Here’s a terrifying article by Brett Christophers (who?) originally in The Guardian.
The author examines the reasons rent, food and energy prices aren’t coming down, if household incomes are.
His answers can be summed up in two words: globalisation and privatisation.
He tells us:
Profits have reached record levels… [but] the cost of living crisis reflects the combination of higher prices for essentials with household incomes that are at best standing still.
Part of the reason that UK companies are generating record profits is precisely because they are successfully keeping wage costs down.
It has long been understood that across an economy at large, companies cannot simply drive down wages and expect profits to hold up in the medium or long term. After all, workers are also consumers. Lower wages mean a lower capacity to consume.
Then he hits us with the reason the big UK firms have managed to avoid this threat to their profits:
Much more than is the case in other countries, such firms tend to be distinguished by one of two key features, both of which insulate the companies in question from the potentially negative impact of UK wage stagnation.
The first is their geography. Companies in the FTSE 100 index derive less than a quarter of their revenues from the UK – a remarkably small share. In other words, domestic demand conditions are largely irrelevant to their fortunes.
That this is true of the UK’s big oil and gas companies, BP and Shell, whose profits are at all-time highs, is well known. But it is no less true of profit heavyweights in other sectors such as AstraZeneca, BAE Systems, British American Tobacco (BAT) and Unilever.
That’s globalisation – these firms operate in other countries where wages are higher and can therefore charge what they like. If UK households default on their energy bills, their lights will go out and the energy firms’ bosses won’t think twice about it.
The second key feature of many leading UK firms is less often discussed. This is the non-discretionary nature of the expenditure that households incur in consuming their services: expenditure such as loan payments, housing rent and utility bills.
Many of these companies have been in the news for their profits, too – companies such as HSBC, Centrica, Thames Water and Annington Homes. Their household customers, many (and, in some cases, all) of whom are located in the UK, are essentially captive: they must make payments, whether wages are rising or not.
In the case of the disproportionate prominence of firms earning revenue in the form of non-discretionary household expenditure, the explanation is … : privatisation. In the 1980s and 1990s, both Conservative and New Labour administrations went about privatising publicly owned assets that occasioned regular household payments – principally housing and utilities – with a gusto and comprehensiveness unparalleled elsewhere in the global north.
So successive Tory and New Labour governments have created a situation in which working households are now being held hostage by the corporations that have effective monopolies on the goods and services we need, simply to be able to live.
I lived through the period when Margaret Thatcher was privatising everything in sight, and when globalisation was the buzzword for the economy. I knew it would end badly for people like myself – and that’s exactly what is happening.
But far too many of my fellow citizens were taken in by the weasel words of Thatcher, Major, Blair and all their fellow-travellers; people who subsequently became extremely rich by forcing us to struggle.
And now, future generations will pay. And pay. And pay…
But if you ask young people today what they think, most of them will say they aren’t interested in politics and it has nothing to do with them.
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