Fact PackUS Growth per person was Higher in the Golden Age-0.06-0.04-0.02 0 0.02 0.04 0.06 0.08...
Transcript of Fact PackUS Growth per person was Higher in the Golden Age-0.06-0.04-0.02 0 0.02 0.04 0.06 0.08...
Fact Pack
Contents
• Three Big Chunks of Time• The Golden Age vs the Era of Market Capitalism – Key Measures
• The Current Era – Where Are We Heading?
• The Myths that make us Believe that ‘There is No Alternative’• The ‘Dangers of Government action’
• The ‘Lack of Evidence’ that an Alternative would Work
• The ‘Unaffordability’ of any Alternative
• 5 Steps to Heaven
Three Big Chunks of Time
The Age of ????The Age of
Market CapitalismThe Golden Age
of Capitalism
1945 1980 2015 2050
35 years 35 years 35 years
We begin by looking back over the Golden Age and the Age of Market Capitalism
The Myth
The post-war period, in both the US and the UK, was a minor economic
disaster, culminating in the ‘dreadful’ 1970s. The two countries
were fortunately rescued by the Thatcher and Reagan reforms, which ushered-in the Age of Market Capitalism and led to
renewed growth and prosperity.
The Facts
The Golden Age of Capitalism was well-named: it had higher
economic growth in total and per person. The typical person enjoyed
a fair share of that growth. And they had a better chance of finding
a job.
0% 1% 2% 3% 4% 5% 6% 7% 8%
Real GDP growth - US
Real GDP growth - UK
Per capita GDP growth - US
Per capita GDP growth - UK
Median household income growth - US
Median household income growth - UK
Long-term unemployment - US
Long-term unemployment - UK
Inflation - US
Inflation - UK
Golden Age Market Capitalism
Source: BEA, ONS, Federal Reserve Bank of St Louis, Census Bureau, Bureau of Labour Statistics
The Golden Age saw better performance on almost every measure than the Age of Market Capitalism
US Economic Growth was higher in the Golden Age
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1940 1950 1960 1970 1980 1990 2000 2010 2020
Lon
g-te
rm t
ren
ds
in r
eal e
con
om
ic
gro
wth
Real GDP growth Golden Age Market Capitalism
The Myth
Economic growth was lacklustre during the post-war period –
especially during the 'dreadful' 1970s.
The Facts
Growth was far higher during the Golden Age then it has been during the age of Market Capitalism – and
growth during the 1970s was farhigher than it has been over the
last decade.
Source: BEA
UK Economic Growth was higher in the Golden Age
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1940 1950 1960 1970 1980 1990 2000 2010 2020
Gro
wth
rat
e o
f re
al G
DP
Real GDP growth Golden Age Market Capitalism
Source: ONS
The Myth
Economic growth was lacklustre during the post-war period –
especially during the 'dreadful' 1970s.
The Facts
Growth was higher during the Golden Age then it has been during the age of Market Capitalism – and
growth during the 1970s was double what we have seen over the
last decade.
US Growth per person was Higher in the Golden Age
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
1950 1960 1970 1980 1990 2000 2010
An
nu
al G
row
th R
ate
in U
S p
er c
apit
a G
DP
Growth Golden Age Market Capitalism
The Myth
The market-based reforms produced growth from which
everyone could benefit.
The Facts
The reforms produced less growth per head. Some people were bound
to suffer.
Source: Federal Reserve Bank of St Louis
UK Growth per person was Higher in the Golden Age
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1940 1950 1960 1970 1980 1990 2000 2010 2020
UK
Rea
l GD
P p
er c
apit
a gr
ow
th r
ate
Growth rate Golden Age Market Capitalism
Source: ONS
The Myth
The market-based reforms produced growth from which
everyone could benefit.
The Facts
The reforms produced less growth per head. Some people were bound
to suffer.
US Growth in income per household was Higher in the Golden Age
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1940 1950 1960 1970 1980 1990 2000 2010 2020
Rea
l Med
ian
inco
me
grp
wth
(6
0th
cen
tile
)
Real income growth Golden Age Market Capitalism
The Myth
Reagan’s reforms created ‘morning in America’ – and all Americans
loved it.
