It's not all over yet

The eight-year programme of cuts to budgets for running Scottish public services is only 40% over.

The analysis, by the Centre for Public Policy for Regions (CPPR) in Glasgow shows 60% are still to be applied between this year and 2017-18. The deepest cuts in that will be towards the last two years of the spending period. A £2.7bn real terms projected cut in resource spending still to come will be increasingly hard to accommodate, especially given the £1.8bn already experienced since 2009-10.

Professor John McLaren, one of the authors of the study, said: "The day-to-day, or resource, budget cuts still to come include some of the harshest annual reductions seen over this period".

The Crisis

A crisis is caused by capitalists choosing not to buy, that is, not to invest profits because they judge they won't make any profits or not enough. Workers cannot be indifferent to a crisis, no matter how much we are disgusted by the predictable pendulum swing between “boom” and “bust”, because our lives can be directly influenced by today’s financial turbulence. But at the same time, we have no interest whatsoever in thinking up ways to put capitalism “back on track” or make it “healthy” again. Even when the system is in tip-top shape it works directly counter to the interests of workers. The crisis will not miraculously or mechanically turn every worker into a socialist, as some hope, but it does at least create a situation where socialists may find workers more willing to consider an alternative to capitalism. It is up to us, as socialists, to present that alternative in a convincing way based on our understanding of the essential nature and limitations of the capitalist system.

 Could the present slump really last for a decade or more? The truth is we don’t know and can’t know. The future course of capitalism is largely unpredictable. Economic forecasting is no more reliable than an astrological horoscope. All we can say with certainty is that it is an irrational system.

A number of quite distinct and separate things need to happen before a slump can run its course. Firstly, capital has to be wiped out if excess productive capacity is to be tackled with devalued capital being bought cheaply by those enterprises in the best position to survive the slump. Secondly, de-stocking needs to take place, with overproduced commodities bought up cheaply or written off entirely. Investment will not resume if overproduction still exists. Thirdly, after this has occurred there needs to be an increase in the rate of industrial profit helped both by real wage cuts and falling interest rates (which tail off naturally as the demand for more money capital eases off in the slump). This will help renew investment and increase accumulation. Also, if recovery is to be sustained, a large proportion of the debt built up during the boom years will need to be liquidated, if it is not to act as a drag on future accumulation. Through these mechanisms a slump helps build the conditions for future growth, ridding capitalism of inefficient units of production. When these processes have run their course, accumulation and growth can begin once more with capitalism again creating a boom situation, which will be inevitably followed by a crisis and slump. This has been the history of capitalism ever since it first developed. Far from being an aberration, this cycle of misery is the natural cycle of capitalism.

A crisis of capitalism

The problem of the crisis is gaining the attention of people worldwide. This is because the present crisis is of unprecedented scale, and unparalleled seriousness and tenacity, have struck throughout the world. Representatives of the two classes in society are seriously engaged in the study of this problem with a rare level of seriousness; economists for the sake of somehow forging a path to stable capitalist production, and Marxists to provide a scientific basis for their tactics in this momentous period. As long as bourgeois economists maintain their capitalist perspective, they are incapable of understanding the problem of crisis. We socialists pointed out that it was not the bankers and financiers but the capitalist, system which was at fault.
To-day, the recession is still as intense than ever, at least, in regards for the working class. Workers in countries all over the world are faced with a world crisis of capitalism. Now genuine questions of survival, issues of actual life and death, are in the forefront of peoples minds. The crisis is not a crisis of natural scarcity or shortage. Millions of workers are willing and able to work; but existing society has no use for their labour. The crisis is a crisis of capitalism alone.
Everywhere there is a call for change and for government interventions that lead to a way out. All the leaders of capitalism, economists, financiers, politicians, are at sixes and sevens. All the capitalist spokesmen, Tory, Lib-Dems and Labour speak of “re-organisation,” and “re-regulation", of new policies of this, that and the other, to “save the British economy.” They appeal to the workers to make “sacrifices” to help and impose austerity cuts to ensure that sarifice. They mistakenly imagine that if only British capitalism could be modernised and improved and rationalisation all will be well. But no policy of patching up capitalism can avail. These so-called remedies not only fail to touch the root of the problem, they can only aggravate the disease.
What solutions do the capitalist leaders propose? They propose to throw the cost of the crisis off the backs of the rich onto those of the poor. The working class has met with the smashing of the unions, the driving down of the standard of living simultaneously with the drastic increase in the cost of living. The capitalists have no solution to the crisis. Its measures aggravate the crisis and pave the way for still more deep-seated and profound crisis in the future. The working class must not harbour any illusions about “recovery”. The motive of capitalist production is profit and the only issue of “recovery” for the bourgeoisie is recovery of profits. Such “recovery” will not alter at all the condition of the working class as wage slaves, or change the conditions of the exploited in relation to the exploiters. In fact, the recovery of the profits of the bourgeoisie can only take place on the basis of the further intensification of exploitation, the further impoverishment and ruin of the masses of the people, with a higher level of the permanent army of the unemployed, an increase in the impoverishment and immiseration of the working class. In order to force through its programme for shifting the burden of the crisis onto the backs of the working people, the bwealthy is launching a savage offensive against the rights of the workers.
In the crisis, the banks could not lend money to business which was not producing profits or dividends and banks could not collect on their loans to business. The government kindly issued loans, took up part of the credit of the banks and in return gave interest bearing bonds (quantitive easing) thus providing a juicy investment field for the bankers. Money went to the banks, the insurance companies, the credit companies to help them overcome the crisis.
With a decrease in revenue and an increase in expenses the government had to increase its taxes. It refused to tax the higher brackets of incomes . Instead, it began a series of wage cuts for government employees in the public sector. It cut welfare benefits. It raised VAT on goods needed by the masses.

