Enemies Of The People

FRIDAY, JANUARY 09, 2009

Enemies Of The People

Even by his own standards, Comrade Kaletsky's latest rant was pretty extraordinary:

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively 

...Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump."

It's such a bizarre idea, it may be a comradely joke - the sort of joke Gulag guards used to crack for their prisoners. Or maybe, as Guido suggested, Mr K has simply flipped. Apart from anything else, why would anyone - except the weak and vulnerable - leave their cash in a bank account just so the Commissars could help themselves? Why wouldn't they switch it all into cash (Japanese Yen for choice) and store it under the bed?

But in truth, Kaletsky is doing no more than expressing what many in our ruling elite believe - savers are Enemies of the People.

When we blogged Punishing Savers last November, we focused on the Left:

"Ever since Uncle Karl explained how savers live off the backs of the workers, left-wing governments have routinely taxed them, dispossessed them, and if at all possible, shot them. Private savings are anathema to the well ordered state because they permit bourgeois anti-social elements to ignore the Will of the People."

And we noted how from his very first day in No 11, Brown set about the systematic dispossession of savers. It wasn't just his notorious multi-billion pensions tax grab, but also his abolition of tax-sheltered Peps and Tessas for small savers.

As for all those pensioners whose savings income is now being whacked so hard, his convoluted pensioner income guarantee and credit system was designed to disincentivise them from saving in the first place - so tough luck.

So in the current headlong rush to cram down borrowing rates, nobody should be surprised that Brown, his party, and his cheerleaders don't give a stuff about the interests of savers.

But we all know about the Left - as we've said before, the lesson of history has always been never EVER save under a Labour government (and as we can see from the chart above, most of us have remembered that again over the last decade). More worrying is that many mainstream commentators have come to share the same general view - savers are now the enemy. The FT's Martin Wolf is no Kaletsky-style extremist, but he too lays into Tory plans to help savers.

This is a very slippery slope. Even if you don't care about the unfairness to the millions of people who've actually saved for their old age, and who have already seen their pensions shredded, you have to recognise that it's Britain's chronic unwillingness to save that is a key factor behind our current crisis. Taking the long view, higher savings are a necessary condition for our future prosperity.

And we surely have to take the long view here. Penalising behaviour that is an essential condition of our long-term prosperity is classic dictatorship of the proletariat stuff. You have to believe that commissariat beastliness to bourgeois elements is purely temporary, and that we will soon emerge into a sunlit workers paradise in which all citizens will spontaneously start doing the right things. Except somehow nobody has ever got that far.

Savers may be temporarily inconvenient, but we need to nurture them. In the long-term they are the true friends to the people.