The Facts
Household income growth almost stagnated for most Americans. And wages did stagnate (see next slide)
Source: US Census Bureau
US wages stagnated during the Era of Market Capitalism
-
50
100
150
200
250
1975 1980 1985 1990 1995 2000 2005 2010 2015
Rea
l GD
P v
s R
eal W
ages
(I
nd
exed
: 19
79
= 1
00
)
GDP
Wages
The Myth
“It’s the economy, stupid” – if the economy grows, everyone benefits.
The Facts
It is possible to have significant (150%) growth in an economy
without the average wage earner seeing any benefit.
Source:
Rising inequality and lower productivity growth wiped out the gains for the median wage-earner
147%
116%
53%
1%7% 8%
0%
20%
40%
60%
80%
100%
120%
140%
160%
Growth inreal GDP
Decliningwage share
of GDP
Total wagegrowth
Growth innumber of
workers
Averagewage
growth
Wageinequality
Medianwage
growth
Earners perhousehold
Medianhousehold
incomegrowth
The Myth
“The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently
limitless potential of increasing production.”
Robert Lucas
The Facts
Production has increased by almost 150% since 1980, but poor – and
indeed normal – people have seen next to no benefit.
Source: BEA, BLS, Census Bureau, St Louis Federal Reserve
Rising Inequality
Lower productivity
growth
US Unemployment was significantly lower in the Golden Age
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1940 1950 1960 1970 1980 1990 2000 2010 2020
US
un
emp
loym
ent
Average unemployment Golden Age Market Capitalism
The Myth
The post-war period saw America become a paradise for ‘welfare
queens’ until Reagan put America back to work.
The Facts
The average rate of unemployment post the Reagan reforms is double
the rate of the Golden Age.
Source: BLS
Market Capitalism has been a dreadful period for unemployment
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
UK
un
emp
loym
ent
rate
(cl
aim
ant
cou
nt)
UK unemployment rate Market Capitalism Golden Age
'Labour isn't working'
'LabourStill isn't working'
The Myth
The Facts
In 1979, based on what was then known, Margaret Thatcher had a
point.In 2010, having seen the impact of the market reforms, the campaign
was far from the truth.
Source: ONS
US Inflation was worse in the Golden Age
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1940 1950 1960 1970 1980 1990 2000 2010
An
nu
al p
erce
nta
ge in
flat
ion
in U
S (C
on
sum
er
Pri
ce In
flat
ion
)
CPI Golden Age Market Capitalism
Source: US Inflation Calculator
The Facts
In this instance, the conventional story is broadly true – inflation was
higher during the Golden Age (especially after the two oil price
shocks of the 1970s).
Nevertheless, even after adjusting for this inflation, the economy
overall, and most people, did far better in the Golden Age.
UK Inflation was worse in the Golden Age
Source: ONS
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1945 1955 1965 1975 1985 1995 2005 2015
An
nu
al P
rice
In
flat
ion
(R
etai
l Pri
ce I
nd
ex)
RPI over 12 months Golden Age Market Capitalism
The Facts
In this instance, the conventional story is broadly true – inflation was
higher during the Golden Age (especially after the two oil price
shocks of the 1970s).
Nevertheless, even after adjusting for this inflation, the economy
overall, and most people, did far better in the Golden Age.
There is one perspective from which the 1970s were truly dreadful
0%
5%
10%
15%
20%
25%
30%
1900 1920 1940 1960 1980 2000 2020
Top
0.1
% s
har
e o
f to
tal w
ealt
h
The Myth
The 1970s were, economically, a dreadful decade. Growth was almost non-existent and unemployment and
inflation were out of control.
The Facts
As we have seen, the level of growth in the 1970s was far higher then it has
been in the last decade.