Is it any wonder that many capitalists showed a larger profit in some of the years of recession than in other more prosperous years?

The capitalists can only look for the solution in fiercer competition and in cheapening their own costs of production, by cutting wages against their competitors, in increasing their own workers’ productivity , in fighting to enlarge their own share of the market. But these measures are pursued by the capitalists in every country. Although one capitalist or another may gain a temporary advantage for a short time, the net effect can only be to deepen the crisis. The net effect of every advance of technique, of every wage-cut, of every cheapening of costs and intensification of production, is to intensify the world crisis for the worker. Increased output is demanded from every worker for less reward. Speeding up and rationalisation are the order of the day, leading directly to worsening work conditions, mounting health problems, and rising numbers of industrial accidents, along with increasing rate of unemployment or underemployment.

Many would-be reformers of capitalism urge that if only the employers would pay higher wages to the workers, enabling them to buy more of what they produce, there would be no crisis. This ignores the inevitable laws of capitalism — the drive for profits, and the drive of competition. The drive of capitalism is always to increase its profits by every possible means, to increase its surplus, not to decrease it. Some economists may preach the gospel of high wages in the hope of securing a larger market for certain capitalist’s goods. But the actual drive of capitalism as a whole is the opposite. The force of competition compels every capitalist to cheapen costs of production, to extract more output per worker for less return, and for wholesale wage-cuts in every industry. All have the same task; to cut down rigidly the standards of the workers at home, to carry through a trade offensive for the capture of markets abroad.

Capitalism has no solution. The most the capitalists can do is to wait amidst the general misery until the universal stagnation of production has run its course and for “demand” to once again return (...to begin a new trade cycle, and lead to a new future crisis.) Capitalism will survive if we let it. Crises can resolve the contradictions temporarily and allow a new period of expansion until the next crisis.

The motive of capitalist production is the securing of maximum profits. Production of goods is in fact an incidental aim of capitalism, as is employment. The bourgeoisie organises production for the purposes of increasing profits. When conditions are such that profits can be increased by increasing production, the bourgeoisie does so, and when conditions are such that profits can only be increased by cutting back production to keep up the price, then that is what the bourgeoisie does. Thus if it serves to increase profits to increase the numbers of workers in production, then this is done; but if profits can only be increased by intensifying exploitation, getting more or the same amount of work out of fewer workers, then this is done instead. These fundamental features of the capitalist system cannot be eliminated without removing the capitalist system itself.

This crisis calls aloud for the workers’ socialist revolution. Only the working-class can solve the causes of the crisis by wresting production from the fetters of private/state ownership and profit-making and organise production for social use. The power of producing wealth is greater than ever. It has grown far more rapidly than population, thus disproving all the lies of those who talk of “over-population” as the cause of the crisis. Although capitalism does not use more than a portion of modern productive power, although it wastes most and deliberately cuts down and restricts production in order to increase profits, actual production has grown much faster than population.

Only under capitalism can there be a curse of plenty. Only socialism can bring the solution. Only socialism can cut through the bonds of capitalist property rights and organise production to meet human needs. Once capitalism is overthrown, then and only then can production be organised in common for all, and every increase in production bring increasing abundance and leisure for all. This is the aim of the Socialist Party, the only party that pointed out during the present period that there is no alternative for the working class other than socialism.

Capital's apologists

Blair Jenkins, chief executive of the Yes Scotland campaign, claimed that Scotland “might very well not have had a financial crisis” if it had been an independent country. This is a ridiculous claim. Some commentators have argued that, if Scotland had been independent, the banks would have been better regulated. The Scottish equivalent of the FSA would have stopped them from pursuing self-destructive courses, barred them from ballooning their balance sheets with dodgy loans and toxic assets, and insisted on higher capital ratios. There’s absolutely no reason to believe that it would have been any different.

The idea that Scotland’s banks – RBS and HBOS, whose combined assets were 21 times Scotland’s gross domestic product at the time of their near collapse (for the sake of comparison, Irish banks’ assets were 4.4 times Irish GDP at point of their October 2008 collapse, and Icelandic banks‘ assets were 9.8 times times Icelandic GDP) – would have been better-regulated if Scotland had been independent is wide of the mark. It is preposterous to suggest the liabilities of a bank are liabilities of the population of the country where the head office of that bank is located. It cost the UK £70bn to recapitalise the Scottish banks. 

Alex Salmond thought the UK authorities and the FSA in particular, were being too tough on the banks in 2007. He felt Scotland would be better off with ‘lighter touch’ regulation. “We are pledging a light-touch regulation suitable to a Scottish financial sector with its outstanding reputation for probity, as opposed to one like that in the UK, which absorbs huge amounts of management time in ‘gold-plated’ regulation." he said in an interview with the Times on April 7th, 2007. Salmond wrote to Fred Goodwin when the latter was RBS chief executive, in May 2007 wishing Goodwin ‘good luck’ with his attempted €72 billion takeover of the Dutch Bank ABN Amro adding ‘it is in the Scottish interests for RBS to be successful’. The takeover is now recognised as one of the most disastrous in corporate history and contributed to the massive losses which caused RBS to fail and require a £45.5bn government funded bailout.

On March 31, 2008 when it was already clear to many investors and analysts that RBS and HBOS had massive holes in their balance sheets and were struggling to fund themselves, Salmond insisted that, with RBS and HBOS, “Scotland has global leaders today, tomorrow and for the long-term” in a speech given to Harvard University selling Scotland as another Celtic Tiger (but a Lion) economy like Ireland. On August 7th, 2008, the day it announced massive first-half losses of £692m, and a few weeks after it had had to tap investors for £12bn to patch up its balance sheet, Salmond told The Times that RBS was “one of the highest-performing financial institutions in the world” which would soon “overcome current challenges to become both highly profitable and highly successful once again”. On September 17th, 2008, Salmond describes the banks as "well capitalised, properly funded financial institutions" ignoring the fundamental problems and the bankers' irresponsibility.

So if the referendum bring change - little will change. Scottish politicians and Scottish parliament will continue to be the servants of capital. 

Three countries - same story

The annual assessment of hunger and homelessness conducted by the US Conference of Mayors reveals that the number of homeless people in 25 large cities has increased by seven percent since 2011. It also says that about 20 percent of the hungry do not get any help, and that social services are being forced to turn them away empty-handed. Half of those seeking food assistance are families and nine percent are homeless. The survey has also found that the lack of affordable housing, rising poverty and unemployment are the root causes of homelessness among families with children.

The British government’s new benefit cuts that will hit working-age people could be “devastating” and dramatically increase poverty, says leading British anti-poverty charity Oxfam.

“This Bill will effectively mean a permanent reduction of benefits, which could be devastating at a time when a proper safety net is desperately needed by millions of the most vulnerable people in Britain,” said Oxfam UK poverty director Chris Johnes. “Benefits are already at their lowest levels relative to average incomes since the welfare state was founded and it’s highly likely that this regressive change could lead to an increase in poverty, especially for those people who are already facing a perfect storm of cuts to public services and rising prices.”
TUC general secretary Brendan Barber said the bill is a “naked attack on hard-working families” who should pay the price for the government’s economic failure.

Recent studies show that millions of people in Germany are threatened by rising poverty despite low unemployment rates. 12.4 million people or one in seven people in Germany have been at risk of poverty. Critics argue that the expansion of the low-paid job opportunities, called “mini jobs,” have put the economic pressures on the poorest in society.

The outlook is bleak

Some 26 of 30 countries covered by the Organization for Economic Cooperation and Development have shown a falling labor share of national income since 1990. International Labor Organization (ILO) data show the gap between the top 10% of earners and bottom 10% increased in 23 of 31 nations since 1995. Between 1999 and 2011, average labor productivity in developed economies worldwide increased more than twice as much as average wages. Real average monthly wage growth worldwide, excluding China, fell to 0.2% last year from 2.3% in 2007. Unemployment might have been higher than it might had it not been for reduction in working hours, shorter working weeks, cuts in overtime and even job sharing in exchange for keeping jobs.

The United Nations bodY focuses on how the shrinking share of the pie going to workers was one cause behind the credit bubble. The falling share of national output going to workers in the decade before the crisis ended up boosting household debt as workers tried to maintain consumption via ever-easier credit. Had falling labor shares of the bottom 99% in the United States not been compensated for by debt-led consumption, it is likely that world economic growth would have slowed or halted much earlier," the report said. The same phenomenon was seen in Britain, Australia,Ireland, Greece, Portugal and Spain. The pressure to rebuild national balance sheets or sustain corporate [profit] margins with further pressure on wages is all too clear.

 Sheldon Adelson, the billionaire who owns the Las Vegas Sands Corporation. Adelson invested more than $100 million in the election, mostly on Republicans who lost -- including $20 million that went to Romney's super PAC "Restore Our Future," $15 million to another super PAC that almost single-handedly kept Newt Gingrich's Republican primary campaign going and about $50 million to nonprofit Republican fronts such as Karl Rove's Crossroads.
Adelson tells the Wall Street Journal he's ready to double his 2012 investment next time around. "I happen to be in a unique business where winning and losing is the basis of the entire business," he says, "so I don't cry when I lose. There's always a new hand coming up." He isn't looking back at his losses.
 Adelson says he has many friends in Washington, "but the reasons aren't my good looks and charm. It's my pocket personality," referring to his political investments. Adelson recently met with three Republican governors said to be eying the 2016 presidential race. This week he met separately with Republicans, House Speaker John Boehner and Majority Leader Eric Cantor. 

The Swindled Scots Again

A previous post concerned the Darien Scheme. Not many Scots however know of Gregor Macgregor, Prince of Poyais, Poyais being not far up the Central American coast from Darien. Gregor MacGregor was born in Glengyle in Stirlingshire and claimed direct descent from Rob Roy. He was a soldier and mercenary who fought in the South American wars of independence. 

Upon his return in 1820 to Britain, he claimed to be cacique ["prince"] of Poyais, a Central American country that MacGregor promoted to investors and colonists. Poyais, was an independent nation on the Bay of Honduras. He claimed that a native chief King George Frederic Augustus the First had given him the territory of Poyais, 12,500 sq. mile of fertile land with untapped resources. Gregor presented himself as His Serene Highness Gregor I, Prince of Poyais and his beautiful wife as the Princess of Poyais. No-one questioned their bona fides; instead they were welcomed into the ranks of the elite and were the toast of society. MacGregor published a 350-page guidebook entitled Sketch of the Mosquito Shore, including the Territory of Poyais. It described Poyais in glowing terms and concentrated on how much profit could be made from the country's ample resources. Poyais was said to possess an already existing infrastructure with civil service, army and democratic government , gold and silver mines and large amounts of fertile soil ready to be settled. The capital, St Joseph, even boasted an opera house. The region was even free of tropical diseases. But now he needed settlers and investment and had come back to the United Kingdom to give people the opportunity. At the time, British merchants were all too eager to enter the South American market that Spain had denied to them. The Lord Mayor of London organised an official reception in London Guildhall. MacGregor was also introduced to Major William John Richardson and he made Richardson Legate of Poyais. He also moved to Oak Hall, Richardson's estate in Essex, as befit his station as a prince. An office for the Legation of the Territory of Poyais was opened in the City of London and MacGregor enhanced his popularity with elaborate banquets and invited dignitaries like foreign ambassadors and government ministers.

MacGregor also claimed that one of his ancestors was a rare survivor of the Darien Scheme, the failed Scottish attempt of colonisation in Panama in 1690s. In order to compensate for this, he said, he had decided to draw most of the settlers from Scotland. For this purpose, he established offices in Edinburgh Glasgow and Stirling. In Scotland, MacGregor began to sell land rights for 3 shillings and 3 pence per acre. The average worker's weekly wage at the time was about £1, which meant that the price was very generous. The price steadily rose to 4 shillings. Many people hoping to make a new start in the new country signed on with their families. MacGregor successfully raised a £200,000 loan on behalf of the Poyais government, in the form of 2,000 bearer bonds worth £100 each.

The Legation of Poyais chartered a ship called the Honduras Packet. Its cargo also included a chest full of Poyais Dollars, the Poyaisian currency MacGregor had printed in Scotland. Colonists were assured the only legal currency in their new home would be the Poyaisian dollar and so, before departing, they exchanged their old Scottish and English pounds for this new currency. What did they care for old money from the old country anyway? A wonderful new world of plenty awaited them. On 10 September 1822 the Honduras Packet departed from the Port of London with 70 would-be-settlers aboard. They included doctors, lawyers and a banker who had been promised appropriate positions in the Poyais civil service. Some had also purchased officer commissions in the Poyaisian army. A Scottish shoemaker was equally entranced at the thought that he was to be the Official Shoemaker to the Princess of Poyais. On 22 January 1823 another ship, the Kennersley Castle, left Leith for Poyais with 200 would-be-settlers. It arrived in the appropriate place 20 March and spent two days looking for a port. Eventually the newcomers found the settlers who had sailed on the Honduras Packet.

The bond issues, land sales, and currency of the Territory of Poyais were all part of a scam. Poyais was an imaginary country. What the settlers found was jungle. "St Joseph" consisted of only a couple of ruins of a previous attempt at settlement abandoned in the previous century. There was no settlement of any kind. Standing where the towering buildings, opera house and banks of the shining capital of St Joseph were supposed to be were instead four rundown shacks. There was no Poyaisian army, no royal family, no civil service, not even one solid building. The great, prosperous nation of Poyais had all been an elaborate illusion, a heartless fraud committed on men and women from hard-working backgrounds who had dared to hope for a better life in the Americas. The monumental fraud had enlisted the credulity not only of adventurers but also of earnest bankers, profit-hungry land agents, and an old-boy network of aristocrats. A bull market had raged and the banking houses were abuzz with the news that Sir Gregor MacGregor was offering acreage in the New World at bargain prices. So convincing was MacGregor that he had duped them all. 180 of the 270 would-be settlers perished during the ordeal. Fewer than 50 came back alive to Britain. MacGregor himself, however, had already left for France where he had plans to send French emigrants to Poyais.

MacGregor published a new constitution of Poyais and changed it into a republic with himself as the head of state. In August 1825 he issued a £300.000 loan with 2.5% interest through the London bank of Thomas Jenkins & Company and the trading organization "Compagnie de la Nouvelle Neustrie" was commissioned to further the affairs of Poyais. Recruited settlers were required to buy 100 francs worth of the company shares. When French officials noticed that a number of people had obtained passports in order to voyage to a country they had never heard of, they seized the la Nouvelle Neustrie ship. Some of the would-be-emigrants realised that something was not right and demanded investigation of the affair. MacGregor was arrested with others but was acquitted at his trial and released.

MacGregor returned to London. This time he claimed that he had been elected as the head of state, the "Cacique of the Republic of Poyais", and opened a new office in Threadneedle Street in the City, without any diplomatic trappings and in much a smaller scale than before. He issued a loan worth £800.000 as 20-year bonds again with Thomas Jenkins & Company as brokers. In 1828 MacGregor tried to sell land from Poyais at the price of 5 shillings per acre. In 1831 MacGregor promoted a "Poyaisian New Three per cent Consolidated Stock" as "the President of the Poyaisian Republic". In 1834 he was living in Scotland and had to issue a new series of land certificates as payment for unredeemed securities. In 1836 he wrote a new constitution for the Poyaisian Republic. The last record of any Poyais scheme is in 1837, when he tried to sell some land certificates.

 Such a scam could never happen again in Scotland, could it?

 The Bank of Scotland and the Royal Bank of Scotland effectively went bust during the recession. At best, there were appalling management failures with an obsession with growth taking precedence over prudent banking practice. At worst, the banks were out-of-control and riddled with fraud and criminality, having been primed by its management teams to deliver maximum short-term profit growth with maximum reward for executives, irrespective of whether the banks had a chance of surviving long term — or whether its customers were harmed. The Financial Services Authority turned a blind eye to the blatant wrongdoing and recklessness, accused by many of acting as a cheerleader for the big banks, if not an accomplice.

The executives who ran HBOS and RBS were supposed to be the best and the brightest. They were selected from the finest schools and the top universities, well qualified in business and accountancy. How exactly do the people running these operations invest? Do they watch everyone else and then do the exact same thing, following instinct of the herd? Do they figure that they have some form of immunity and get away with what others can't? Surely, they understand the business cycle. Surely, they understand what a bubble is. Surely they could see what was going on, when it was going on, and where it was leading before it went there? If they didn't, how come others did? The financial world was full of information about the coming crash before it happened. Most in the money community knew the market was bound to come tumbling down. But, just what are the chances of those with their snouts deep in the trough ever questioning the system? Little to none. Not in a million years will they ever question the fundamentals of the system, even though it blows up in their faces every decade or so. Despite all the sophisticated best-practices and the cleverest financial technology capitalism is fatally flawed. The system will eventually rebound from the present recession. The bankers with their spread sheets, their risk analysis, their clever accounting methods will once again seek out their "opportunities" in the next bubble. And then express their surprise when that too bursts.

At some point, the system has to be questioned. The idea that people can trust in more and more regulatory authority to foil the "few" bad pennies and rotten apples is sheer wishful thinking. What must come out of this mess is not a restructured financial and regulatory environment but a fundamental questioning of the whole concept of capitalism. It is no exaggeration to say that the global financial sector tolerates and even encourages systematic fraud. The behaviour that caused the sub-prime mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of a criminalised pattern, rather than some kind of economic accident. There have been very few prosecutions and even less criminal convictions of senior executives. Similar to MacGregor, the bankers have walked Scot-free from the legal process.

The economist, Nouriel Roubini, in Crisis Economics recalls Gregor MacGregor and reminds us of the recurring nature of economic crises. He wrote "...the panic of 1825 reverberated around the world. It began in Britain and had all the hallmarks of a classic crisis: easy money (courtesy of the Bank of England), an asset bubble (stocks and bonds linked to investments in the emerging market of Peru), and even widespread fraud (feverish selling of the bonds of a fictitious nation called the Republic of Poyais to credulous investors)."

Just like many another capitalist swindler, Gregor MacGregor got away with his crimes and found a friendly foreign country to retire to. His name can still be seen on a  monument to honour Venezuela’s heroes of independence. His legacy in his Scotland is very different. The fraud cost more than just the livelihoods of those he fooled, it cost them their lives.

Poor as a church mouse!

In a hard-hitting speech to the General Assembly of the Church of Scotland, businessman Professor Charles Munn said that, as a society, “we have made a mess of our economy and in the process have done a lot of damage...We are party to growing inequality, rising poverty, rising homelessness,” he said. “The rich are doing ok. The poor are getting poorer. “And it’s not just the poor that are getting poorer, pretty much everybody else is suffering as a result of the economic crisis.”

Rev Ian Galloway, departing convener of the influential Church and Society Council, attacked the UK government’s deficit reduction strategy, saying “If austerity means we all have to tighten our belts – and maybe especially those who can most afford it – then so be it. But what is really happening is that the most vulnerable are being punished out of all proportion.” He said that while austerity had a “stiff upper lip quality about it”, the reality was “somewhat different”. “Food banks, places for desperate people to find something to eat are opening across the UK at a rate of one every four days,” he said.

The  Church of Scotland says it cannot afford to pay staff in its care homes the living wage – despite a proposal from a special Kirk commission that all employees should be guaranteed the £7.20 per hour rate. The report of the Commision on the Purposes of Economic Activity, chaired by Professor Charles Munn, which recommended that all Church of Scotland agencies and congregations be instructed to implement the living wage.

The commission condemned growing inequality, the “corrosive” effect of the bonus culture and called for the living wage – defined as the minimum needed for a worker to provide his or her family with the essentials of life – to be brought in “with all possible speed”.

But the Kirk’s social care arm CrossReach, whose work includes operating around 24 elderly care homes across the country, has made clear it just does not have the money to pay the living wage to all its 2000 staff. CrossReach staff are already paid more than the national minimum wage, but have had no cost-of-living rises for the past two years.

In a separate report, the Kirk’s church and society council said it would be “an important demonstration of our commitment to justice and poverty eradication” if by 2015 all churches could move towards paying the living wage. But it said: “It is recognised there are barriers to congregations achieving a Living Wage for their employees, not least that resources are scarce during this economic downturn.”

As well as backing the living wage, their report proposed a maximum interest rate for all kinds of consumer credit, urged the expansion of credit unions to take the place of such pay day loan organisations, as safer ways of accessing loans. The Kirk has attacked companies that make pay day loans with sky-high interest rates, accusing them of causing “a great deal of damage in our society” and calling for greater regulation. Professor Charles Munn said interest rates charged by so-called “pay day loan companies” were a prime concern. “We were very conscious that the levels of interest rates some people are paying for consumer credit, that means very often people borrowing money just to meet very basic human needs, some were using pay day loan companies, some of which charge 4,000 per cent interest for their loans,” he said.

 Prof Munn also criticised the UK government’s handling of the tax system, saying that the commission had been “appalled” at the huge number of organisations, companies and individuals involved in tax evasion. Taxes should be seen as “a social obligation akin to loving one’s neighbour”. !!

http://www.scotsman.com/edinburgh-evening-news/edinburgh/kirk-unable-to-pay-all-of-its-employees-the-living-wage-1-2308374
http://www.scotsman.com/news/politics/general-assembly-pay-day-loan-firms-doing-great-damage-to-society-1-2308638

What's in store

Scotland's struggling shops have been dealt a fresh blow today as figures reveal that the numbers of shoppers plunged in the run-up to Easter. Retailers reported a 12.6 per cent drop in footfall in the three months to the end of April, outstripping the 2 per cent fall posted for the UK as a whole.

Ian Shearer, director of the Scottish Retail Consortium said "...the essential picture remains of consumers lacking confidence, disposable incomes still being squeezed and fewer people shopping for anything that isn’t an immediate need."

Richard Dodd, a spokesman for the SRC, explained: "Scotland’s shops have been trailing behind the rest of the UK for quite some time now, about a year. Fundamentally, that’s because a bigger proportion of Scotland’s economy is dependant on the public sector. So public sector cuts – either real cuts or just the fear of them – have a much greater impact in Scotland.”

Property experts warned that the rapid growth in online shopping meant the days of big retail developments are over and fewer shopping centres will now be built.

Mark Robertson, a partner at property agency Ryden added this could also trigger a second crash for housebuilders, which are often reliant on shopping centres or retail parks for the building of infrastructure, such as roads, roundabouts, street lighting and sewage.

http://www.scotsman.com/business/high-streets-hit-as-cash-strapped-scots-shoppers-vote-with-their-feet-1-2307537

doom and gloom

Scotland faces "five more years of pain" with unemployment rates expected to outstrip the UK average and hit their highest level in almost two decades, a think tank has warned. By 2016, the Scottish unemployment rate will be close to 10%, according to the Centre for Economics and Business Research.

Economist Rob Harbron, one of the report's authors said "The outlook is tough for UK households, particularly those in places with a high dependency on public sector employment. Family budgets are being squeezed between the pressures of rising unemployment, low earnings growth and stubbornly high inflation."

http://www.heraldscotland.com/politics/political-news/scotlands-jobless-will-suffer-five-years-of-pain.17520316

shops and shoppers disappear

One in nine Scottish shops is lying empty as the retail sector slowdown shows no sign of easing, new figures have revealed. Scotland’s store vacancy rates stand at 11.1%.

Stephen Robertson, British Retail Consortium Director General, said: “Fewer people are shopping because households are facing high inflation, low wage growth and uncertainty about future job prospects.”

Colin Borland, spokesman for the Federation of Small Business in Scotland, said “Hard-pressed families are reviewing every pound in their weekly budget. People are thinking before they buy and that, of course, has a knock-on effect on foot-fall and wider business confidence. As soon as people start to see vacant units appearing in high streets, it is almost as if they are contagious. It gives the impression the area is on the way down and means there is less economic activity to sustain remaining businesses.”

capitalism won't collapse

Official figures released last month by the Accountant in Bankruptcy showed that a record number of Scottish firms went to the wall in the three months to 30 June. The number of Scots companies failing rose by 19.7 per cent quarter-on-quarter.

Matt Henderson, business recovery and insolvency partner at accountancy firm Johnston Carmichael, said: "This makes for truly miserable reading, particularly when we see the stock markets in global meltdown."

"I believe that many of these failures are among smaller Scottish firms and that some will simply be victims of larger firms going bust. The 'domino' effect of larger firms taking smaller firms with them is well known but I have seen many examples of firms who were not massively in debt but who simply lost their order book when a larger company went bust." Bryan Jackson, corporate recovery partner at accountancy firm PKFwarned: "I have continued to see many long-established, well-known businesses going bust. Some of the owners, who may have been through two or three or more recessions in the past, have tended to believe that they can ride out the recession as they have in previous years. Unfortunately, this recession is unprecedented and its impact is still being felt by many businesses across Scotland. The much-anticipated upturn may be some way off."

Iain Fraser, Scottish spokesman for insolvency practitioners' trade body R3, added: "What these figures reveal is corporate Scotland is really struggling to cope with the after-effects of the recession."

Once the recession is upon us, conditions that are favourable to a recovery become apparent. Companies that declare bankruptcy sell off their assets cheaply to their rivals. Less demand for producer goods means lower prices. The reserve army and many others are laid off creating a competition for jobs and thus lowering wages. Lower demand for loans reduces interest rates like any other commodity. The large stocks built up before the advent of the recession gradually decline to a point where production is again necessary. All of these factors make investing in production more attractive and the cycle begins its upward swing. It is evident then that the seeds of every boom are to be found in every recession and, conversely, the seeds of every recession are to be found in every boom. This boom and bust cycle is an entirely natural occurrence of the capitalist mode of production. It hasn’t collapsed capitalism yet, and, in fact, recessions tend to strengthen the system by weeding out the weak and inefficient enterprises.

unemployment

Areas such as West Dunbartonshire and East Ayrshire have overtaken inner London boroughs as the hardest places in the country to find work, with more than 40 candidates chasing each job, TUC analysis has revealed.

"Dozens of towns and cities have more than 10 dole claimants chasing every vacancy and areas on their doorstep are not faring much better. It's not good enough for ministers to brand those out of work as feckless and claim that there are plenty of jobs out there. The reality is very different." TUC general secretary Brendan Barber said

It doesn't matter where you live, deprivation is a world problem.

recession news

The typical household will see its disposable income fall by 2 per cent this year, the equivalent of £780, an economist warned today. Roger Bootle, a former government adviser who now works with Deloitte, the accountancy firm, predicted that 2011 would be the worst year for household finances since 1977 – and added that if interest rates were to rise, British families would not have seen conditions deteriorate so badly since 1952.

Said Mr Bootle. "I think this year will see falling real earnings, falling real house prices and rising unemployment."

Cameron threatens the unions

In his first television interview of the year, Cameron, facing a possible spring of discontent as unions consider co-ordinating strikes against public-sector cuts, sent a tough message against any militant action. "Striking is not going to achieve anything and the trade unions need to know they are not going to be able to push anyone around by holding this strike or that strike or even a whole lot of strikes together – they can forget it,” he declared.

Bob Crow, general secretary of the RMT union countered: “If David Cameron thinks he can batter working people into the dirt through his undiluted brand of fiscal fascism, then he’s got another think coming.” He added: “Millionaire public schoolboys, who are insulated from the lives of working people taking the daily hit of VAT increases and spending cuts, are in no position to tell the unions what we should and should not be doing to defend our members.”

Grahame Smith, the STUC general secretary Cameron was deliberately raising the political temperature with an anti-union sentiment, which, he argued, was “extremely unhelpful" and explained that "If union members want to take industrial action, they do so not against the Government but against their employer. Any industrial action will not be politically inspired,”

wages or jobs?

Cuts in public spending could wipe out up to 125,000 jobs in Scotland – about 5% of the working population – within the next financial year, union leaders have warned. Unison, said 60,000 public-sector and 65,000 private-sector jobs could be lost north of the Border because of spending cuts.

“The recruitment freeze is already condemning a generation of young people – many of whom have trained for years – to unemployment..." the union explained

Aberdeen City Council's SNP-LibDem coalition voted in December to begin negotiating with the unions about a 5% pay reduction, which would remove the need to shed about 1000 members of staff.

The Recession - it is a death sentence

The World Bank is issuing even bleaker warnings about rising poverty and hunger in the developing world. Initially, it estimated that 46 million people in developing countries could be pushed into poverty. Now, that level is up another 7 million.
“We estimate that about 130 million people were pushed into poverty from the food crisis and if you add the financial crisis on top of that we are estimating that about 53 million more people could be pushed into poverty as a result of the financial crisis,” World Bank Managing Director Ngozi Okonjo-Iweala said

The World Bank estimated that the current financial downturn may add between 200,000 and 400,000 additional infant deaths per year on average in the 2009 to 2015 period. That means a total of 1.4 million to 2.8 million more infant deaths, if the financial strain continues.

"...When you talk about the financial crisis becoming an unemployment crisis in the developed world, in the developing world for many poor people it’s not an issue of unemployment, it’s an issue of life and death.”

forgotten victims

Charities estimate that more than 8,000 buy-to-let properties could be repossessed in the coming year, with at least 10,000 people being made unexpectedly homeless. In some cases families are given no warning at all, sometimes returning home to find locks had been changed and their possessions out on the street.In one instance a family had to spend the night sleeping in their car, before being moved into emergency hostel accommodation.

Shelter chief executive Adam Sampson said "Tenants who have kept their side of the bargain by paying their rent are being thrown out on to the street because their landlords have defaulted on the mortgage."
Leslie Morphy, of Crisis, said "We risk forgetting that tenants of private landlords are extremely vulnerable to the recession,"

recession is bad for your mental health

First discussed here , we now read that the UK government are now going to finance similar therapy services in England to help identify those who might be suffering from depression due to the downturn. Support workers will help those who have lost their jobs and suffer from depression and anxiety .
The BBC's Mark Sanders said the announcement was, in effect, an acknowledgement by the government that mental health problems could be caused by the recession.

inescapable burden of debt

Up to five million homeowners could be in negative equity by the end of this year if house prices continue to fall, research has claimed

Andy Thwaites, director of insight at GfK Financial, said: "The shift to negative equity has the potential to be a mammoth welfare disaster for the nation, particularly when so much of the population has recently relied on the capital appreciation in their home to supplement their lifestyle, consolidate debts and fund retirement.The reality is that if there are further job cuts, the problem will become significantly worse."

The average person approaching Citizens Advice for money advice owed £16,971, the organisation said. It would take around of 93 years for people contacting a debt charity for help to repay their borrowings at an affordable rate.

"Low income, combined with irresponsible lending, unreasonable debt collection practices and badly informed financial decisions are at the root of many of our clients' debt problems." David Harker, chief executive of Citizens Advice said " The reality is that they are condemned to a lifetime of poverty overshadowed by an inescapable burden of unpayable debt."