Failed policies keep repeating

There are three policies that are decidedly proven as failures.  Failure is measured in terms of making the financial / economic / social circumstances worse than they already were when the policy was applied.  Creating gross and widespread inequalities in wealth, education and income is a social example.  

The first is a trickle down policy.  That is, cutting the tax for the rich in the hope that they will spend more and give a boost to the economy.  The USA is the master at this so can provide decades of experience on which to test the policies success or failure.  

The second is austerity policies in times of economic contraction.  Well, there are more examples than you can poke a stick at:  Greece, Ireland, Latvia, Spain, England.  The outcomes are criminal in the effect this policy has on the population’s standard of living, the possibility for economic recovery, and long term decline in social cohesion.

And the third is self regulation.  A good example of this is the financial system.  Oh, you think it is regulated do you?  Nah!!  There are boundaries, such as Basle II (and soon (III)) and “rules”, but really it is then left up to the banks to monitor their own performance to these rules.  And then we have the global financial crisis in 2007 as a consequence.  So another example of proven failure with heavy costs to the communities continuing today around the world.  The grief in Ireland, Greece, Latvia, Spain etc etc would not be occurring if not for the monumental failure of self regulation in the financial system.

Now would you believe, even though these policies have proven to fail, in the last week I have come across new policies of each being implemented?  

Let’s deal with the last one first.  In Australia, the central government regulatory body – Australian Securities Investment Commission – chairman Greg Medcraft has done an interview that suggests that they are not really a regulator, but rather a co-regulator with the financial system.  He has a ''philosophical view that industry is generally best to self-regulate and, where possible, regulators can help to co-regulate''.  And gobsmackingly further “I've taken 'protection' out of our language because I think it's better to under-promise and over-deliver.  I think just saying you protect sends the wrong message; it's up to people to take responsibility for themselves, and we will certainly help to assist them in becoming confident and informed,''

Get it?  It is all your fault if you get spived. 

But we could have guessed that this would be his “philosophy” as he was Chairman of the American Securitisation Forum for the four years as they self regulated themselves into the GFC in 2007.  That’s right, the peak body overseeing the self regulation of the USA securitisation industry that blew up the financial world.  

We can deal with the first and second policy failures together.  Because, you guessed it, in the UK they are introducing both at the same time.  Both austerity AND trickle down tax cuts.  That is robbing the general population twice at the same time.

And as for robbing the poor to pay the rich, here it is – The Telegraph reports that GBP3 billion was taken from 5 million pensioners to pay (in part) for a 5p fall in income tax for high earners.  This despite a poll which showed that 2/3 of voters wanted to keep the top tax rate according to The Guardian.  

I have written before about the trickle down effect, how it creates massive disparity in wealth and income distribution as it gives to the rich, squeezes the middle class (downwards not upwards) in Trickle Up Trickle Down and Squeeze.  .  Further how it eventually leads to trickle up austerity, where Trickle up austerity is what you get when you unrestrainedly crush the middle class with trickle down policies and fail to restrain the rich with trickle up policies (taxing the rich and giving to the poor who will spend it and therefore expand the economy).  

And as for austerity policies in the middle of an economic contraction – the evidence this is wrong is wide spread.  And of course it flies in the face of the massive liquidity injections into the financial system that are intended to make its way into the economy but which are not.  Britain can expect its living standards to contract for another five years at least.  Especially as I have written that stagflation appears to have taken hold.  Rising costs of living against falling revenue / GDP. 

But it may be best written about in The Guardian with its six year scenario.  

This is what trickle down policies will achieve for the UK.  We know because it has already occurred in the USA.  Recent data from there is analysed in www.my.budget360.com – always an interesting read.  In 2010, the top .01% income was up 37% (or an average US$4.2m); the the remaining top 1% up 56% (US$105,637) and the bottom 99% up 7% (US$80).  And that was a good year.

Failed policies keep repeating themselves, and we let them.  Why?