Like so many people, you are probably fed up with our economy.

Wages have declined in real terms. Living costs are rising. Job security and employment terms have declined. Government expenditure on services and infrastructure has deteriorated and is now pathetic. The list of hardships goes on. Clearly, the economy is not working for you, but it’s definitely working well for the rich. The divide between them and us widens daily. This problem needs to be addressed because when I last looked, the economy was supposed to serve the majority. 

You may not think this is your problem or something you can fix, but it is your problem and something you can definitely fix. However, you need to understand a few simple things to do so, which I cover in this article. I explain the problems and solutions. Your vote is an instrument of change. Armed with the facts, you can implement much-needed change through your vote.

Because you have the power to change things, it becomes your responsibility to act.

What makes our economy dysfunctional?

In a democracy, the economy must serve majority needs. That’s its primary objective. Failure to consistently meet this objective renders the economy dysfunctional.

Our economy has grown over the past four decades, but the majority's share of the economic pie has declined significantly. A small, wealthy minority has benefited from this growth. Their share of the pie has grown exponentially, while the majority’s share has shrunk proportionately.

As the economy has consistently failed to serve majority needs, it’s classified as dysfunctional.

How has this affected you?

Wages in real terms have declined.

Government support, services, and infrastructure expenditures have declined.

The affordability of one’s own home is no longer a reality for many.

Job security and employment terms have worsened.

Quality of life for the majority is in free fall.

This is the reason we have seen recent mass protests across virtually every sector of the economy. Each demanding higher wages and better working conditions.

Ignorant observers claim discontent is due to the negative impact of the pandemic and the Ukrainian war. However, these circumstances are simply the final straw that broke the camel’s back. The consistent and prolonged downgrading of factors listed at the opening of this paragraph is the real cause. While the majority are getting poorer, a small minority are getting richer. Unless we change, the decline will accelerate. Life for the majority will become much harder. This is not how a democracy works.

What’s the cause?

Political choice.

Governments choose what economic policies to follow.

The policy chosen affects outcomes.

The government has chosen the wrong economic policy.

The government is like you in the choices it faces. Your first priority is to look after your family, just as the government’s first priority is to look after its citizens. However, to do this, you and the government need money. You cannot spend all your time staying at home looking after your family; you have to go to work to earn an income to pay the bills. The same with the government. It has to earn money to pay for all the costs of looking after a nation. You make life/work choices just as the government makes society/market choices. The more you decide to work, the less family life you have. It’s your choice. The government also needs to make choices in balancing the needs of society with those of market needs.

Markets represent the means of producing wealth needed to support society. While government must encourage and grow their markets, they can’t afford to over-support markets. Society would suffer as a result, just as family life suffers when you spend too much time working. It’s a balancing act to serve the two opposing parties making up our economy – society and markets.

In making their choice, government follow different economic policies. We have two extremes here - Socialism and Free Markets. Both favour one over the other almost exclusively. Socialism favours looking after society almost exclusively, and free markets favour looking after markets at the expense of society.

These two extremes would represent you working all the time with no family life or with you not working and spending all your time at home. Neither of these extremes is desirable or followed. Hence, we have a mixed economy containing parts of socialism and free markets.

Some governments place more emphasis on markets, and others on society. A Social Market Economy provides the perfect balance in serving society and markets equally.

Unfortunately, we don’t follow this wise and balanced approach. We give markets more support, making us more of a free market economy than a social economy.

By providing greater emphasis to free market policies, markets have benefited. Their owners, the rich minority, have benefited. Society (you, me, and the environment) have lost out.

What’s the solution?

The solution is obvious. Dial back our support for markets and return us to a more balanced economic policy that serves both society and markets equally. This is not a revolutionary step but a simple and logical one we can demand our government makes now.

It will return us to a growth in the quality of life for all and greater protection for the environment. With larger governments, we get more government oversight and control. This provides greater protection and support for the vulnerable. The wealthy cannot exploit them easily and without consequences.

How did we allow this imbalance to occur?

In a democracy, we serve the majority, not minorities. So, how has this serious imbalance happened?

Money is power. Power is political influence. The wealthy use their power to usurp control through the following processes: -

Lobbying - Corporations and the wealthy spend billions per year trying to influence politicians’ decisions.

Political party funding. It’s difficult not to favour somebody who supports your political career with hard cash.

Revolving door – where ex-politicians receive cushy, high-paying jobs by helping businesses while in office. Or being able to provide access to high-ranking government officials.

Cronyism – where politicians help family, friends, and associates obtain some benefit(s) in return for their help.

Consulting / Services. This works on the same principle as the Revolving Door. Rather than employment, the ex-politician offers services or consults at exorbitant fees. This is the preferred option of senior politicians, such as Prime Ministers and Presidents.

Corruption – accepting brides, gifts, low-interest loans, or obtaining risky loans. Plus, myriad forms of other corruption.

Unfair tax system - allows the wealthy to increase their wealth and thus pressure on the government to support their causes. This results in ever-increasing downward pressure on taxation for the rich and businesses.

Lack of transparency – in the shadows, shady deals thrive.

Political polarisation means politicians cannot agree on or implement important legislation.

Media that is predominantly owned and controlled by the wealthy exerts pressure on politicians in a similar way to that of lobbying. It also influences the masses to believe the lies and misleading information fed to us by the wealthy.

Loss of independent thought. Not only governments but all institutions, associations, organisations, and academia are infiltrated by similar influencers (listed above.) This has limited independent thought and opinion available for decision-makers to confer with.

The accumulative effect of all these influencers, over a period of time, has eroded the democratic process. It has allowed the wealthy one per cent to influence government decisions in their favour. We refer to this state of affairs as a Plutocracy. It’s a system of governance where the wealthy exercise disproportionate power and influence over the government. They shape policies that favour their interests. This leads to a situation where we ignore or disregard the needs and concerns of the majority. As a result, the gap between rich and poor widens.

Living under a plutocratic government does not mean the manipulators have complete control. They only need to exercise some control to divert the course of democracy. The control they exercise can vary across government. It may not be all-encompassing and all-powerful, but it is omnipresent, and exercises influence most of the time.

The difference between plutocracy and State Capture is a fine line. State capture involves greater corruption, illegal and unethical practices. However, both share the same end game - control over government policies for their direct benefit. The distinction between the two is academic, as they are both involved in perverting the course of democracy for personal gain. To debate whether one method is more or less ethical is absurd when their shared objective is immoral. Therefore, why distinguish one from the other? Let’s lump them all together under the heading of State Capture because that’s what it is.

Under a captured state, the government pushes for ever more free markets. This increases the economic imbalance between society and markets, making the rich richer and the poor poorer.

Again, this is not how a democracy should work.

Why do free markets cause so much harm?

Free markets call for two things: - 

1. The lifting of restrictions and regulations on businesses so they may trade more freely (hence the name “free markets”).
2. Smaller government, as this means lower taxes on businesses and the wealthy.

In return for these concessions, businesses and the wealthy claim they will reinvest increased profits to help grow our economic base, to benefit all. Our standard of living and quality of life will be much better.

This may have sounded reasonable as an unfounded hypothesis proposed forty-odd years ago. However, reality has proved entirely different. The complete opposite has occurred. It has led to massive economic and social inequality and serious environmental degradation. Quality of life for the majority is in free fall.

We now look at the two concessions and consider how much worse off we are for making them (points A and B.) We then look at how they have not grown our productive economic base as promised (point C) but instead used their increased wealth to bleed the majority dry.

A. Restrictions, regulations, and oversight are necessary.

We have market restrictions, regulations, and government oversight for good reason. To ensure fairness for all and to protect the vulnerable from exploitation.

Why do you think proponents of free markets are hellbent on destroying labour unions? So they may exploit their workers. Pay them less and offer less favourable working terms. If businesses exploit their own staff, what do you think they will do to external resources to whom they have no allegiance?

To protect the vulnerable, we need large governments to provide oversight of business practices.

Consider what happens when we: -

Have a small police force – crime increases.

Have a small revenue department – tax evasion skyrockets.

Underfunded environmental departments lead to increased degradation of the environment.

Consumer and staff exploitation increases as a result of underfunded business departments.

Controls (regulations) and oversight are instruments used to protect the weak and vulnerable.

Free market proponents want these removed so they may exploit others without consequences. They cannot hide this simple fact.

 B. “Big government” is good for a healthy economy.

The wealthy are against “big government” as it comes with a high tax bill. Consequently, they demand a small government. However, they want the benefits that derive from having a strong, healthy low/middle-income economy. Unfortunately for them, they can’t have their bread buttered on both sides. As the two points listed below demonstrate, you only get a strong, vibrant low/middle-income economy by investing in it.

B1. The government must provide high-quality services to improve the quality of life.

