[dropcap style=”font-size:100px; color:#992211;”]I[/dropcap]f I were boss of a country…
and I knew the people of that country had a combined personal debt in the thousands of billions – much of it unsecured credit card debt, and the rest secured on a housing market that was overvalued, I would be a bit worried.
Especially if families in above average paying jobs had so little income after paying their rent, that they were entitled to housing benefit. Even though the amount housing benefit assessment allows for living costs doesn’t vary, and hasn’t increased dramatically. If I knew that the average wage was so low, and the average house price so high, that people on relatively decent incomes were absolutely reliant on tax credits to pay their mortgages, I would think there was a problem.
I would probably look for other countries who had the same problem, and look at what happened when their property bubble became apparent. Check if there were any major problems caused by similar circumstances. I might do an assessment of poverty that factored this in, rather than deliberately excluded it. Purely in the interests of wanting to understand our economy. I might want to measure what percentage of the nation’s earnings were being funneled into servicing this credit bubble, and whether we are sufficiently protected if that can’t be maintained.
Even if it was much easier to blame a culture of welfare dependency. Even if I really had hoped to use this crisis as an opportunity to roll back state support for good, I might try and look at it in context of the global economic crisis, and ask if this was an indicator of any problems in future. Especially when this problem might be underpinned by more private personal debt than could be repaid; what happens if the bubble it is wrapped around bursts?
Even if I really objected to the state providing a plaster that disguised how much our property and credit market had distorted, unless I absolutely knew what would happen when I removed it, or had at least checked, I wouldn’t be in a hurry to rip it right off. I might exercise some care. Especially if all my main trading partners were doing the same thing.
The fact that our market is distorted enough that millions of working families now need state help to meet basic living costs is the problem. Not the ‘scroungers’ who keep working, even though no matter how much they earn, they will never have more money than housing benefit assesors say they need to live on.
I might measure just how long those people had been working for so little return, before assuming the problem was them. I might make an attempt to measure just how many people this affected. And what would happen if those people stopped working, and how much it might remove their ability to work in future. Will this affect our ability to service a debt bubble we hope won’t pop, in the long term?
If I hoped that ripping it off might cause a bit of a crash would bring the housing market down, and get it to rebound the way it did in the nineties – I might want to check which factors are different now. While I had time. I might start watching what was happening in Europe, and asked if there was any similarity to what had happened elsewhere? Is it really a completely new problem, or part of the same one we are suffering from?