An indicator which was truly dreadful (for them) was that the wealth share of the top 0.1% was falling rapidly –
though of course it was never close to 0.1%
Source: Saez & Zucman
Wants and desires
Needs for a normal life
Absolute needs
What is supplied
Desire for super luxury
How the economy met people’s needs – 1980 position
Needs for an easy life
Almost everyone had their most basic needs met, but there was real hardship in
places and at the other end of the spectrum there was
relatively little super-luxury available.Source: 99%
Wants and desires
Needs for a normal life
Absolute needs
What is supplied
Desire for super luxury
How the economy meets people’s needs – 2015 position
Needs for an easy life
We have made little or no progress in meeting peoples’ basic needs, but there is far more super-luxury available.
Source: 99%
Three Big Chunks of Time
The Age of ????The Age of
Market CapitalismThe Golden Age
of Capitalism
1945 1980 2015 2050
35 years 35 years 35 years
Now let’s see where we may be heading (on current trends)
Since 2000, almost half of American families have seen falling income
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Bottom20%
20-40% 40-60% 60-80% 80-100% Top 5%
Gro
wth
rat
e o
f re
al h
ou
seh
old
inco
me
1980-2016 1980-2000 2000-2015
The Myth
Since 1980, everyone has become better off – thanks to the market
reforms.
The Facts
As we saw, the only reason families are better off is the increase in
household size – wages have been flat. And since 2000, even this has not been true: most middle-class families have become worse-off.
Source: Census Bureau
Under Market Capitalism, it has been the middle class which has suffered most
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0-20% 20-40% 40-60% 60-80% 80-90% 90-95% 95-99% 99-100%
Gro
wth
rat
e o
f re
al h
ou
seh
old
in
com
e, b
y se
gmen
t o
f th
e p
op
ula
tio
n
CAGR 1980-2011 Average for whole population
The Myth
America is a middle class society with relatively few working class and upper
class.
The Facts
Although 70% of Americans still self-identify as middle class, only 50% now qualify on income grounds. The middle class is being hollowed-out as priority is
given to the richest and the poorest.
Source: CBO
Note: Figures include, for poorer families, Social insurance benefits (Social Security, Medicare, unemployment insurance, and workers’ compensation) and means-tested transfers, both cash and in-kind, such as Medicaid and Children’s Health Insurance Program (CHIP) benefits, Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) benefits, and Temporary Assistance for Needy Families (TANF) cash assistance.
10,000
100,000
1,000,000
10,000,000
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060CB
O r
eal h
ou
seh
old
inco
me
extr
apo
lati
on
($
)
0-20% 20-40% 40-60% 60-80%
80-90% 90-95% 95-99% 99-100%
The Myth
Economic growth sustained by further tax cuts will enrich all
Americans.
The Facts
If the hollowing-out continues, by 2050 there will be almost no middle class remaining. Mass
impoverishment will have claimed most of them.
Source: Extrapolation of CBO data assuming priority given to top and bottom segments
If these trends continue, by 2050 almost half of Americans will be living in or near poverty
If the trends continue, poverty rates in the US in 2050 will be a bit like South Africa today
US 2015 US 2050 South Africa 2015
Percentage getting by on household income of $27,000 or less
20% ~45%
Percentage in poverty (2015 standards)
12% ~25% 26%
Percentage in deep poverty
6% ~11%
Percentage in absolute poverty (2015 global standards), living on less than $4 per day
1.5% ~3%
Source: Census Bureau, Deaton, OECD
Since 2010, the UK has seen lower economic growth and declining pay
Note: CAGR = Compound Annual Growth RateSource: ONS
-
20
40
60
80
100
120
1995 2000 2005 2010 2015 2020
Ind
exed
rea
l dat
a (2
01
0=1
00)
Median income Real GDP per capita
The Myth
Austerity was a hard but necessary decision for the health of the
economy.
The Facts
The period since 2010 has shown lower overall economic growth than
1997-2010 (the period which included the Global Financial Crisis).
Even worse than the overall economic performance has been the impact on
those who work for a living. Even though the economy as a whole is
richer, employees are poorer.
CAGR up to 2010
CAGR since 2010
Median gross weekly pay
1.3% -0.6%
Real GDP per capita
1.6% 0.7%
Continuation of current trends would mean that by 2050 the UK's median wage would have fallen almost half way to today's poverty income!
