As the European Central Bank unveils quantitative easing, BERNIE EVANS asks why politicians seem so unable to learn the lessons of both British and Weimar history
UNTIL recently it was deemed essential for every state school pupil in Britain to study the rise of nazism in Germany before they decided on their optional examination subjects. Those choosing history as one of their GCSEs had to be given the choice to study — in more depth of course — the rise of Hitler.
Consequently information about the frenzied printing and circulation of paper money in Weimar Germany in 1923, and the resulting hyper-inflation, is now well known.
If facts like workers being paid twice a day, prices doubling overnight, entire savings being lost, money becoming entirely worthless and a new currency, the Rentenmark, having to be introduced in 1924, are well-remembered in this country, imagine how they must have been drummed into the memories of German children.
This is the impression we have, so strong have been the German objections to solving European economic problems with the 21st century’s version of quantitative easing (QE).
Faced with austerity-driven Europe-wide deflation and the election of left-wing anti-austerity parties like Syriza in Greece — and possibly Podemos in Spain — the European Central Bank (ECB) was last week allowed, in the words of the Financial Times, to “unveil a programme of mass bond-buying.”
In Britain the £375 billion of QE which went to the banks early on in the coalition’s tenure did nothing to benefit the British economy or change the banking culture, was not loaned out to businesses as intended, and probably contributed instead to obscenely high salaries and bonuses.
Isn’t it typical of the way the world’s economies are controlled by the politicians’ capitalist paymasters that the callous and cruel cuts of austerity are seen as the first step, and QE the second, on the road to what they see as economic recovery?
Isn’t it ironic, too, that there is an alternative method in existence — one that has been in practice to some extent at least, in Germany, of all places?
Rather than running the risk of QE simply filling up the overflowing coffers of banks and big business, Britain would be well-advised to follow the example set by post-war Germany. Its government allows co-determination, which involves union representation in the running of companies, a role which involves setting pay levels for all employees.
In Germany, with an unemployment rate similar to that of Britain, the number of people in work has reached a record high — but unlike here, tax receipts have increased. The federal budget has been balanced, planned borrowing has been cancelled and old debts paid off. Tax revenues climbed to €270.8bn last year, about €2.6bn higher than forecast.
The need for this country to have a sensible pay structure, starting with a minimum wage sufficiently high as to warrant the payment of more tax, and which enables working families to enjoy life without having to resort to benefits, is obvious.
We also need an efficient system whereby employers are properly punished for failing to pay this increased minimum wage, instead of measly fines like the £1,400 imposed on H&M, and other prosperous firms recently.
The Labour Party is pledging an £8 minimum wage by 2020, but that doesn’t deal with the immediate problem.
With a large increase now, there would be much less need for the austerity-inspired cuts which most of our political parties have in store for us.
This would be especially effective alongside the restoration of all jobs lost at HMRC under the present government, and the addition of 1,000 more to tackle what Margaret Hodge describes as the tax avoidance “industry” currently costing the country around £35bn a year.
QE could solve most of Europe’s financial problems if used sensibly, but that is unlikely.
It is far better to concentrate on increasing the spending power of those more likely to spend their money, while setting limits on the incomes of those being paid obscene amounts, including CEOs, bankers and private landlords.
The result could well be a flourishing economy and a society well on the way to being based on justice and fairness.