Christmas is over.
And I might still do a review of 2014, but since I am always much more forward than backward looking I am more interested in my 2015 wish list than any appraisal of what did, or did not, work in 2014. With that in mind I have a number of blogs I might write on just what I wish for on 2015.
An end to the narrative of austerity is the first, and over-riding wish because austerity is akin to madness. We have to remember that the austerity narrative did begin with some theory. It was claimed by those who think that the market is the answer to everything that if only the government cut its spending than the private sector would rush into the space that this created within the economy and that the entrepreneurs who would then be liberated by a reduced tax bill would create new products, services, jobs and growth.
The logic was always wrong. First, it assumed that the economy is of fixed size and already at full employment so that because the state employed someone, or used capital, then this meant that resource was necessarily denied to the private sector. That was very obviously wrong in a recessionary environment: since 2008 economies throughout the world have suffered under employment and stagnation coupled with very low costs of capital so that any entrepreneur with any ability who wished to take advantage of a market opportunity has had ample opportunity to do so. The whole logic that the state was denying entrepreneurs an opportunity was completely wrong from the outset.
It was also absurd to think that the economy was of fixed size, although that was necessary assumption for austerity to work. The logic of austerity is based on the theory of the firm, which is that if it is in trouble a firm can get rid of costs (like employees) without worrying about them after they leave as they are no longer on its payroll. But this is not of course true of the state: if someone is made unemployed in the state and there is no alternative work for them they still exist: they still have to be fed, and they still need public services. All that happen is that as a result of their sacking there is now no productive activity from them to help meet that demand, or pay the tax that makes it possible. So, in the economy as a whole sacking people simply means that there is less income and if there is less income than it inevitably follows there is less tax, more benefits are paid, and the pressure on public services is therefore greater, and the capacity to supply such services is reduced. This also remains true if, as I admit I did not expect, the economy substitutes poorly paid, part-time, insecure and potentially self-employed work for secure, better paid work. In both cases the capacity to supply the services that people need is reduced, the austerity does not work, and never can.
If the theory of austerity has not worked then the practice has been even worse than expected: if the exceptional year of 2009, in the immediate aftermath of the crisis, when the government had little chance to react to the situation, is excluded from consideration then the deficit has hardly been cut since the recession began but one million public sector employees have lost their jobs, with many more yet to do so, and public services have, in a great many areas, been slashed whilst many more are at crisis point. These are not peripheral issues either: it is the NHS, law and order, social services, child protection and many other issues of fundamental importance to the well-being of society that are at breaking point. The police are clearly expecting to be out of their depth soon, if they are not already.
I have said it before, and I will no doubt say it again, but there is only one way round this and that is for the government to spend now. When consumers, business and export markets all refuse to provide the necessary stimulus to the economy that it needs to get things going again then there is only one option left if we are to see a recovery in employment, sustainable growth, public services and, perhaps most importantly, those innovative parts of the UK private sector that do, without doubt, help create a significant part of our well-being, and that is government spending. So, unless the government is willing to borrow at the exceptionally low interest rates that it now can enjoy to invest in infrastructure for the long term and the necessary investment in new enterprises undertaken on a joint venture basis with the government to stimulator long-term economy in areas where there is obvious public need, such as energy technology, new building methods to meet the needs of the twenty first century and health care innovation, or is willing to fund the same activities by literally printing money through a new round of quantitative easing, then we have no hope of getting the economy out of the mess that it is in.
Austerity has failed. But in the wreckage it has created there are the building blocks of the economy we want, the knowledge of how to create it, and the desire to deliver it if only politicians were willing to embrace these issues of investment and practical wealth creation and realise that this is the way in which they can secure their own futures, as well as the safety of democracy and the well-being of the people they are meant to represent.
That's not too much to ask for in 2015, is it?
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I doubt that’s how politicians envisage securing their futures. I suspect they envisage a rather better future in creating a planet of oligarchs and serfs with them among the oligarchs. Why else would they be promoting TTIP which will in many regards render their political roles redundant?
So we need to change our politicians
Change in politician?.. or overhaul of the political system?