Source: ONS
The Myth
Whatever we do, we must not risk undoing all the hard work of austerity.
The Facts
Most economists believe that the austerity programme was a serious
mistake. Unless we admit the mistake and take urgent steps to build a
society which both grows the pie much faster and shares it fairly, we are
heading towards a grim future.
Possible 2050 median wage on different trends
2050 wage on today’s trends
34,286
29,902
19,730
23,920
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Pre-2010 trends Post-2010growth and fixed
inequality
Post-2010growth andinequality
Today's medianwage
Me
dia
n w
age
s in
20
50
(20
18
£)
2050 Projection Today's poverty rate
The eight scenarios for society in 2050
Will the Pie Grow?
Pie Grows Pie Does Not Grow
Will we have a peaceful
transition to our future
state?
Will the Median
Slice Grow?
Median
Slice Grows
Scenario 1:
Revolution
Scenario 2:
Eat the RichViolent transition
Scenario 3:
Solidarity and
Abundance
Scenario 4:
Philanthropy ++
Peaceful transition
Median
Slice Does
Not Grow
Scenario 5:
Accepting
Impoverishment
Scenario 6:
Sharing Decline
Scenario 7:
Neo-feudalism
Scenario 8:
CollapseViolent transition
This is where current policies are taking us
Source: 99%
Wants and desires
Needs for a normal life
Absolute needs
What is supplied
Desire for super luxury
How 2050 might look: Solidarity and Abundance
Needs for an easy life
In the scenario Solidarity And Abundance, we do a great job of giving everybody a decent
life, but there is relatively little super-luxury available.
Source: 99%
Wants and desires
Needs for a normal life
Absolute needs
What is supplied
Desire for super luxury
How 2050 might look: Accepting Impoverishment
Needs for an easy life
In the scenario Accepting Impoverishment, we do a great job of providing super-luxury, but many fewer people enjoy
an easy life.Source: 99%
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’• The ‘Dangers of Government action’
• The ‘Lack of Evidence’ that an Alternative would Work
• The ‘Unaffordability’ of any Alternative
• 5 Steps to Heaven
Far more than we would like, we are going post-fact
Absolute truth Approximate truth SpinDeliberate
misrepresentationUnfounded falsehood
Definition True without reservation and demonstrable by experiment or logical reasoning
Broadly true and not misleading – but there will be exceptions
Does not contain outright falsehoods, but facts are presented in such a way as to be misleading
Comment may be based on real-world events but reporting is not factual and is deliberately misleading
No real-world basis – simply an attempt to manipulate opinion without regard to truth
Example “The world is not flat”.
“There are no integers a,b for which a2/b2 = 2”.
"Immigration is good for the economy as a whole, but for unskilled and semi-skilled workers there is a small negative impact"
“Migration has apositive impact in three areas – the labour market, the public purse and economic growth.”
“Every week we send the EU £350 million which could be used to fund our NHS instead”.
“Pope Francis Shocks World, Endorses Donald Trump for President”
Research in hard sciences and mathematics
Research in social sciences and economics
Mainstream media
Political discussion
Social media
Post-factFact
Source: 99%
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’• The ‘Dangers of Government action’
• The ‘Lack of Evidence’ that an Alternative would Work
• The ‘Unaffordability’ of any Alternative
• 5 Steps to Heaven
Government spending did not cause the Global Financial Crisis
UK 2007
Spain 2007
Greece 2007
Japan 2007
Latvia 2007
Ireland 2007
US 2007
Germany 2007
France 2007
Italy 2007
UK 2012
Spain 2012
Greece 2012
Japan 2012
Latvia 2012
Ireland 2012
US 2012
Germany 2012
France 2012
Italy 2012
-12%
-11%
-10%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
0% 50% 100% 150% 200%
Gen
eral
go
vern
men
t n
et le
nd
ing
/ (b
orr
ow
ing)
General government net debt
Maastricht Criteria
Excess Spending
Excess Debt
Excess Debt & Spending
The Myth
“Indeed, it is expansionary policies and weak fiscal positions that created the current
problems of high debt and low competitiveness in the crisis countries in the first place.”
