THE ECONOMICS OF ABJECT LUNACY

Once again Oxfam has used its seat at the Davos economic summit in the Swiss Alps to shine a light on the sickeningly unequal world we all share. No doubt those delegates representing the oligarchs of banking and Big Oil must be itching to write out a few six figure assassination contracts on the pesky delegates who are giving voice to the eight billion of us who make up the 99%.

Here are a few of the more jaw dropping stats they threw down onto the table.

-          By 2016, the richest 1% of the world’s population will own more that the bottom 99%.

-          Since the recession arrived in 2008, the richest 100 families in Britain have managed to get themselves £15 billion richer. Big number, right? Let’s break it down some. We are talking £150 million each. Look at another way, each one of these gilded families has managed to get £68,000 richer every single day since the recession hit. Look at it another way, they have added £3000 to their fortunes every hour. £50 every minute.

-          Those very same 100 families are now richer than the poorest 20 million Brits put together.

Whichever way you look at these kind of numbers, they completely beggar belief. So what would you do if you were lucky enough to be a member of this particular 100 club? Well, first up I expect you would spend quite a lot of time worrying that the other sixty something million will one day get really pissed off with this state of affairs. So what then? What if the worm turns? Then of course you’re going to have to get out of Dodge quick before you get strung up from the nearest lamppost. You know, kind of like the same gig that members of the top 100 club like Tsar Nicholas the Second and King Charles the First and King Louis the Fifteenth once faced. Oh, but all of that lopping off heads stuff went out of vogue years ago, surely? Well maybe not. Nicholai Ceaucescu was in his own 100 club. As was Colonel Gaddafi. And I certainly would put a hefty bet on Bashar Assad’s head staying attached to he shoulders for the whole of 2015.

So to protect themselves, those who make up the 1% have been playing it canny. Their best move has been to invest a few of their bottomless millions in buying up the majority of the media. This has enabled them to deflect the attention of the 99% away from themselves and onto some pretty convenient scapegoats, namely Islamic terrorists, the poor and the immigrants. Everything is their fault, right?

Whilst driving up a snowy Nith Valley to Kelloholm this morning, my mind wandered onto wondering how this process of wealth transfer actually plays out at ground level. Why is it so very different now to the way things were thirty years ago?

So. Let’s check out a typical, common or garden daily transaction. A mundane transaction. A British citizen receives a prescription. A free prescription paid for by the tax payer.

The first thing is to try and create some kind of a level playing field. Thirty years ago, most Scottish prescriptions were not free. They have only been free for the last few years thanks to the SNP administration in the devolved Parliament.

So I will keep things close to home as someone who manages a charity which works in the world of addiction. A prescription for an unemployed drug user was free back in 1985 just like it is still free today.

So in 1985 a Dumfries heroin user reports to his GP and asks for some help with his habit. The GP duly responds to the request by writing out a script for methadone. And the whole process is made possible by the tax payer.

The heroin user has made his way from a flat paid for by the tax payer to a GP whose salary is paid for by the tax payer in a surgery paid for by the tax payer. The heroin user walks along pavements paid for by the tax payer, lit by street lamps paid for by the tax payer and he uses pelican crossings paid for by the tax payer.

When he arrives at the pharmacy, he enters a building whose sinks empty into drains paid for by the tax payer and which is lit up by electricity which has flowed through a National Grid which is paid for by the tax payer.

He duly hands over his prescription to a receptionist who has been well educated by the tax payer and the prescription is fulfilled by a head pharmacist who has been even better educated by the tax payer.

The heroin user swigs down the first of many thousand daily doses of methadone and the paperwork starts to move along the chain. An administrator who has been well educated by the tax payer raises and invoice for £7 and sends it to a government administrator who duly pays the bill.

The methadone game is a good gig for the pharmacist and by the end of the year a chartered accountant who has also been extremely well educated by the tax payer works out that a healthy profit has been made. Tax is due and tax is paid. But even when all of the tax is paid, there is still plenty left for the successful pharmacist to live well. He buys clothes and food and fuel from local businesses. He pays his subs to the golf club and the gym. He eats in local restaurants and he drinks in local bars. Locals do his garden, wash is car, clean his house and mind his kids.