Research has proved this. By providing good quality healthcare, primary and secondary education, affordable housing, and ensuring workers earn liveable wages. Also, providing social safety nets and good social care.

There is a direct correlation between the majority's quality of life and the economy's health. Therefore, it’s equally important for both businesses and governments to achieve this objective.

B2. Investing in the “commons” benefits all.

Investing in infrastructure, policing, judiciary, defence, and other areas of "common good" is highly beneficial for the economy. The high investment in these “commons” distinguishes advanced economies from developing economies.

Again, investments in “commons” are good for both businesses and government, just as their investment in services is.

Small governments don’t benefit the majority; it hurts them. Therefore, businesses and the wealthy need to pay higher taxes to have a healthier, more vibrant economy in which to trade.

The argument that tax rates need to be internationally competitive is nonsense. Businesses that want to trade in our national market need to contribute to its upkeep and pay taxes or through other means (i.e. import duties.) Either way, they must pay. To use a business phrase, “There are no free lunches.” The ugly face of globalisation, which has adversely distorted national economies, has a bearing on this argument. Its unfavourable effects are discussed shortly.

C. Our productive economic base has shrunk substantially.

Claiming that lower taxes and fewer restrictions would grow our productive economic base has proved untrue. Businesses and the wealthy do reinvest their larger profits, but NOT in expanding our productive economy.

You see, we divide our economy into two parts. Our Normal (or Productive economy) and the Rentier (or Non-productive economy.) This division into productive and non-productive stems from Adam Smith (the “father” of modern economics.) He identified three forms of income - profit, wages, and rent. The owners of capital and labour earn their income in our normal (or productive economy.) They both do something (i.e., they are productive participants in the economy making and selling things.) However, rental income does not involve any productive activity. It involves the transfer of money from one party to another based on one party’s ownership of a scarce resource (or assets.) For example, the owners of property undertake no productive role in the economy. They receive an income from their scarce resource. Therefore, including their income in our normal or productive economy would be wrong. Instead, we allocate it to the rentier economy, as there is no productive output.

The average person relies on the normal economy for their income. When we take profits earned in the normal economy and invest them in the rentier economy, the majority receive no benefit. In fact, we disadvantage them, as explained later. The rentier economy doesn’t just involve property rent. Financial services (banking, money lending), including insurance, form part of the rentier economy. Gambling, patents, and copyrights also form part of the rentier economy. It’s a massive and fast-growing economy. The reason is that returns are high and risks lower than in the normal economy.

Vacuum-Up effect.

You’ve probably heard of the “Trickle-Down effect”, which claims that if we allow the rich to become richer, you benefit by some trickling down to you.  This has proved to be an unfounded fallacy. What has happened is the opposite – the “Vacuum-Up effect”. This is where the rich have created services to exploit the vulnerabilities of the majority, which they have created through free market policies. These services then vacuum up every morsel from the majority’s table. For example, they hold down wages over extended periods and then provide us with “easy credit” to fill the financial void.  They reduce the size of governments, creating desperation amongst the most vulnerable, and then offer them gambling as a way out. There are many more examples of these vacuum-up services, all part of the rentier economy. The rich invest billions in these Vacuum-Up services annually to exploit the majority.  Trickle-down is a lie. Vacuum-up is a reality.

Our productive economy shrinks while the non-productive economy grows.

Many Western economies are becoming service (rentier) economies. (Services in the UK account for over 80% of GDP, and manufacturing is less than 15% and declining.) We are losing our manufacturing base because the wealthy have spread free market ideas worldwide for their exclusive benefit. Globalisation (or international free markets) has enabled them to produce anywhere globally, at the lowest cost, and sell everywhere at optimum profits.

While businesses may win, countries (national economies) and their citizens lose out. The reason for this is that the manufacturing sector has a higher multiplier effect than the service sector. It creates more jobs and has a higher value-added per worker. According to a report by the National Bureau of Economic Research, the manufacturing sector has a multiplier effect of 1.4, while the service sector is only 0.6. If you want to grow your economy, manufacturing produces far better outcomes. However, the risks to manufacturing are higher because of higher investments and longer repayment periods.

As an example, take a car manufacturer that decides not to expand its manufacturing facilities. It decides to diversify into financial services as it is more profitable and less risky. The country loses out from manufacturing’s beneficial multiplier effect. Instead of expanding the productive economy, which benefits all, we end up with an expanded, rentier economy. The expanding “buy now pay later” market offered by virtually every trader on everything is further evidence of an expanding rentier economy. When reinvestment should go into expanding the core business, it doesn’t. Who needs more financial services?