Ludger Schuknecht
The Facts
The countries hardest hit by the crisis were (with the exception of Greece) prudent in their
pre-crisis management of government finances – it is the crisis which caused their
debt and spending to rise
Source: IMF
It is not ‘normal’ for governments to run a surplus
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
1950 1960 1970 1980 1990 2000 2010 2020
% o
f n
om
inal
GD
P
Year
UK Public Sector Net Borrowing (excluding Banks) The Myth
A normal, prudent government would run its finances so as to
remain in surplus.
The Facts
Of the 234 quarters shown, the government borrowed in 200 of
them (85% of the time). Of Margaret Thatcher’s 46 quarters in power, the government borrowed
in 39 (85% of the time).
Government borrowing is not an anomaly, it is the norm.
Source: ONS
Governments should not run like households
-20%
-15%
-10%
-5%
0%
5%
10%
15%
01/01/1960 31/12/1969 01/01/1980 31/12/1989 01/01/2000 31/12/2009
Sect
ora
l Bal
ance
s as
% o
f G
DP
Private Sector surplus / (deficit) Government Sector surplus / (deficit)
Foreign Sector surplus (= Trade deficit)
The Myth
Every housewife, and every small business owner knows that you cannot keep
spending more than you earn.
The Facts
The three balances (Private Sector, Public Sector and Foreign Sector) always sum to
precisely zero.If there is a Trade Deficit (Foreign Sector surplus) as there is in the US and UK, and
also a Public Sector surplus, then there must be a Private Sector deficit.
A permanent Government surplus would force the private sector into permanent
deficit.
Source: Federal Reserve Bank of St Louis
Higher Government debt does not necessarily lead to higher borrowing costs
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1900 1920 1940 1960 1980 2000 2020
Inte
rest
-to
tal p
erce
nt
of
GD
P
The Myth
Austerity was justified on the basis that without it, Britain would lose
its cherished AAA rating and borrowing costs would rise.
The Facts
The UK did lose its AAA rating in 2013 , despite austerity, but borrowing costs fell anyway
because of quantitative easing by the Bank of England.
Source: Chantril, BBC, Bank of England
In 2013, the UK lost its AAA rating
Lower taxes do not increase social mobility
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Earn
ings
mo
bili
ty
(1-i
nte
rgen
erat
ion
al e
arn
ings
ela
stic
ity)
The Myth
The freer the market, and the lower the tax rates, the freer the people.
The Facts
Many of the countries with the highest levels of social mobility have relatively high tax rates.
For the inhabitants of these countries, their freedom to better
themselves is higher.
Source: OECD
It is not true that cutting public spending frees the private sector to grow faster
UK
Spain
Greece
JapanAustria
LatviaIreland
US Germany
France
Italy
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
-10% -5% 0% 5% 10% 15% 20%
Gro
wth
Austerity
Growth vs Austerity (2008-2013)
The Myth
“As regards the economy, the idea that austerity measures could
trigger stagnation is incorrect… in the current circumstances,
confidence-inspiring policies will foster and not hamper economic
recovery, because confidence is the key factor today.”
Jean-Claude Trichet
The Facts
There is no question that Austerity did trigger stagnation.
Source: IMF
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’• The ‘Dangers of Government action’
• The ‘Lack of Evidence’ that an Alternative would Work
• The ‘Unaffordability’ of any Alternative
• 5 Steps to Heaven
There are (far) more than 50 shades of capitalism – and they show some interesting evidence…
Role of the state in society
Role of the private sector in
society
Communism
Denmark UK USA
Market Fundamentalism
100%/0% 50%/50% 0%/100%
Balanced economy
Sierra Leone
France Germany
North Korea
Source: 99%
Generally speaking, the happiest countries have an active state sector
UK
US
Madagascar
YemenChina
Norway
Canada
Sierra Leone
France
Germany
Denmark
Switzerland
Iceland
Angola
Sweden
Netherlands
Finland
New ZealandAustralia
0%
10%
20%
30%
40%
50%
60%
0 50 100 150 200
Gen
eral
go
vern
men
t re
ven
ue
(P
erce
nt
of
GD
P)
World Happiness Ranking
The Myth
Government is the problem, not the solution.
