pay the interest on the credit debt incurred earlier. Credit is there to stimulate growth and you can only grow if you have energy. If there was ever a better indicator that we had reached peak oil then the credit crunch is it. Lack of a suitable energy source is the real villain as for the rest I agree with you completely. The consequences of which could have been divined from even a cursory reading of History by our Politician, that is if they hadn't spent there time taking cultural sensitivity course and attending Gypsy awareness week.

Deep Regards

Yorkshire Miner

Professor Chris Rhodes said...

The break-down of British society is a complex issue. I was the only kid in the school to come from a broken-home, some thirty-five years ago, and now....

Even Freidman gave-up on his monetarist philosophy in the end, before Maggie endorsed it with such enthusiasm!

The North Sea Oil revenue was entirely wasted - a gift from the Gods. The Norwegians, on the other side of the sea, have not wasted their bounty! That might be another place to go, for a writer and environmental consultant.

"Gypsy awareness" yes, PC has encouraged a lot of spineless neo-liberalism, and is a major contribution to the lackluster mess that this formerly great nation has become!

Deep Regards,