Message to the Magic Mountain: austerity is not inevitable

I suspect most people who read Red Brick have not been invited to attend the World Economic Forum in Davos in Switzerland this week. Forum members are, after all, (according to WEF’s website) typically ‘one of the world’s foremost 1,000 enterprises with a leading role in shaping the future of its industry or region, a solid projected growth potential and a turnover of a minimum of US$ 5 billion’.

According to Larry Elliot, Davos was put on the map by Thomas Mann with his book The Magic Mountain about a sanatorium treating people with incurable sickness.  He draws some interesting comparisons between the book and next week’s inhabitants – who will include, mingling with the Forum’s members, Angela Merkel, David Cameron and George Osborne.

Will Hutton in the Observer derided the Forum’s theme of building a more resilient and dynamic capitalism.  As he notes, stagnation in the world’s economy has coincided with profits as a share of GDP in most western countries reaching record highs, along with executive pay, while real wages for the vast majority have been falling. Nothing will change at Davos, he comments, because  the system already works so nicely in the interests of the super-rich – and against the interests of the 99.9% and the broader economy.  The attendees are the very people that have destroyed capitalism’s dynamism.

Hutton says: ‘I was stunned to read in a recent IMF working paper, with the hardly catchy title Income Inequality and Current Account Imbalances, that the whole – yes the whole – of the deterioration of the British current account deficit between the early 1970s and 2007 could be explained by the rise in British inequality.’

In its report published to coincide with Davos, Cost of Inequality: How Wealth and Income Extremes Hurt Us All’ Oxfam calculates that the increasingly vast fortunes being made by the world’s richest 100 billionaires, who are accumulating at an unprecedented rate, not only drive up inequality but actively hinder the world’s ability to tackle poverty.  Astonishingly, they calculate that the world’s poorest could be lifted out of poverty several times over should the richest 100 billionaires give away the money they made last year – around £150 billion.  Just closing tax havens could yield an additional £118bn in additional tax revenues.

So, next time you hear anyone say that austerity is inevitable, we’re all in this together, etc, etc, just remember the super-rich bankers, industrialists, media magnates and politicians living it up in Davos.  And our message to them should be simple: there is a better way.

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