The Facts
The best countries to live in, as judged by their populations, all
have an active state sector. (That this is necessary but not sufficient
is shown by Angola).
Source: World Happiness Report, 2015
Top 10 countries
Happier Less happy
Having a higher GDP per capita helps, but the richest are not always the best countries to live in
UK
US
Norway
Canada
France
Germany
DenmarkSwitzerland
Iceland
Sweden
Netherlands
FinlandNew Zealand
Australia
-
20,000
40,000
60,000
80,000
100,000
120,000
0 5 10 15 20 25 30
Gro
ss d
om
esti
c p
rod
uct
per
cap
ita,
(U
.S. d
olla
rs)
World Happiness Ranking
The Myth
It’s the economy, stupid.
The Facts
It’s not just the size of the pie, but how it gets sliced.
Source: World Happiness Report, 2015
Top 10 countries
Happier Less happy
Raising median income is necessary but not sufficient for happiness
Switzerland
Iceland
Denmark
Norway
Canada
Finland
NetherlandsSweden
New Zealand
Australia
United States
United Kingdom
France
Germany
ChinaSierra Leone
YemenMadagascar
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0 20 40 60 80 100 120 140 160
Med
ian
Inco
me
World Happiness Ranking
The Myth
All that matters is what you get paid.
The Facts
If you are paid a little more, but then have to pay for healthcare out
of your income, it can be very stressful – indeed ruinous.
Source: World Happiness Report, 2015
Top 10 countries
Happier Less happy
Tackling poverty is one of the clearest factors leading to a happy society
Switzerland
Denmark
Netherlands
Sweden
United StatesUnited Kingdom
France
Germany
Sierra Leone
Yemen
Madagascar
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0 20 40 60 80 100 120 140 160
% L
ivin
g in
po
vert
y
World Happiness Ranking
The Myth
Rich countries don’t really have poverty.
The Facts
Even some of the richest countries have surprisingly high poverty
rates, and this has clearly led to lower satisfaction levels in their
populations.
Source: World Happiness Report, 2015
Happier Less happy
Increasing social mobility (decreasing immobility) leads to a happier society
Denmark
Norway
CanadaFinland
Sweden
United StatesUnited Kingdom
France
Germany
0
0.1
0.2
0.3
0.4
0.5
0.6
0 20 40 60 80 100 120 140 160
Soci
al Im
mo
bili
ty
World Happiness Ranking
The Myth
Freeing up the market is the only way to free individuals to better
themselves.
The Facts
Freer markets lead to dynastic concentrations of wealth, lower social mobility and unhappier
populations.
Source: World Happiness Report, 2015
Top 10 countries
Happier Less happy
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’• The ‘Dangers of Government action’
• The ‘Lack of Evidence’ that an Alternative would Work
• The ‘Unaffordability’ of any Alternative
• 5 Steps to Heaven
The US and the UK do not need to spend less because times are tough
-
50
100
150
200
250
1980 1990 2000 2010 2020
Rea
l GD
P p
er
cap
ita
(in
dex
ed, 1
98
0 =
10
0)
UK
USA
The Myth
“There isn’t a magic money tree that we can shake that suddenly provides for everything that people want.”
Theresa May (in answer to a nurse asking why she hadn’t had a pay
rise for 8 years – a real-terms pay cut)
The Facts
Both the US and the UK are richer today on a per person basis and adjusting for inflation than they have ever
been. Anything they could ever afford, (including paying nurses) they can afford today.
Government has three ways it can pay nurses: 1) it can borrow; 2) it can tax; 3) it can create money out of
nothing.
