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Beggar thyself

In the early days of satellite TV in the UK there was a battle going on between Sky and British Satellite Broadcasting (BSB). There probably wasn’t much room for two competitors in such a narrow market, so a great battle ensued in the late 1980s. With lower operating costs Sky was able to cut its prices hard to gain an upper edge. Both companies bled profits on a frightening scale. Ultimately BSB surrendered. Sky had bled itself hard, but the pain paid off. Thus began the emergence of the beggar thyself strategy.

Listening to the following Michael Hudson interview, one gets a clear sense of how the current international economic warfare is playing out in an eerily similar manner:

Michael Hudson on the Real News Network

He describes how the USA is prepared to squeeze US standards of living to protect the dollar and the US economy. A very clear example of beggar thyself. Those countries that can reduce the living standards of its citizens without provoking rebellion among the hoi polloi are the ones that will survive this 21st century economic warfare.

If the Kleptocracy is blatant, and living standards are low and declining then for sure revolt is likely (e.g. Egypt, Tunisia & Libya). Other Middle East countries may be able to protect themselves as much by reasonable standards of living (say an average income of over $10-12k) as they can through Autocratic regimes. Ireland is a case in point in that people are broadly aware of the Kleptocracy, but fortunately they still have a reasonably comfortable lifestyle, so the friction is moderated.

In the UK we still have (the illusion of) a comfortable lifestyle and very little awareness of the fraud. As in the US (and Japan beforehand), we are bending over the barrel and taking the economic shafting (Austerity & Inflation) without much of a whimper.

Perhaps by showing that we can bleed, and bleed heavily but not collapse, we can in fact hang on long enough to break our opponents. Unrest in China is probably more likely than than in the UK or the US, as the population may not yet have graduated in to the category of docile Kleptocracy tolerators.

In a bizarre and masochistic sort of way, this could indeed be our saviour.

But at what cost?

Categories: Economics, General
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