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In Britain, as in many other countries, governments seem to revere businesses. They see them as the basis of a strong economy and often dub them ‘job creators’. This gives them a certain ‘untouchable’ status within our society, insofar as businesses seem to be immune from cuts and austerity, with the harshest cutbacks always falling on the backs of the poorest and most vulnerable.
The news that internet-giant Google will pay just £150 million, or just 3% of what it actually owes, to cover taxes owed since 2005, has drawn huge criticism from across parties, and even from the Conservative Mayor of London, Boris Johnson, who labelled the settlement as ‘derisory’.
The standard neoliberal argument is that if we tax these corporations more, then they will take their business somewhere else. However, this is absolute nonsense and incredibly short-sighted. Even if they were to sacrifice their UK profits for these misguided principles, there will just be a gap in the market ready for someone else to fill.
With so many political parties trying to call themselves ‘business friendly’, is it true that we should hold businesses and the rich in such esteem? Or could it be that successive governments have fed us lies? Lies that have eventually turned into fact? Are businesses really ‘job creators’, and should we, as a country, be giving them the privilege of a government that is friendly to them at the expense of the working people?
Firstly, let’s look at why jobs are created by businesses. Let us say that a business employs 6 people who produce 100 screws each per day, meaning an average of 600 overall every day. The business then goes on to sell these screws and that is the way that business and profit works. However, a business can only sell 600 screws if people want that amount of screws. This means that if the people wanted 400 screws, then they would have 200 left over. If this is the case, then the business is overproducing, meaning it needs to somehow produce less. So what the business then does is it gets rid of 2 of its 6 workers. Now the business is creating the right amount for the demand of its products.
This can also work the opposite way. If the business has those 6 workers, and they make 600 screws per day, but the market now demands 800 screws, the business has to adhere to that demand, and make sure the supply is meeting the demand. To do this there are a few efficiency tweaks it could make, but the easiest way would be to employ two more people to cover the extra demand.
The point of this over-simplification is that the vast majority of private sector jobs are therefore not created by business, because businesses rely on demand. Demand is the creator of jobs, as the higher the demand, the higher the business tries to raise the supply to meet that demand, usually requiring a bigger workforce. Businesses claim to be the ‘creators’ of jobs, but really, they are just a receptacle for the jobs created by demand. Business is obviously an essential part of holding jobs, but businesses do not create the jobs unless there is demand for the extra products or services.
So, if demand is the creator of jobs, who creates demand?
It is obvious that the lower your wealth and disposable income are, the bigger percentage you need to spend on essentials as you do not have enough to save. The poorest people in our society have to use up nearly all of their income just to afford the basics, they do not have bundles of cash with which they can put away and earn interest on, they need their money now. This can be shown in the hike of payday loans being taken out by the poorer in our society and the mass personal debt that our citizens are finding themselves in due to wage stagnation and wealth inequality. Coupled with the fact that there are more low earners than there are high and middle, the low earners create a massive amount of demand.
But it is also the middle earners that create demand, they may be able to afford to save a bit, but they still use a sizable amount of their wealth to fuel their life, and they can also afford the expense of a luxury or two. Both the low and middle income earners, being the majority of the population, create the vast majority of demand that businesses rely on.
It can therefore be concluded, because middle to low earners are creating this demand, and that demand then goes on to create jobs; that it is actually the normal, working people who are the job creators in our country. The lies that we are being told about businesses being the creators of jobs and the fact that they are the foundation of economic stability is pure fiction. The basis of a strong economy is a strong workforce that has enough, not only to demand the basic living needs, but can also afford other things considered luxury items. The facts are that if every person in the UK had a decent disposable income, this extra wealth would create extra demand, and therefore extra jobs. Austerity is a con.
Successive governments have lied to us, they have made business and the rich an untouchable group of very wealthy people who we couldn’t possibly annoy, as our economy relies of their ‘job creation’. They pander to these businesses by calling themselves ‘business friendly’, but this is just an excuse. It is an excuse for an ideologically driven form of economics, an excuse for austerity.
So when the Tories and many other people try to tell you that businesses should be taxed less, or let off with not paying their tax just as Google were, you know the are wrong. If we take what is required, or even if we reverse the Tories’ reduction in corporation tax by just 2% (which could pay for everyone’s university fees), these businesses are not just going to leave, they have enough money to pay their taxes tenfold. If we tax them properly, then maybe we won’t have to go to the poor and look around for money. Even if they do leave, demand will not diminish, people will still want those things, somebody will take advantage of the gap in the market. But the ‘business friendly’ elite would not have you know that.
What does ‘business friendly’ even mean? It means that businesses will be given whatever they need, and the expense will be picked up by the taxpayer, by the people at the bottom who are struggling to live. Business friendly is an excuse for the bottom-up redistribution of wealth we see today. The wealthiest tenth of households, the top 10%, own 43% of the UK’s overall wealth, whereas, the bottom 50% of households own less than 10% of our overall wealth. The top 10% therefore, own over four times as much as the bottom 50% in our society.
We are told day-in and day-out that the UK is a land of opportunity, that if you work hard, you will be rewarded, but the evidence suggests otherwise. We have a society that is propping up the rich and business, at the expense of the everyday working person. Austerity is the vehicle for the gross inequality that we see today and it is making sure that the postcode that you were born in, can now determine your opportunities in life. There seems to be no trickle down in the economics that we see today, just a drip here and a drop there for us to fight over.
But how does the idea of businesses being portrayed as ‘job creators’ have any influence on the grotesque inequality we see today?
If we are giving businesses the privilege of tax breaks, of subsidies, and the ‘untouchable by austerity’ label, then someone has to bear the brunt of these ideologically driven cuts. It is not going to be the businesses, it is not going to be the rich, but instead, the government’s cuts to public services and welfare are designed to hit the poorest hardest, and not only the poorest, but the most vulnerable too. Disabled people are 9 times more likely to be hit by welfare cuts than anyone else, meaning we are failing these people. Is this because we haven’t got enough money? Or is it because we don’t get the money from the right places, and we instead take from the poor and needy and give to the rich and greedy?
To simplify the situation again, if the UK’s wealth were £100, the poorest 10% would now own just one solitary Pound. Welcome to Tory Britain.