The Politicians that are supposed to represent the people are no longer on different sides. The colours of their ties no longer determine their beliefs. They serve the corporations and the elites. Changing the politicians will not stop the government from ensuring the super rich get richer and the poorest remain poor
Enjoyed your piece about tax for 2015 and it would be ideal way to re-distribute wealth to ensure everyone received the basic Inge like food, housing etc.
But this is I ly possible I feel under a revolution of the current system in place.
Thoughts?
I hope it is clear I argue against the hegemony of neoliberalism
And I have argued for a basic income
Richard puts the case against austerity very well but the case doesn’t get much mainstream publicity from anyone. Interviewers still ask politicians questions such as ‘where will you make the (implied necessity) cuts?’
Putting the case takes a bit more than two minutes. Al jazeera will give people ten minutes in a half hour programme. It is rare for the BBC to let anyone speak for more than two minutes without interruption.
I feel we are let down by our media and we need alternatives to them as much as we need alternative politicians.
Agreed -many now feel the BBC is a neo-liberal propaganda machine. Alternative voices are to be found on RT and to some extent on Al Jazeera but the best ones are independant news organisations like ‘Real News’ and ‘Truthout’ which are funded by public donations (not the Koch brothers!).
Thanks for sharing!
Looks like Syriza in Greece might be the start of this process-as flash elections are declared there.
An attempt will be made to crush a Syriza-run Greece depending on how radical they want to be. IMHO this could be something like our generation’s (i.e those politically active now) version of the Spanish Civil War (obviously without the ‘War’ bit!!!). So much is at stake here. So much. If Syriza act against the austerity narrative, then everyone on the progressive side of politics has to support them. Syriza cannot fail. If they get elected they will have a democratic mandate to pursue their programme. They must be supported at all costs. I really think this is massive. It could define a generation.
Supporting Syriza is vital
If the governments of the EU do not do so they will show democracy has failed
I’m not a betting man, Richard, but on this occasion I think I’ll confidently bet that not one EU government will support Syriza. If Podemos was in power in Spain, it’d be a slightly different matter, but on this occasion I can’t even see any of the social democrat governments lending support.
As you say, that will show democracy has failed – and indeed it has. It will demonstrate beyond doubt that citizens casting their votes in elections is simply an exercise in maintaining an illusion – a sham democracy. In normal circumstances, that is, within “accepted” parameters, it is a practice that is tolerated – even encouraged for its PR value – by those entities and individuals who truly exercise power and control. But if Syriza stick to their word they will be moving well outside those parameters and for those who truly rule us that can most certainly not be allowed. It would therefore seem likely that we are about to see the full arsenal of the power and control of the “elite” revealed, as we’d expect to be the case when hegemony starts to fail. What the outcome will be is anyone’s guess. But in the meantime Syriza require every ounce of support we can give them.
Agreed
And I think it a faultine will be revealed that will be significant – but it is quite unpredictable as to how
Unfortunately support is slipping away, thanks to the frighteners being applied with force.
Excellent post Richard.
My partner works for the public sector, and frankly the reality is even worse than you paint.
Yes, there have been the sackings and services are under strain to the point where some seem almost to be counter-productive.
But for me the scandal is the very widespread use of outside consultants to fill the gaps in the staff: basically this means re-hiring staff who used to be on the payroll at, say. £50-60k per year but now at a day rate of about £600 !! You don’t need to be a mathmatician to see the folly of this. The consultants are ex-employees and get absolutely all the work they want or need. They can work every day if they wish. Do the math.
There needs to be a comprehensive, Piketty-like deconstruction of these practices, but who will do it ?
Just find me the money…
I wonder if you could turn this in to a two minute comedy stand up skit, or something that is compatible with modern media. Maybe Mark Steel could help!
Interesting idea
But I don’t really know Mark
I do know Mark Thomas
A timely post Richard. Yes – we need to start to start thinking about this as 2015 is to be an election year.
I ordered your book for Christmas Richard but they sent me William Keegan’s new book ‘Mr Osbourne’s Economic Experiment’ by accident instead (your tome will be sent to me later to make up for the mistake) but I’m two thirds of the way through Keegan’s short but concise exploration of austerity.