This looks to me like an example of capitalism working reasonably well. The tax payer decides it is a good idea to invest £7 a day in helping the heroin user to stabilise his life and stop costing such a fortune when he is arrested for robbing shops and locked up in jail for months at a time. The pharmacist makes a bloody good profit out of the £7 a day he receives for dishing out the methadone, but that is OK. 40% of the profit finds its way back to the tax payer in the form of income and corporation tax. Of the other 60%, most of it again finds its way home to the tax payer in the form of VAT, petrol duty, road tax, booze duty or the taxes paid by the businesses the pharmacist has spent money with.

So. It isn’t exactly a Lenin style socialist paradise, but at least the money flows around some and stays in the system.

Time to look at the 2015 version of the transaction.

On the surface, things look kind of the same. The heroin user makes his way along tax payer funded pavements to see a tax payer funded GP to be issued with a tax payer funded methadone prescription to be issued by a local pharmacy.

But here is where things start to look rather different.

Why? Because the pharmacy is Boots.

Again on the surface things seem the same. The script is handled and invoiced by staff who have been well educated care of the tax payer. And the thing will be signed off by a senior pharmacist who has been even better educated by the tax payer.

But the reception and back room staff are working 20 hours a week at a rate of pay that means they will never pay any tax. The senior pharmacist will pay some, but not a huge amount.

Boots make a nice fat margin on the £7 a day they receive for doling out the methadone. They electronically export this profit to a post office box in a tiny cantonment in Switzerland where they have thrashed out a sweetheart deal which means they pay a mere 8% tax.

Of course every penny of that 8% stays in Switzerland to pay for Swiss pavements and Swiss pelican crossings and Swiss GPs.

Boots is now owned lock, stock and barrel by a small gang of private equity guys who will promptly take the 92% of the cash that is left after the Swiss have had their bite and then electronically whizz it around the world into their offshore treasure troves in the Cayman islands or the Grand Duchy of Luxembourg. None of these lads will live in Scotland and so none of their 92% will ever find its way either into the pockets of local businesses or back to the tax payer from whence it came.

So basically a healthy chunk of the £7 which the tax payer stumped up will disappear forever from these fair shores and duly vanish into an off shore account where it will never see the light of day again.

In short, it becomes dead money. A bunch of noughts on a computer screen that will never be anything but a set of noughts. They are a bunch of noughts that will never be used to buy a pint or a pair of shoes or a packet of corn flakes. These noughts will duly join all the other trillions of dead noughts in computers in the offices of the off shore bankers of the 1%.

And here I guess is the great difference. Thirty years ago, every pound we spent would continue to flow around the system in one form or another. The wheels kept turning. Now everything has changed. Now the 1% have found new and different ways to siphon every £1 that we spend and drain more and more away into those secret treasure troves from where the light of day will never again be seen.

So we work longer and we get paid less. We eat worse food and we keep the heating low. We wear frayed clothes and switch from Heinz to Tesco Value. We give up going to the match and watch it on TV instead. We walk instead of driving.

And year by year, there will be an ever shrinking pot of cash to go around as the $23 trillion offshore dollars become $30 trillion off shore dollars.

And then $40 trillion.

And then $50 trillion.

Until eventually 40 hours a week of work will mean no more than a tin of Tesco Value beans every night.

And no doubt we will still blame the poor and the immigrants and the Islamic terrorists.

And the gilded 1% will have the pleasure of gazing yearningly at a few more electronic noughts on their screens.

And the 1% will have more money than they could possibly spend in a hundred lifetimes no matter how hard they try.

And so with a dismal inevitability almost all of the money in the world will become dead money. And 8 billion people will live out lives of endless grinding poverty and monotony whilst a thousand or so individuals will endure monotony of a different kind as they sail the oceans of the world in their vast yachts, forever terrified that one day the other 8 billion of us will finally lose patience and hang them from the nearest lamp post we can find.

Apparently all of this makes sense. I’m damned if I can see any sense at all. To me it seems rather like the economics of abject lunacy.