Source: World Bank; PositiveMoney.org
0%
50%
100%
150%
200%
250%
300%
1700 1750 1800 1850 1900 1950 2000 2050
Deb
t:G
DP
rat
io
Debt:GDP ratio Average debt:GDP
UK Government Debt is not at record levels
Source: Bank of England
This tiny part of the picture is what we are shown, and
out of context, it looks scary
The Myth
“To every mother, father,grandparent, uncle, aunt – I would ask
this question. When youlook at the children you love, do you
want to land them with alegacy of huge debts?”
David Cameron
The Facts
The UK’s Government debt is not ‘huge’; it is not ‘rather high’; it is not
even ‘average’ – it is below the average of the last 300 years.
But that debt was the justification for austerity.
High debt levels did not prevent the Golden Age
0%
50%
100%
150%
200%
250%
1948 2015
Pu
blic
Net
Deb
t (a
s a
per
cen
t o
f G
DP
)
-132%
The Myth
High levels of Government debt spell economic disaster. Paying off
the debt requires higher taxes, which cripple economic growth, and nobody ends up benefitting.
The Facts
High levels of debt preceded both the Industrial Revolution and the Golden Age of Capitalism – two of the most successful periods in our
economic history
Source: Bank of England
Higher taxes do not stifle growth
1916 - 1920
1921 - 19251926 - 1930
1931 - 1935
1936 - 1940
1941 - 1945
1946 - 1950
1951 - 1955
1956 - 1960
1961 - 1965
1966 - 1970
1971 - 1975
1976 - 19801981 - 1985
1986 - 1990
1991 - 1995
1996 - 2000
2001 - 2005
2006 - 2008
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
0% 20% 40% 60% 80% 100%
GD
P p
er c
apit
a gr
ow
th r
ate
(5-y
ear
aver
age)
Top marginal tax rate (5-year average)
The Myth
“…penalizing investors, successfulentrepreneurs and job creators with
higher taxes, to reward the less productive … to make everyone more equal, is a sure-
fire way to get less productivity, fewer jobs, lower wages and reduced economic
growth.” Peter Ferrara
The Facts
Over a long time frame, there is no evidence of such a ‘sure-fire’ link. Higher
taxes correlate with higher growth –possibly because the wealthy ‘invest’
their income, often in pre-existing assets, while the poor spend and fuel demand.Source: Maddison, IRS, Dynan, Skinner & Zeldes
And it is not even true that money cannot come from nothing – the vast bulk of all money does exactly that
The Myth
Money doesn’t just come from nowhere.
The Facts
Money is created (almost) out of nothing in a variety of ways:
1. a central bank has coins minted and bank notes printed;
2. a central bank creates money electronically;
3. commercial banks create money electronically by making loans – and this is how the vast bulk of all money is created
The Bank of England’s QE programme has created over £400 billion of new money – out of nothing. And almost £1trillion of guarantees were made to support Banks. More than 11 years’ budget for the NHS.
Source: US Federal Reserve; Bank of England; NAO
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’We have allowed ourselves to be persuaded, despite all the evidence, that government is the problem, not the solution – and this prevents us from taking the obvious steps…
• 5 Steps to Heaven
5 Steps to ending mass impoverishment
Step 1: A Democratic Reset – constitutional reform
Step 2: Base Policy-making on Fact, not Myth
Step 3: Formulate Policy for Abundance and Solidarity – grow the pie and share it fairly
Step 4: Invest Wisely in the Future
Step 5: Ensure Clean, Competitive Markets
Source: 99%
It must be the constitutional duty of a
government to look after the whole population – it must not be captured by a
small minority
You have seen some of the myths that prevent us from tackling the problem – we need to base policy on the
facts
Step 1: A Democratic Reset is the vital first step to change
1. An elected government should have an explicit duty to
govern for the benefit of its entire population
2. There should be a written constitution in countries which do
not have one, or constitutional amendment in those countries
which already have one, to enshrine Point 1 above
3. The constitution should safeguard separation of powers to
prevent the risk that capture of one part of the elite facilitates
capture of the remainder
4. Media ownership should not be concentrated
5. The constitution should also protect against an elected
government seeking to circumvent democratic safeguards
Source: 99%
Point 1 seems so obvious that it should go without saying. Unfortunately, as the figures show, it also goes without doing.
We need to enshrine it in our constitution.
