Anti-austerity but hooked on Interest
- Published on Tuesday, 29 September 2015 10:20
There is little argument with the claim that austerity is regressive; it attacks the poor hardest but has virtually no effect on the wealth of the rich. Rising inequality has been a feature of the last 35 years but since the 2008 crisis it has got much worse: latest figures show just 66 people own wealth equivalent to that held by half the population of the planet, 3.5 billion people.
Inequality is structural and an inevitable consequence of the current political economy and if we are serious about tackling austerity and inequality, we need a structural response. Interest is one of the two primary drivers of inequality (the other being the distribution of the commons – more of that later). Inequality is built into the interest based money system because it disproportionately benefits those with more money than they need at the expense of those who need it.
Everyone pays interest because within the price of whatever you buy, a railway ticket, food, electricity, there is an interest element relating to the capital cost of: the railway infrastructure (stations, tracks, rolling stock), the food production chain (land, machinery, transport) and in the case of electricity, the cost of power stations and transmission infrastructure.
For her book, Interest and Inflation Free Money, Margrit Kennedy calculated that, on average, approximately 50% of what West Germans spent in 1982 was interest. But she found interest doesn’t treat everyone equally. She divided the population into deciles (10% bands) by income and calculated the interest each decile or band paid in interest relative to interest received. What emerges is an exponential pattern of wealth distribution from the poorest to the richest.
The first eight deciles or bands (ie. the bottom 80% by income) paid twice as much interest as they received whereas the top decile (top 10%) received twice as much interest as they paid. That means the bottom 80% paid all their interest to the top 10% – in the words of Ivor, a Critical Thinker, “interest is a wealth transference mechanism”. It proves the expression “money goes to money” but as you go up the income scale it gets dramatically worse. The top 0.01% (equivalent to approximately 700,000 people out of a global population of 7 billion) received 2000 times what the top decile (or 10%) received.
We aren’t being serious about tackling austerity and inequality unless we remove the corrosive force of interest which drives exponential inequality. Interest is destroying our civilisation and the planet while enriching the Structural Elite and their elevated cattle.
Poverty, wars and environmental destruction are all symptoms of a diseased political economy – only by removing the fundamental flaws in the system, one of which is interest, can we resolve these existential issues.