As the economic crisis deepens, the real pain is beginning to transcend down and across all elements of society. Although all recessions tend to have a deep impact on standards of living, the burden normally falls on those elements of society that are traditional disenfranchised. Yet this recession is different. The term ‘squeezing the middle’ has been defined to articulate how the recession is affecting the middle classes.
Not normally one to complain...
The middle class in most societies are normally the most placid and easily manipulated or incentivised. However, when a recession begins to erode this group's standard of living (and more importantly their long-term prospects), the politicians have a problem.
Gathering storm clouds
The fledgling protest movements that are beginning to spring up around the world (US, UK, Tokyo, Italy, Germany etc) are still yet to find a definitive voice but they are united in protest at the seemingly double standards of the economic and political agenda that is being pursued and doggedly defended within Western economies.
What’s the message?
Politicians are beginning to recognise the potential danger of ignoring this growing frustration. Barack Obama and David Cameron have both made speeches specifically aimed at recognising and placating the anguish that these demonstrations are representative of.
Is it enough?
The danger is that individuals are growing in their demands for wholesale restructure and change of social, political and economic systems. It would be easy to claim that this is some call for a new form of socialism, but is it? I think that the growing recognition of self-fulfilling corporate greed that takes from society, is beginning to be recognised as an unsustainable approach.
The deep-rooted debt crisis has driven economies to keep interest rates at an all time low whilst inflation has risen beyond expectations. This economic policy is highly effective at eroding the effects of debt (as the debt becomes cheaper) however it also hits savers the hardest. The combined effect of this strategy is to penalise savers and reward people or organisations with debt.
What are the lessons?
Someone once said, if you owe the bank £250,000 it’s a big problem for you. If you owe the bank £25,000,000, the bank has the problem. It would now appear that when the bank lends recklessly, it now becomes the problem of the individuals within the society. This is the source of the problem and causes an unjust situation where large corporates have been encouraged to manage their debt crisis by passing the debt on, restructuring it through bankruptcies, share issues, state loans and quantitative easing in order to reduce their responsibility and accountability for the economic crisis.
Back on the merry-go-round
The problem with this economic strategy is that nothing has changed. The same people who made the mistakes are still in key positions of responsibility. All that has been learnt is that poor decision making carries no accountability, whilst unreasonable risk taking results in individuals 'earning' huge rewards.