The economic benefits of manufacturing are excellent. However, its political benefits are equally impressive. Covid and the Ukrainian war have proved how vulnerable we are in a crisis because we produce so little. These events are nothing compared to the problems we would face if we were unable to source from our current foreign suppliers. We are totally reliant on them. Globalisation leaves us politically vulnerable.

Have a look at the table below, which highlights how the majority suffer under free market policies. Governments should sit up and take note.

Free markets serve the needs of a small minority to the exclusion of the majority. Hence, it can justifiably be referred to as Economic Apartheid. Just like Political Apartheid only served minority needs, so too does Economic Apartheid. We abhor political apartheid but appear to condone economic apartheid. Yet, economic apartheid is far more oppressive.

Free markets spawn two evils: -

The Rentier Economy (often referred to as the Bloodsucker Economy because of the Vacuum Up effect) and

Globalisation (often referred to as Gobblisation as it gobbles up all national manufacturing.)

 Collectively we refer to these three evils as,

THE TRIAD of EVIL.

How have they managed to hide the truth from us?

For over four decades, we have known about environmental degradation and the increasing divide between rich and poor. These problems are too big to hide, so rather than attempt to hide them, as they do for less serious problems, they lie to us. They tell us these are the unavoidable consequences of a modern economy. What absolute nonsense!

Through control of the media and political influence, together with their control of academia, institutions and organisations, they have quashed free independent thought. As an example, most have heard of the “trickle-down effect”, which is a fallacy and lie, but few know of the “vacuum-up effect”, which is a reality and the truth. Google the two concepts to prove my point.

They lie and mislead us on a massive scale. By limiting the exposure of dissenting voices, they silence them.

Change does not involve a revolution, just a change in policy.

At the beginning of this article, I explained that we are in this predicament through choice.

Plutocracy has forced the government into choosing the wrong economic policy.

The solution is to choose one which best serves majority needs without ignoring the market. A Social Market Economy is the solution. An economic system which looks after both society and markets equally. Any imbalanced system, such as free markets, eventually crashes, but before that, it does immense damage.

The key points of a Social Market Economy are: -

• Higher taxes to pay for a larger government.
• Larger government to provide better services to the majority, greater investment in the “commons”, and more business oversight and control (through regulation).
• The return and support of manufacturing as the backbone of our economy.
• The dismantling of globalisation.
• Limiting rentier economy expansion through higher taxation on rental income and more incentives to encourage productive investments.

 You can bring about change.

You must support the political party that is in favour of dropping free market policies in favour of those of a Social Market Economy. A political party with the foresight and courage to swim against the tide and return some balance to our economy. By adopting a balanced policy, they return us to a stronger, more resilient economy.

Nobody wants to pay higher taxes.

Why call for policies which will tax us more? Because higher taxes lie at the heart of a stronger economy when we use those taxes to improve the quality of life for the majority

We all have short memories when it comes to paying taxes. We moan about how much comes out of our paycheques every month, but we conveniently forget or are blind to the enormous benefits we enjoy. Some businesspeople have gone as far as calling tax theft. Really, their ignorance is astounding.

What distinguishes advanced economies from emerging economies is their substantial investment in "the commons." Commons refer to what we all share and benefit from. It includes things like infrastructure (roads, rail, sea, air), utilities such as power, water and good communication systems. It also includes social support such as health, social care, social safety nets and education. The police and judiciary are also included. The list goes on, but you get the picture. All the good things that make life easier, safer, and more enjoyable for all.

All of the above requires enormous and ongoing investment to maintain and grow. We all benefit from these common investments. Foreign businesses and migrants all want a share of this. This is what big government is all about - providing valuable services and investment in commons. As well as controls and oversight, which helps protect us and the environment from exploitation.

All this creates a healthier and more prosperous middle and low-income economy, which is a magnet for all businesses. Those with access to this market have to pay for the privilege. If our middle and low-income society (making up the vast majority) was poor, as it is in developing economies, the market would be far less attractive, if at all. So, by taking from us and investing wisely in commons, we all benefit, and tax is the mechanism which facilitates all this.

Time is of the essence.

The ball is in your court now. You have the basic knowledge to address the economic problems we face. You have the power to act. The longer you leave it, the worse things become.

You may read other articles by Adrian Dore on Medium at

https://medium.com/@adrianmarkdore/