Step 2: We need a serious effort to move political discussion and policy formulation to the level of approximate truth
Absolute truth Approximate truth SpinDeliberate
misrepresentationUnfounded falsehood
Definition True without reservation and demonstrable by experiment or logical reasoning
Broadly true and not misleading – but there will be exceptions
Does not contain outright falsehoods, but facts are presented in such a way as to be misleading
Comment may be based on real-world events but reporting is not factual and is deliberately misleading
No real-world basis – simply an attempt to manipulate opinion without regard to truth
Example “The world is not flat”.
“There are no integers a,b for which a2/b2 = 2”.
"Immigration is good for the economy as a whole, but for unskilled and semi-skilled workers there is a small negative impact"
“Migration has apositive impact in three areas – the labour market, the public purse and economic growth.”
“Every week we send the EU £350 million which could be used to fund our NHS instead”.
“Pope Francis Shocks World, Endorses Donald Trump for President”“No deal, no problem”
Post-factFact
Source: 99%
From HereTo Here
Step 3: We must formulate policy on the basis of Abundance and Solidarity –no more Vulture Policies
Ensuring Solidarity
Sharing the pie unfairly Sharing the pie fairly
Creating Abundance
Growing the pie
Type I: Captured Growth PoliciesBalance with types II & IV
Widespread automationLarge scale immigration
Free trade with low-cost countriesUnfunded tax cuts
Type II: Shared Growth PoliciesFocus policy here
Investment in:• R&D• Infrastructure• Education• Healthcare
Direct job-creationSupporting Private Sector investment
Not growing the pie
Type III: Vulture policiesAvoid
Funding tax cuts by reducing benefits and public services
Regressive tax changes
Type IV*: Balancing PoliciesUse to balance Type I policies
Raising the minimum wagePaying benefits to those in need
Progressive tax changes
Source: 99%
Step 4: We must Invest Wisely in the Future
0
100
200
300
400
500
600
700
800
900
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Exp
end
itu
re o
n F
loo
d D
efen
ces
(£ m
illio
n)
The Myth
It was responsible government to reduce the spending on flood defences
as part of the austerity programme.
The Facts
There were serious floods in 2015. The cost of the damage to the UK ran into many billions of pounds. Spending on
flood defences would have been a sound investment for the UK economy, while ‘saving’ taxpayers a few hundred million pounds has cost them over £5
billion.
Source: DEFRA
Step 5: We must Clean-up Capitalism
Source: 99% Appendix IX
The Myth
What’s good for business is good for the economy, and
what’s good for the economy is good for the people.
The Facts
Until we create clean, competitive markets this will
not be true.
While businesses can externalise their costs, bad
businesses can benefit from hidden subsidies, which allow
them to drive out good businesses.
Profit and Loss Account
Reported values in profit and loss
account (£ million)
Benefit of subsidies
(externalised costs)
Value in unsubsidised profit and loss account
(£ million)
Revenue 1,500 0 1,500
COGS (1,145) 23 (1,168)
Variable staff cost at minumum wage
(118) 39 (157)
Gross profit 237 61 176
Graduate payroll below threshold
(20) 5 (25)
Other payroll (100) 0 (100)
Government grant income
1 1 0
Other operating costs (49) 0 (49)
Operating costs (168) 6 (174)
Operating profit 69 67 2
The subsidies make this business very profitable
The business is not carbon-neutral – we bear the cost
It does not pay a living wage –
the rest of society picks up
the tab
It wants graduate skills, but does not
pay them enough to cover their
loans
Contents
• Three Big Chunks of TimeThe Golden Age was a time of growth and prosperity in which the bulk of the population shared; during Market Capitalism, growth was lower and many people did not share in it. If we continue for another 35 years, by 2050 large parts of the population will be living in or near poverty
• The Myths that make us Believe that ‘There is No Alternative’We have allowed ourselves to be persuaded, despite all the evidence, that government is the problem, not the solution – and this prevents us from taking the obvious steps…
• 5 Steps to Heaven…and these steps are relatively easy to take, once we realise that we can act