Yves here. UK and Irish readers may offer corrections, but from my perspective as a student of English and French history and literature during the Industrial Revolution, it seems that the UK is more candid about its disdain for the poor compared to the United States. However, this doesn’t imply that the US is benevolent. The UK boasts the NHS, while we have a costly healthcare system that fails to achieve commendable outcomes for the population and often leads to financial ruin. Following the Civil War, the US implemented the debt-cropping system, which perpetuated a cycle of debt for what the British would term smallholders. As Matt Stoller noted:
This issue is embedded in our culture. The term ‘the man’, as in ‘fight the man’, originally referred to creditors. In the 19th century, ‘the man’ symbolized the ‘furnishing man,’ the merchant who provided supplies on credit to Southern farmers and sharecroppers. These farmers, often illiterate and unaware of the terms they were entering, faced yearly interest rates of 80-100%, with liens placed on their crops. When approaching these agents for credit, a farmer often bowed his head, seeing his debts noted in a ledger. By the year’s end, due to deflation and usurious practices, farmers generally found themselves in greater debt than they began with, resulting in forfeited land and a shift to tenant farming.
These farmers were ensnared in debt, gradually becoming subservient to the creditors. This system of sharecropping and usury, maintained by political violence, persisted in parts of the South until the 1960s. As late as the 1960s, Kennedy observed rural poverty in Arkansas and described it as ‘shocking.’ This was the result of usury—a society structured on untenable debt peonage.
Kennedy’s response underscores that the exploitative practices toward the poor through debt peonage were largely invisible to many Americans. In contrast, the UK had established workhouses as early as the 1600s to minimize the cost of caring for the impoverished. However, this workhouse system shifted toward a more punitive approach with the 1834 Poor Law Amendment, which effectively fragmented families seeking aid.
It’s important to note that the complexities behind social and economic injustices have escalated under neoliberalism, where various forms of exploitation are often rationalized in the name of the unyielding market. This trend has been apparent in modern times. Karl Polanyi, in his seminal work The Great Transformation, explained how a market society, driven by relentless pursuit of efficiency and profit, could disrupt the fundamental social order. Nonetheless, persistent opposition against the most harmful facets of this so-called ‘progress’ can mitigate its impact and afford society a chance to adapt.
Additionally, one might argue that the US tends to mask its cruelty—whether by cutting food assistance programs like SNAP, complicating Medicaid qualification processes, or conducting military operations in countries like Laos—while the hardships experienced by the lower classes mirror a more sadistic cruelty, as highlighted by Richard Murphy. Is this a byproduct of the UK’s entrenched class system? Has the increasing inequality in the US instigated similar inhumane practices, such as the abuses seen in deportation procedures?
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
The Telegraph reported in an email this morning:
Andy Burnham’s debut as Prime Minister yesterday was overshadowed by a market plummet that pushed borrowing costs to their highest levels in decades.
This statement is misleading. The increase in interest rates was a global phenomenon and had nothing to do with Andy Burnham’s presence at the Despatch Box. Nevertheless, the Telegraph seizes any opportunity to misinform, showcasing its trademark approach.
More concerning was the Financial Times’ response to the global rise in government bond interest rates, which I interpret as a sign of impending financial turmoil. They published an editorial today with the headline:
Governments should heed the bond market’s warning
What does this entail? Their argument can be summarized as follows:
Governments should avoid taking short cuts. The best strategy to diminish market risks is to heed the warnings from bond investors rather than disregarding them. This involves addressing the escalation of welfare and pension expenses directly and resisting unnecessary giveaways or tax cuts without solid funding plans. Easing political pressures today will not resolve the issues; it merely defers instability in the bond markets, which could lead to harsher economic decisions down the line.
Furthermore, they pointed out:
Efforts to maintain lower rates penalize savers, complicate central banking tasks, and critically drown out essential price signals, eroding trust in public debt. Regardless of the methods they employ, finance ministries risk engaging in futile battles against globally intertwined capital markets.
What, then, is the FT’s desire? A few points are unmistakably clear:
First, they want to grant central banks the freedom to raise interest rates as needed to combat the inflation that will stem from various crises, including energy shortages and speculative financial practices. This demand, however, disregards the reality that increasing interest rates cannot combat inflation driven by supply shocks, which no individual economy can rectify through interest adjustments. The real heart of the FT’s perspective is one of economic ignorance.
Secondly, their mention of “vital price signals” illustrates that the FT maintains the belief that market forces should dictate government policies, putting the needs of democratic governments and their constituents on the backburner. Autocracy seems to be a recurring theme in FT’s philosophy.
