Of course I am referring to the luminaries gathered at Davos. Larry Elliot has a brilliant piece on the state of play there in the Guardian. A few interesting points come up. First of all, that what we could call the representatives of the notorious 1% sucking up all the wealth out of the rest of the world, do not share the European officials and politicians buoyancy of the worse of the crisis being over.
I suppose that lot can be excused for wild statements like that. As they have grandly demonstrated throughout the Euro crisis, they haven’t a clue how the economy works. Yet do the Davos bunch know any better? Perhaps not. As Larry Elliot points out:
“But the dilemma for the CEOs gathered in Davos is that the policies they have championed in the past ? fiscal austerity, weaker trade unions, aggressive cost cutting ? have hammered consumer spending.”
Which they obviously did not expect to happen! Yet if they had a modicum of common sense, would it be hard for them to realise that that is precisely what happens. The more you squeeze income and cut benefits to increase your profits, the less your customer has to spend. The less he has to spend, the less he buys and your profits simply do not materialise.
Anyway, Karl Marx did point this out over a hundred years ago, as one of the contradictions of capitalism, did he not? And okay, you can’t expect gung ho business CEOs to read terribly subversive books like that, now can you? And the neo liberal dogma thinks Keynes is just as bad.
How about homely proverbs and fairy stories then? When you slaughter the chicken that lays the golden eggs you lose everything. Don’t you? But perhaps all these macho CEOs are not allowed to read fairy tales to their kids either.
Still if they started screaming that this debilitating austerity must be stopped before we all die, then perhaps the best and greatest of Europe, that is Frau Merkel, might listen. Well, it was listening to the bankers alone that got us into this state in the first place. Perhaps a few industrial producers might help turn her head this time.
After all, it does seem from Davos, that the penny has finally dropped. Their workers are also their customers. So if you squeeze them dry, still worse snigger with pleasure as more and more of them are thrown onto the dole because that will enable you to cut wages even further (hurray!), you’re not going to be selling much despite having achieved greater profit margins in theory. Are you?
Meanwhile although this great big devastating crisis was created in the first place to save the banks, it is finally dawning on all our luminaries that, oh dear, by squeezing the people to save the banks, through cuts in wages, pensions, welfare and over taxation… whoops! Deposits have dwindled! People will not borrow, and… Yes. That hasn’t worked the way they wanted either.
So as Larry Elliot concludes:
“Three things would help: fixing the banks, a reining back of austerity and a new social compact to ensure that productivity gains are once again shared by capital and labour.” (My bold print)
Amen to that!