Gangster Economics Pt 2


 More to the point, it’s the only offer you’re going to get

Just before I continue the second part of this blog I’d like it clear that Simon Duffy works for the Centre for Welfare Reform and is an expert on the way the most vulnerable people in our society are treated. These ideas did not spring from a vacuum, they are empirically observed facts about what he deals with everyday.

How then should we characterise their economic policies if they should not be called liberal? I’ve been thinking about this for a while and I think I’ve come up with the right name. We are living through an era of Gangster Economics, where the purpose of economic policy is to reinforce the power and wealth of a small group by exploiting the poorest and bribing the powerful.

Think how gangsterism works. First you must exploit the poorest, using fear and violence, while ensuring that no powerful forces of resistance can arise from within the exploited communities. Compare this to a range of current Government policies:

  • Benefit cuts, sanctions and workfare brutalise the poorest
  • Regressive tax increases (poorest 10% now pay 50% of their income in taxes) milk them
  • Legal aid, trade union rights and the right of charities to protest have all been weakened
  • Asylum seekers, immigrants, disabled people and the poorest are stigmatised and insulted

This is pretty much where I broke off yesterday, is there anyone left denying the reality of the situation? Yes there’s that soothing background music saying the disabled are scamming the system and the unemployed too lazy to work. By all means cling to comfort if you need it but I know you know there are no facts to back it up.

The second phase of gangsterism is to protect the gangster’s field of operation, to ensure that nobody will come to the aid of the poorest. In 1920s America this was achieved by bribing the police, the mayor and by threatening jurors. In the UK today such bribery and pandering takes a somewhat subtler forms.

  • Tax and benefit policy is designed to benefit swing voters, to keep the elite in power
  • Honours and contracts are distributed to political donors, charities and commercial interests
  • The commercial media is courted, the independent media is undermined

For instance, during the Coalition Government taxes and benefits were both changed so that the poorest 10% were hit more harshly than any other decile. Their income, which was already only £40 per week after tax, was reduced by a staggering by 9%. At the same time the incomes of some middle-income groups were even increased. If the Government’s objective had really been to reduce the deficit then logically it should have targeted the well-off and middle income groups. If you’re looking for money, don’t go to the poor. This policy reveals that current economic policy is an exercise in power – not in accounting.

We have reached the limits of what the poor can pay now it’s time to go up the scale until they get to you.

The third stage of gangsterism is to get the whole economy dependent upon some substance over which you have monopolistic control and from which you can then cream enormous profit. Twentieth century gangsters used alcohol and then, when that was legalised, drugs. In Gangster Economics the drug on which we’ve all been hooked is debt.

  • Government has allowed banks to create more money, by creating debt.
  • Banks then profit from this new power by taking a slice of their Government granted monopoly
  • Politicians then discover the joy of the housing boom, as interest rates drop house prices grow, along with all the associated debt.
  • Home owners are happy (a ‘popular’ policy in the UK and US with high levels of home ownership) because their house is ‘worth more’ and they vote for the Government.
  • Banks are happy because they can cream off yet more money from higher levels of debt.
  • Banks then discover that they can manufacture new forms of debt, junk bonds, CDOs, synthetics from which they can cream further profits.

I would like to say that, eventually this all came crashing down; but it hasn’t. After a small wobble, the world economy is still doing its crazy debt-ridden dance. The Government keeps it going with Quantitive Easing and, now, 0.25% interest rates. Banks are the drug pushers, government is their backer and protector.

Those still wondering what QE actually does is made plain above. The state removes one asset class (bonds) from the banks and replaces it with another, cash. instead of being lent into the economy this money has simply chased asset prices higher and not ones your pension relies on either.

Historically debt has always been the means necessary to create slavery. Debt keeps us obedient and makes us run for protection to the government. Government reassures us and tells us that they will solve the problem, a problem they say that was the fault of the poor, the disabled and the immigrants. It beggars belief that we believe them, but believe them we do.

It is encouraging to see organisations like Positive Money emerge to challenge this nonsense, for social justice will require more than a restored welfare state, it will require new forms of economic policy. I think this will happen, eventually; the current system is just too crazy to survive and, as Adam Smith also said:

“Avarice and injustice are always short-sighted”

Why are we so worried about preserving the exorbitant privilege of a rentier class that have no interest at all in our national wellbeing? The taxes we pay and the debt that we, as a nation, take on is being hijacked by gangsters as tribute and protection money. Employers like Deliverroo and Uber are playing fast and loose with existing employment law leading a race to the bottom to the detriment of all of us. What is it that’s on offer to make all this pain worth while? Tomorrow I’ll take a look at the alternatives on offer, but remember one thing. Deficits are perfectly normal, a balanced budget won’t make your life any better.


5 thoughts on “Gangster Economics Pt 2

  1. Well now! Here we have the gangsterism of the debt problem: “Debt keeps us obedient and makes us run for protection to the government.”

    Now imagine a ‘gangster’ central bank and the rest fits. They’ll keep the government obedient and the government will always run to mummy for more money when the penny chews run out.

    And the British people believe the media when it tells them there’s no problem with Britain’s government debt… when the media is part of the gangster tentacles!

    “It beggars belief that we believe them, but believe them we do.”

    This is the end game in economics, when everything has run dry. Believing in fantasies is what happens when people are desperate for a solution – a solution that they saw coming twenty five years ago, only to be smashed by yet another stock market crash.

    In my book, set in the 1890s, there’s a scene where a banker admits to having lost the bank’s money on horse-racing. The point being that a bank can make more money by betting on the horses than it can by investing in real businesses. This just happens to be true of today’s banks and the stockmarkets. It makes for healthy bank profits, but does nothing for the economy.

    Gangster banks have ensured that the British government has relaxed the regulations governing them… derivatives have pumped up the stock market and derivatives can only make a profit with ZIRP. It makes it look like the British economy’s fine as well… You have been warned.

    Employers like Deliverroo and Uber are playing fast and loose with existing employment law leading a race to the bottom to the detriment of all of us.

    Now you know why Uber has been banned in many European countries. I know from the media that the social problems in Britain aren’t as bad as they are in Syria, I know the British debt problem can be solved easily by looking the other way… but as with all the people who peddle untruths, they will always catch themselves out. The British media focusses on the problems Europe has… and forgets that European governments protect their workers through actively enforcing legislation.


    1. As long as the UK remains monetarily sovereign we’ll be fine, check my newsfeed, Neil Wilson has a take on this. As to Uber and their ilk, ban them in short order.


      1. As to Uber and their ilk, ban them in short order.

        But they won’t, will they?

        As to monetary sovereignty, that’s fine just as long as nobody interferes with it. Until then, Britain can print and print and print without any more care than they have for legitimate taxi drivers.


          1. Money printed for the right reasons would be as welcome as a ban on Uber, wouldn’t it?

            When people don’t know how to do business, you have to regulate them. If you don’t you’ll get people like Uber to undercut everybody else – and so everybody loses. In the long run, anyway. Perhaps it’s time to write my post on the German railways…


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