Thirdly, the FT prioritizes the interests of the affluent. They assert that savers should not face penalties while insisting on the need to proactively manage what they term rising welfare and pension expenditures. The message is clear: the system needs to be organized to benefit those who are already privileged, with little regard for those who bear the brunt of market inequities.
Fourthly, the FT issues a veiled caution as the self-appointed spokesperson for the bond vigilantes. The implication is that markets should not be defied, warning that government interference could lead to chaos; however, they stop short of specifying precisely what chaos might entail, merely suggesting it could result in instability in bond markets, leading to “painful political choices” that fall on the shoulders of those least capable of enduring them, according to the FT’s narrative.
I delve into the FT’s arguments extensively for a critical reason. The analysis presented is deeply troubling, and their own words serve to highlight this fact.
It is rare to witness such a blunt admission that those with wealth expect the costs of the economic failures they contribute to, through the political agendas and flawed economic ideologies they endorse, to be shouldered by the vulnerable individuals who had no part in causing our current predicament, despite them being the ones who will suffer the most.
What solutions exist? This question is paramount at this juncture. Several straightforward alternatives come to mind, all of which could be implemented without delay.
First, the Bank of England should reconsider its quantitative tightening measures that are deliberately exacerbating this crisis.
Second, the government could openly identify the situation we face as a cost-of-living crisis and intervene in Bank of England policy, giving directives to lower interest rates instead of raising them in this context.
Third, if the government so desires, it could limit bond issuances when they’re not in demand by canceling impending auctions and opting for funding directly through the Bank of England. Regulating the influx of new bonds could drastically affect their prices and send ripples through the market.
Fourth, the government might suspend the so-called full funding rule. This convention is unnecessary; it merely upholds the illusion that the government needs to clear its debts with the Bank of England daily through bond or treasury bill issuances, which must come to an end.
Fifth, the government might introduce tiered interest rates for central bank reserve accounts, aiming to restrict the funding available to commercial banks dominating London’s bond markets while also making clear that, if they maintain their stance on balancing the books (another flawed economic view), they are doing so to safeguard the vulnerable members of society.
Sixth, the government could propose an investigation into introducing a financial services tax, potentially involving what’s called Spahn taxation, which is designed to deter financial speculation by increasing its costs.
Seventh, the government could express intentions to increase tax rates on unearned income—supported by the FT—and on the monopolistic profits of banks, which the FT seeks to protect.
The reasoning behind these points is clear: the idea that there is nothing the government can do to confront such an assault on the welfare of many citizens to benefit the wealthy is a misconception. Viable responses do exist.
The vital question remains: will this government have the fortitude to challenge bankers, knowing full well that they will soon be seeking bailouts as the financial crisis—misrepresented by the Financial Times as a governmental funding issue, when it actually stems from failing neoliberalism—becomes unavoidable?
As a continuation of today’s discussion, Is there any limit to what the poor might fund?:
Previously, I highlighted the perspective that the most disadvantaged in our society must endure an income loss to fund interest deemed appropriate for savers during these trying times for the affluent.
Today, The Telegraph reports that Kemi Badenoch argues that the poorest among us might need to contribute even more during the nation’s period of need. As the report indicates:
Today will mark the first occasion that Kemi Badenoch, Conservative Party leader, outlines how she intends to secure the £10bn needed to achieve the 3% GDP target for defense spending by 2030.
This entails slashing the welfare budget, raising £3.1bn by reinstating the two-child benefit cap and cutting £1bn by eliminating VAT exemptions for Motability vehicles, among other strategies.
Now we can see clearly. Kemi Badenoch and, presumably, her party—along with a significant fraction of its supporters—believe that those least equipped to contribute should bear the greatest burden in funding the country’s needs.
Poverty-stricken children and individuals who desperately depend on adapted cars due to their disabilities are expected to shoulder this sacrifice.
Additionally, while specifics are not yet available, I suspect the triple lock on pensions will be reevaluated, potentially leaving some of the most vulnerable elderly individuals even more susceptible to economic hardship than before.
The rationale behind these proposals is grotesque. It is fundamentally cruel, designed to foster suffering, hinting at a sadistic enjoyment derived from such suggestions. The gloating evident in the Telegraph’s email underscores this sentiment.
In simpler terms, if evil exists—and I believe it does—the comments made yesterday by the FT and those anticipated from Kemi Badenoch today encapsulate that presence in our political landscape. We have come to expect repugnant behavior from Reform and Restore, yet these sentiments arise from a political party that once modeled itself as a champion of ‘One Nation’ and a newspaper claiming to uphold the establishment.
Ultimately, one thing is clear: the establishment is deeply flawed.
