Cheap credit was and still very much is the elephant in the room of UK economics, until it is addressed (which will mean a contraction in our economy, a loss of jobs and reduction in living standards for the majority) our economy is on a one way ticket to disaster.
It only means a “contraction in our economy, a loss of jobs and reduction in living standards for the majority” if you choose to follow certain economic policies which cause that. There is never “only one way” in economics.
30 plus years ago there comparably very little credit available, in fact there were strictly enforced government credit controls. Despite that, there were much lower levels of unemployment than there are today and people’s living standards were increasing.
The reason for that was partly because wages as percent of GDP were higher. When the neo-liberals seized power one of their priorities was to drive down wages. To counter the obvious economic and political effects of such a move, they immediately abolished all credit controls.
They basically said to ordinary working people “the bad news is that everyone needs to be paid less, the good news is that you can borrow as much as you want”. In other words, “we are going to pay you less, but you will owe us more”.
Quite a handy little arrangement really – more profits due to less wages, and then more profit again from lending money to underpaid workers.
And it worked quite well too – it certainly fooled a lot of people. Plus they were still able to pay for their cheap consumer goods from China. Obviously the strategy was always going to have a limited shelf-life. So now people are been told that they can’t borrow anymore and will have to tighten up their belts. The good news is that it’s all Labour’s fault.
There are no “truths” in economics – only choices. And the choices are endless…….”There Is No Alternative” is a lie.
