Two stories today illuminate the absurdity of modern-day capitalism, where inequality is so profound that the economy appears broken in two, orbiting in completely different realities from one another. On the one hand, food bank usage in Scotland has more than doubled since the pandemic, up 108 per cent on the year previously according to the Independent Food Aid Network. On the other hand, average UK property prices just hit a record high, up 1.6 per cent on the month, and 5.2 per cent over the year. In Scotland, the average price of a property is now £195,474, 1.5 per cent higher than three months ago.
Poverty and prosperity have always stood side by side, but there is something unique about the way in which asset markets appear to have become detached from reality in this pandemic crisis. As economist and former Greek Finance Minister Yanis Varoufakis recently stated, “something extraordinary” is happening.
“Something that has never happened before in the history of capitalism. In Britain, the news came out that the economy had suffered its greatest slump ever – more than 22 per cent down during the first seven months of 2020. Remarkably, on the same day, the London Stock Exchange, the FTSE100 index, rose by more than 2 per cent.”
Varoufakis argues that we are entering an age of “post-capitalism” where there is no longer “any correlation between what is going on in the real world (of wages, profits, output and sales) and in the money markets”, as the latter is propped up by Central Banks constantly pumping money into banks and corporates, who invariably invest it in assets like shares and property.
“In the post-2008 world, speculators – for the first time in history – don’t actually give a damn about the economy,” he adds. “They, like you and me, can see that Covid-19 has put capitalism in suspended animation. That it is crushing corporate profit margins while also destroying lives and livelihoods of the many. That it is causing a new tsunami of poverty with long-term effects on aggregate demand. That it demonstrates in every country and every town the pre-existing deep class and race divides, as some of us were privileged enough to keep social distance rules while an army of people out there laboured for a pittance and at risk of infection to cater to our needs.”
That latter sentence speaks to part of what is happening in Scotland’s property market. As work relationships change for office workers – whereby many can now work from home permanently – there is a storm of activity in the middle to upper end of the property market as people adapt their life around that new reality. For places like the Highland and Islands, which has been one of the worst hit parts of Scotland economically in this crisis, the effect is to increase the number of remote-workers moving to the Highlands either as their main property or as a second home, pushing up prices and making it increasingly unaffordable for locals to stay. And of course that is on top of those speculators who buy up property in the Highlands just because land is a safe investment. In an open letter published on Source, communities in the western isles warn that this “economic clearance” is now reaching breaking point.
“We have first-hand examples of local young people, professionally qualified, putting in offers for houses, and despite communicating to sellers the importance of population retention, cash-rich buyers often jump in front and buy houses which often have not been viewed – and in the worst examples, the island not yet visited!,” they write.
None of this is sustainable, either socially or financially. You can’t have islands on the west coast full of remote-working bankers – society quickly breaks down when that sort of Ayn Rand dystopia becomes reality. The pandemic should have taught us that every place needs nurses, social care workers, etc to function. And property prices can’t keep rising while wages have fallen by the fastest amount on record, down every month since April. At some point people start defaulting on re-payments, probably about the time that the ‘payment holiday’ ends, which just happens to be the same day that the furlough scheme ends – 31 October. Half of the 325,000 people in Scotland who have taken a payment holiday – in which the debts accumulate – have no savings. Six in ten of those on a payment holiday say they are already in financial difficulties.
The food banks could be getting increasingly crowded, but none of that will worry the FTSE100 – they’ve always got the Bank of England on hand to help them out.
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