Why this government will not eliminate unemployment

I often think that if people knew what our governors really believe, or are willing to pretend they believe, about how our country works they would be horrified. The theories that form the basis of the political class’ framework for managing our country are mostly superstitions and religious nonsense, but the topics are so convoluted and boring that they’ve managed to keep it all a secret. This smokescreen around their beliefs has created a kind messy, self-contradicting, cartoon reality that can be twisted and shaped to fit any story, which is exactly the way politicians, all politicians, like things to be. Politicians would never risk reality coming into their discussions if they can help it.

I just overheard a man from the Guardian newspaper on TV, on a discussion show, say to the audience members “the deficit on all of your pensions will be £75 000!” I have no idea what he could possibly think that means.

Luckily, I have a high threshold for convoluted, boring subjects. In these religious ideas there is a particularly crazy idea. One that they will never let slip. They think that unemployment is necessary.

This idea is interesting because it really shows everything that has gone wrong with how we run our country, but first thing’s first, why do they think unemployment is necessary? The reasoning is this: if there were more jobs than people the companies would have to compete for workers, this would force them to offer higher wages to get staff. Higher wages mean higher costs, which means higher prices. Higher prices is called inflation and inflation is like the devil incarnate to economists. So if you eliminate unemployment you unleash the inflation monster and you destroy the economy.

Now this misses the obvious point that prices might be higher but wages would be too. If everything costs twice as much but wages are twice as much then any inflation just cancels itself out. So what’s the problem?

The problem is that there is a group of people who earn money, not by being paid wages, but by capital investment (which is a technical term for “owning stuff”, another one of those smoke screens). For those people wages are a cost they pay to maintain those capital investments. For example, if you own a stretch of land that you rent out you might have to pay people to look after it. Those people have a vested interest in wages being as low as possible. Those people also have vast amounts of money from centuries of capital investments, they could pay people wages with that money or they could spend a fraction of it to buy politicians and theorists to write and spread nonsense scare stories about what will happen if they don’t get what they want.

The result of this is everything we see. Wages have been held down for decades while returns for capital investors have increased. Wealth, and therefor control, is being concentrated into a smaller and smaller fraction of the population. At the top of the pile we have a financial sector that engages in no actual production, their capital is imaginary, hires very few people, and yet commands extraordinary profits for the people who own that capital. The government is implementing policies designed to cause unemployment.  When the government increases interest rates they do it because they believe it will slow down economic expansion, that is, stop people doing new productive activities, because they are afraid, or say they are, of runaway inflation. The most extreme measure is austerity. New jobs require new pounds. New pounds come from the treasury deficit. Austerity is designed to stop the creation of new pounds and thereby limit how many new jobs the economy can finance. They want to maintain what they call a “buffer stock” of workers to ensure employers can always find someone cheaper.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: