Category Archives: Austerity

Austerity, benefits process, cuts and poverty impact on mental health and psychological wellbeing

Psychologists march from BPS Leicester to BPS London to raise awareness of impact of benefit system (process, cuts, sanctions and poverty), food poverty (in and out of work) homelessness (rough sleeping, sofa surfing, poor inadequate housing and risk of homelessness) (Guardian article)

The psychologists walking 100 miles to fight austerity’s impact on mental health

Walk the Talk website

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Austerity ideologies, possible alternative scenarios, the Iceland model and the next financial crisis

Austerity is an ideological policy that many governments decided on when they got together when it was realised that the entire global financial system was at risk of collapsing in 2008. It is one reaction to the scenario that was hastily put together to stop the imminent collapse, originally from an emergency meeting in US with the President and Federal Reserve and with constant communications between investment banks.  This policy was then copied in Europe, with just one exception, Iceland. it is also the one that was calculated to cause the least damage to the very rich and powerful, to corporations, chief executives of large companies, governments senior executives and high pay hierarchical bureaucratic structures of civil servants, health administrators and even down to maintaining a high pay entertainment industry, with advertising and sports that pay some of the highest rates of pay, and of course banks and bankers, high pay with phenomenal bonuses. The people who made the decision were closely tied to this group of people, so they were interest parties.

 

The alternatives were not good, as that would have been an immediate collapse of the banking system, which would have been uncontrollable and wiped out banks along with corporations with heavy investments, the global economy would have ground to a halt, but would have still existed.  The fallout would have hit those with the most invested in the financial sector the worst. However like Iceland, the fundamental bases of economies, especially ones with larger public services not totally reliant on the financial sector could still have carried on with the support of governments enabling the general system to carry on, bearing in mind that the financial system of banks would have collapsed, so everyone would have been affected. But the hit would have been top down instead of bottom up, as is the way of the austerity policies. The nearest in effect would have been the way Iceland dealt with the crisis, but on a much bigger scale. There would have been a re-basing of wages for different jobs and careers, with lower paid jobs being largely unaffected, some may even have taken over current higher paying ones, due to necessity of social care jobs compared with the redundancy of bankers and lowering of pay attached to bank sponsorships, so very much the advertising industry

 

But many higher paying jobs would have taken big hits, at least in the short term until an alternative banking system had been re-established and a new leaner advertising and sponsorship industry had been rebuilt.

 

For instance the entertainment industry, movies, television, big theatre shows and concerts would not have been able to continue to pay mega salaries to many film and sports stars, advertising would have decimated, big sports sponsorships, especially baseball,  baseball, tennis, golf, cricket, motor racing and any big tournaments that rely heavily on advertising and bank sponsorships. This is because many, even most banks would have collapsed.

 

However with fairer policies people could have kept their homes and there could have been support for at least up to a certain level of savings, but would have been enough to support all poor to middle incomes, again like Iceland. Some banks would have survived and they could have expanded along with a vastly nationalised system of retail banking, but with investment banking largely collapsed under the mark to market real value, i.e. bankrupt.  Mortgages could have been underwritten by governments via nationalised mortgages and government borrowing, as happened after World War I and II.

 

Borrowing would have had to rise to secure homes and an economic base.  Some will say this would have been unaffordable as it would have been immense. This would have been immense and unaffordable, but what they do not recognise is the cost of saving the banks, due to black holes of debt, highly leveraged products such as credit default swaps and derivatives, mean the cost is actually far higher than saving the people’s savings and mortgages, as in effect government shave instead taken on board all the banks’ bad debts and gambling losses and still have had to prop up the mortgage system.

They have also tried to re-engineer the housing bubble and equity bubbles using vast sums of money through quantitative easing and record low interest rates. In desperation for the first time even going into experimental territory with negative interest rates for banks, although for borrowers this is not the case as banks charge steep interest rate premiums to add to profits from customers.

Counties have also seen the opportunity to follow through ideological policies of austerity using excuse that the deficit is caused by spending on public services, which Is not the case, as in many cases such spending is part of the fabric of society, its services, but also the engine of the economy. The financial sector has multiplied in size to become dominant in the economy. Countries with the heaviest weighting of financial services sector are at the greatest risk, which is why Iceland was hit hard quickly, but they let the banks fail. In all other countries they have propped them up, but with smaller countries having least alternatives from central banks through QE, so Cyprus had to confiscate peoples’ savings and be bailed out by IMF loans with deep austerity conditions as is the case with Greece. Not the fault of the people, but the people are paying the price.

 

Stacy Herbert at People’s Parliament explains how the derivatives bubble of $1 Quadrillion debt exploded and the reactions of governments with ideological austerity and the mass investment involving oil and arms trades as well as banking in what has been termed by’ Artist Taxi Driver’ The War Machine:

Stacy Herbert on People’s Parliament #WarMachine

‘Artist Taxi Driver’, Mark McGowan on People’s Parliament:

The derivatives bubble of $1 Quadrillion represented the largest sum in the world, as much as 20 x total world GDP at the time in 2008. Latest estimates are of a derivatives bubble exceeding $1.5 Quadrillion and record debt and investments tied up in equities to $2 Quadrillion :

New York Times: Central Bankers, Worried About Bubbles, Rebuke Markets

By some accounts, the most up to date estimations of global derivatives in 2013 were already over $2 Quadrillion and by 2014 are even higher:

World Federation of Exchanges – over $2 quadrillion of derivatives in 2013

Growth in derivatives was steady from 2009 following the world stock market falls in 2008 to 2009 and emergency central bank stimulus measures of multiple QE around the world, flooding the banks with liquidity, i.e. money to speculate with. From regaining former record levels they have soared since 2011, with latest estimates up to 20% per annum by 2014 to new record highs that could exceed $2 Trillion or double what it was at the start of the global economic collapse in 2008:

LaRouche: ‘It’s Wall Street or Mankind, Your Choice’: Global Speculative Bubble About to Break the $2 Quadrillion Barrier!

When the highly leveraged banking gambles collapsed, the existent high stock market value sand high property prices imploded and governments panicked with emergency measures, which they followed through by austerity measures which were designed to recapitalise the banks from masses of people, along with reflating the bubble.  Trouble is it was that being such a big bubble caused the original collapse in 2008, so reflating the bubble and now even exceeding it with new high son equity prices in stock markets and new highs in housing bubble sin many countries. This places the world at the same risk as then, but without the same tools to deal with it, in fact there are not any because counties would start the next collapse from a position of vast debts from the last collapse. She very concisely explains the position that the world now finds itself in.

Wall Street hitting new highs daily, the familiar tune

The masses largely do not anywhere near comprehend the sheer scale of the losses or amounts covered, which in fact dwarf the cost of entire welfare states, benefits, health care, education, even GDP for years of all countries following this plan. However the debt has exploded again because the problem was not resolved and no action was taken against the banks and bankers involved. They have merely partially recapitalised banks based on governments’ ballooning debts and austerity measures that have been largely symbolic and  ideological have already been imposed which are like a drop in the ocean, with the world again teetering on the brink of economic collapse.

World stock markets Irrational exuberance again but requiring a more dramatic description this time round in world equity markets, with many stock markets around the world registering record highs. The only exceptions being in countries such as Japan where the meltdown was so fierce it has never regained anywhere near former values in 25 years and once down its down, its start again so lie the rest of the world the new base was in 2009 as the world banks and governments tried to convince the masses they had resolved the crisis. This has been fuelled by this pretence but also by the largest amount of money printing, infusions of liquidity through quantitative easing (QE) that there has ever been and as an index ratio to world GDP and contributed to banks ploughing in astronomical sums and the biggest rise on global equities on record in many countries.

Of the three biggest bubbles in history, the one referred to in 1999 was a technology sector bubble that was on a comparable scale with stock market history major bubbles and it collapsed in  2000, although it has been re-inflated again along with everything else in the current super-bubble. But for the general stock market in all sectors combined the current bubble is closed to the 1920’s one that led to the Wall Street Crash of 1929, with further crashes in 1930 and every time it rose in the 1930 fell back again, until WWII changed global economics, along with a human tragedy for millions, acted to boost the economy with demand, quickly followed by new developments in technology following WWII, to become post-war an age of another kind of industrial revolution, a technological one and expansion of capitalism, all before corporatism took over and technology was used to suppress the masses, with lower incomes, longer hours and mass unemployment, as opposed to improve things for them. But as bubbles go the current one is either second the 1920’s one or as the sheer amounts gambled and levels of leverage in so-called investing or rather gambling, way exceeds even the precipitous bubble peak of 1929, this is therefore perhaps the biggest bubble in modern history and more comparable to Tulip Mania or South Sea bubbles of even earlier times. But again as amounts of money in the economic system are at record levels and with vast leverage and the kinds of derivative based investment products and use of high frequency trading, places it even possibly beyond those historic bubbles, making it the biggest bubble in history

Dow closes above 17,000, yet another new record high.

Another day, another new high on Wall Street

Cheerleading advice given on US mainstream TV media in America was now it has reached a new plateau its time to get in:

In 1929 Fisher stated “Stock prices have reached what looks like a permanently high plateau”

Wall Street has for a century been the barometer of world equities and the current position is most closely compared to that of 1929 at the height of the irrational exuberance then where markets were considered to have gone up above a new plateau before the Wall Street Crash and Great Depression.

The volume of trading is vastly larger in modern times compared to 1930’s, but if it goes wrong then so too is the absolute level of risk, with banks again involved in complex derivatives, betting using high frequency trading (HFT) . UK, US and European banks and hedge funds, but especially UK and US are heavily involved gambling and betting on the global markets. Last year on one day the Japanese Nikkei index plunged 10% possibly contributed by rapid responses of high frequency trading to perhaps even an error in the algorithmic programs dictating the trading.

A Serious Drop in Japan’s Stock Market Adds to Wall of Worry

As at the time of the Wall Street crash in 1929, again in 2014 investors in the stock market have also reached a record high level of margin debt:

NYSE margin debt rises in May; first increase since February

Happy Days Are Here Again, a song that is from a film called Chasing Rainbows made in 1929 and a hit in 1930 at the very start of the First Great Depression

Austerity, Poverty, (Un,Under-) Employment, Inequality, Physical and mental health, and Psychological Well-being

A big determinant of absolute poverty is the cost of essentials and cost of living based on things that are unavoidable such as housing, food and shelter and legalistic bills such as Council tax and maintenance security costs such as house insurance. If running a car  legalistic as well as necessary insurance cover. If buying a house with a mortgage insurance requirement as part of the mortgage agreement plus to cover for risks to property in all aspects. Alternatives to buying a home or running a car are not free. Renting can be just as expensive as buying, in fact for anyone becoming redundant after paying a mortgage for years, renting can be a lot more expensive than a mortgage would be. But renting is also often the only means of getting housing when the large amount required to secure a mortgage and maintaining it is not possible on extremely low incomes, no incomes and poor job security. Not running a car cuts the insurance and maintenance aspects, but public transport is expensive, especially so on low and no incomes can be impossible to travel very far and restricts geographical mobility.

 

Most of the so-called ‘new’ jobs have been in London and the south East, although the quality, job security and pay rates of new jobs are not usually referred to, but again of all new jobs, the best paid and most secure may also be in London and the South-East, with the majority of newer jobs outside these areas tending to be in the most insecure lowest pay sectors. Also there can be great disparities within cities, with enclaves of poverty amongst great wealth, often showing some of the greatest divisions of wealth, also with dangers of property prices in areas with more better paid work pushing out lower paid workers who cannot afford to buy or rent property on low incomes. This means there is a poverty problem outside London and the South-east, which is masked by a skewing of economic statistics because of the London and South-east bubble, but also within the same otherwise more affluent regions an increase in poverty amongst the lowest paid, often insecure and unemployed, the poorest.

Since 2010, according to the Adonis Report, 80% of all new jobs have been London and another 10% in 9 other cities, leaving just 10% in the rest of UK spread unevenly:

Guardian article: Lord Adonis review backs devolution as key to ‘balanced economic recovery’

Cost of Essentials and Cost of Living in UK are discussed in the following article on the Living Standards Gap published by JRF:

“Party leaders must close the living standards gap facing the worst-off families”

Vox Political – ” The minimum income is 2-5-times what people get on benefits but still they are labelled scroungers”

According to Joseph Rowntree Foundation (JRF), Minimum income standard (MIS) many of the UK poorest will never have the opportunity to be able to achieve even this what is after all meant to be a minimum standard of living:

Guardian: Many British people will never afford an acceptable minimum living standard

Back in 2012 it was found in a report that the average person required £30 per day to cover the cost of bills, as food is one component amongst many essentials.

As the cost of essentials has continued to rise rapidly since then even that data is already out of date and therefore the cost of living is even higher. What the following article points out is it i snot the spending of the poor that counts most when determining an absolute minimum requirement as often the poorest people go without essentials such as food and heating in order to pay bills. This can be mothers skipping meals to ensure children are fed and even then not necessarily able to give them what they most need. Also single people are often under-represented in that benefits for single people are the lowest, although no child costs, but also no child benefits. Single parents too are under-represented as in couples even if one is low paid often one partner brings in some income and cost of living, such as mortgage, rent, heating, utilities, insurance is shared between two adults and any children, but for single people or single parents with children this is not an option. Also being single is often not the choice of the individual, either they have not managed for many reasons, including not being able to afford to socialise through being poor or just two compatible people just not meeting, or to becoming a couple or they have been but have ended up separating or getting divorced, with UK having one of the highest divorce rates in the world, so being single is just as common as being in a relationship.

The next article highlights something that is lacking in many reports, that of data lag, but also when reports are written with the purpose of propaganda dates can be deliberately selected so as to alter the results. As most of the worst cuts in benefits occurred after the data collection of many published reports, this means the situation is already far worse than is indicated in many even recent reports.

All told, essentials make up a very large proportion of the use of income and benefits are often inadequate to maintain even the basic cost of living requirements. This is where austerity and poverty is very under-represented and appreciated in terms of it now becoming absolute poverty in the developed world.

 

Many comparisons are often expressed for the purposes of excusing or belittling the problems of the poor in developed countries by making comparisons with the absolute poverty of living on, for example, £1 a day in the Third world, which is dire, and should not be in the first place. But this simplistic comparison also lacks taking account of the very high cost of living in many developed countries.

UK is one of the most expensive countries in the world to live, just to cover these essential non-negotiable costs. Because of this it would not be possible for anyone to pitch up a tent, along with UK climate and land regulations, Council tax, water rates, plus service such as sanitation and if trying to get to work in urban environments, transport, where to put one suit for interviews etc. and cost of produce in shops, to live on £1 a day. The essential costs now require above benefit levels for non-disabled and the additional sums for disabled are required for additional cost of being disabled, with many having to use these to pay for essentials and with cuts in disability befits also to endure absolute poverty, with even fewer ways out due to limits of disabilities and discrimination by employers.

Many have no choice but to resort to benefits as a safety net because of insufficient numbers of jobs that pay adequate wages to support the cost of living for essentials and then have to endure living with a shortfall of income to meet basic needs, many having to resort to debt or go without essentials, which in effect means many more in the developed world moving from relative to absolute poverty.

In any country there are added problem where there is relative poverty, as inequality in itself causes psychological and social problems, with social division. In developed countries there is sufficient wealth within the macroeconomic system pertaining to each country.  Np one should have forced to be in absolute poverty in rich countries and inequality can be minimised, with everyone having as reasonable as possible lifestyle, and especially equality of opportunities in education and employment as well as all aspects of society. There should not be anyone in absolute poverty, economically there is no reason for it, unless the economics are those of deliberate division and inequality.

World Bank report finds GDP growth in unequal countries, when deconstructed into top and bottom quartiles, that as inequality rises, poor wealth declining whereas wealth of rich increasing:

Ideally underdeveloped countries too should also be able to eliminate or at least minimise absolute poverty too, as the UN and UNICEF have often stated in their mandates for a more equal world and the poverty of the Third world is related to exploitation of the richer developed countries, so also a need for a more equal world too.

Helen Keller > Quotes > Quotable Quote:

“The few own the many because they possess the means of livelihood of all … The country is governed for the richest, for the corporations, the bankers, the land speculators, and for the exploiters of labor. The majority of mankind are working people. So long as their fair demands – the ownership and control of their livelihoods – are set at naught, we can have neither men’s rights nor women’s rights. The majority of mankind is ground down by industrial oppression in order that the small remnant may live in ease.”

 

 

Psychological and Physical Effects of Relative and Absolute Poverty and Austerity

Effects of poverty and austerity are wide-ranging and noticeably affect the lives of the poor, physically and mentally, with many alarming comparisons available as well as many not often sufficiently accepted in the media and by governments that are working on different agenda, where the poor are given low priority or in unequal countries are a priority in that  they are used a spawns in enabling the rich to get richer, by exploitation or discarded, cast aside.

In psychological terms all these stresses of the poor are manifest by  relative deprivation that adds to immense psychophysical and biological, and even neurobiological consequences of relative and  absolute poverty.

Ongoing blog item shall be added to as appropriate

Race to the Bottom: In and out of work poverty in reality both getting worse in UK and in many countries

One aspect of the current economic transference of the labour market is increasing in-work poverty, mixing unemployment and underemployment, more as part of a continuum of employment, with part-time, zero hour, and low paid remuneration, based on increasing of inequality. There is a widening as well as record wealth divide in many countries around the world. Some economics workers refer to the Gini coefficient and index, but this itself can be misleading, especially as it inadequately represents the scale of absolute poverty at the bottom and misses off the difference between poor and very poor, which can be the difference between being hard up and affording to live. Destitution, hunger and often is with respect to particularly disadvantaged groups or sectors within society, so that the reality for groups driven into poverty can be far worse than the very general Gini index can accommodate.

The following article also mentions availability of data, like unemployment statistics can be very misleading, or even if in the same direction, can underestimate the real situation and related circumstances for those suffering poverty. Limitations and even worse biased selection of samples of the population used in data collection, with resultant statistical error and questionable validity mean absolute poverty at the bottom is often far worse than statistics based on official available figures:

‘Difficulties calculating inequality and the gini coefficient’

‘In-work poverty’ soars by 59%

Useful reports on In-work poverty by Joseph Rowntree Foundation, discussing the various elements that contribute to falling incomes for the poorest in work:

‘Zero-hours contracts are just one part of the UK’s in-work poverty problem’

Not enough jobs, not enough hours, not enough pay: shocking rise of in-work poverty in Wales revealed in new JRF report

Search of ‘in-work poverty’ from Joseph Rowntree Foundation site provides some interesting demographics and details of reality behind the statistics:

In-work poverty article search

“Child poverty is increasingly a problem in working families”

It is a typical graphical representation from official sources illustrating rising UK in-work poverty statistic (2001/02 compared with 2011/12). It is useful as it highlights a problem of in-work poverty mushrooming in UK, but it is also  problematic to compare 2001 to 2011, as standard of living rose especially so for the poorest, but has rapidly fallen since 2010 and continued to fall since 2011. It also has to be borne in mind that the division is very general rich and poor, whilst in reality there are divisions of poor, with many shades of poor, with the poorest without means or with family able to supplement inadequate means, having the greatest fall in the standard of living in UK.

This statistic has been featured in many recent articles and newspaper reports on in-work poverty in UK relating to the latest in-work poverty situation. However, I have felt every time I read this information on in-work poverty increasing that it is often unintentional, but sometimes intentional affect, by comparing the two of making people think that out-of-work poverty is falling, whereas in-work poverty rising, but in reality both are rising, just in-work poverty is mushrooming. Often headlines state in-work poverty is now a bigger problem than out-of-work poverty. It is actually an unnecessary association, but it is a factor of comparing two variables, namely in and out of work poverty as a percentage of total poverty.

It was important to emphasise that this is something though that is often missed from illustrating the rise of in-work poverty and not a criticism of this graphical representation. In-work poverty is indeed a very real problem in itself, with many more going to work, but still not having a living wage and even benefits increasing due to inadequate income. However benefits have been cut per individual, so although the benefits bill in terms of government expenditure can rise and needs to with real inflation, as opposed to the inadequate official inflation figures is rising even more for the poor, due to the much higher weighting of essentials in the cost of living.

So for those having to rely on benefits, it is a very real cut and those not in work unless they have any other sources of support, such as family and not everyone has family or family that can provide financial support are left even more impoverished. But the way that the comparison appears is a factor in the way that statistics work, or rather are used. A lot depends on presentation of variables and associations, interactions, often with different types of error. There are many good books on statistics used in psychology and economics that explain these various aspects of using and presenting statistics (see recommended reading references note below for some books I like).

The case in point is that it would be interesting to examine further, by including in the graph, on the same scale, increasing poverty both in and out of work, but also still illustrating the massive increase of in-work poverty. This would help to illustrate both problems at the same time. That is, in and out of work poverty are both increasing in the UK. This is also quite possibly the case in many countries around the world that are currently praising themselves on falling official unemployment figures, bearing in mind many countries such as UK also use manipulate statistics to try to show unemployment as much lower than it actually is.

OECD forecasts, based on recent trends, inequality rising and GDP growth slowing in spite of population growth increasing:

Disguised unemployment, making official figures appear not anywhere near as bad as they really are still exists just its not featured in official figures, along with an enormous growth of underemployment, much lower job security and falling incomes of lower to middle incomes in many countries, but especially those following ‘Austerity’ policies such as UK. So Prof. Stiglitz in a lecture on the reality of US along with most of developed world, especially North Atlantic bordering countries, but with macroeconomic linkages throughout the world, still being in a Great Depression (24:00 in video) UK is even worse, but all are in a Great Depression.

The North Atlantic malaise: failures in economic policy

“not just a lost decade, but unless anything is done we could be talking about a lost quarter century..”

References

Joseph Rowntree Foundation website

Recommended reading references for books on statistics:

My favourite books on statistics, especially relevant for psychology, include one of my recent set books Andy Field, ‘Discovering Statistics Using IBM SPSS Statistics’ (4th Ed) (2013) Published by Sage and available as a book or on Kindle. Also the heavy weight book Barbara G. Tabachnick and Linda S. Fidell ‘Using Multivariate Statistics’ (2013) Published by Pearson.