It’s a sobering read and amongst other things forensically compares post war and post credit crunch environments. What it is revealing and confirming to me is a gigantic confidence trick that has been perpetrated against the British people that too many of us have swallowed hook, line and sinker. We’ve probably accepted this because we Brits never stop talking about the war. This memory of perhaps our ‘finest hour’ (with the not inconsiderable help of the USA who smelled an opportunity to make money – we should call it perhaps ‘our most expensive hour’) has been abused and used as a smoke screen to do some more economic vandalism just like Thatcher did in the early 80’s. The reason for austerity in post war Britain is unarguable; the reason for austerity in the biggest private market failure since the 1930’s (did you hear me – PRIVATER SECTOR MARKET FAILURE)is entirely and rightly questionable.
Too many of the public remain convinced that Labour left a huge deficit – that it was all their fault. Yet we have seen a Tory party – aided and abetted by a supine power hungry Lib Dem party – effectively destroy demand (including public sector demand on private sector goods and services). The Lib Dems seem to be changing their tune. Too late perhaps but within ear-shot of an election – who knows?
Osbourne told us that where the public sector pulled back, the private sector would expand. Well it didn’t really did it? When you take money out of the economy (for example drops in wages, cuts in benefits, unrenewed or cancelled contracts) you reduce effective demand. That means that even cash rich companies hold back on investment because the cash that has been withheld (proper wages; decent benefits, benefit sanctions, contracts) isn’t there and the risk of no or less return prevents investment in the first place. And if you are cutting the public sector, how can it invest?
Now, either Osbourne is the most incompetent Chancellor ever or they still want to destroy demand in order to justify lower taxes and a smaller state. I think its the latter.
We are however in a position to regard the austerity narrative you speak of Richard as a house of cards. All we need to do now is to collectively blow as hard as we can to knock it down. Nothing Osbourne has promised has borne fruit. The counter-narrative has some real facts and figures behind it now. The question remains however: How do we deal with the misinformation and ignorance out there in the general public?
It may be time to see if the leading lights of the counter narrative can co-operate and create a united front. The mainstream politicians cannot be trusted to do this: their indoctrination in market speak and ethics is now complete.
It’s also down to those of us who read or contribute to this blog to step up to the plate and get talking about this at work and play – somehow.
Strangely, I posted on the question of Local Government today. It has become a very different world to that of the past. And it doesn’t work. Which largely explains why the money is going wrong and why austerity happens.
Hard to disagree
But it us not a complete explanation
Part of the problem in Britain today is that there is so much fear and loathing. Many DWP workers agree with the government that those on benefits should face sub 1% increases. Their argument being that as they, like many civil servants, have not had pay rises for over half a decade. A lot of people unfortunate enough to be on benefits hate the civil servants who administer the system with incidents of threats and verbal abuse very high. The fact is that both groups deserve to be treated fairly but ministers must be chuffed at the sight of them fighting each other on the way to the bottom as sanctions rise and civil servants are made redundant. That just one example, we could look to the cuts facing local authorities. Lots of people hate social workers and housing benefit clerks so why shouldn’t they lose a few jobs. A recent BBC radio piece on the subject claimed that local government was inefficient and was always able to make more cuts. While we’re all kicking about in the gutter looking downwards for another foot to stamp on the country’s most powerful and wealthy portion of society are all doing very well thank you very much. And there we have the very real success of austerity.
Nicholas is spot on.
The Tories have moved the ‘jealousy narrative’ from ordinary working people supposedly being jealous of the rich to them being jealous of each other AND resenting/being jealous of the poor.
In the public sector where I work I now see service workers more intent on making value judgements on people (deserving/undeserving) who need benefits rather than focussing on need.
I think that this is a result of budget cuts (what can we do with so little) but also I sense that it is a product of fear in the public sector and the general public at large. The attitude is one of encouraging certain groups to be targeted ‘as long as it isn’t me’. It’s redolent of a basic need to survive. It’s sad and scary – and redolent of Orwell’s 1984 culture – except that it is not a perverted form of socialism that has got us here but a perverted form of capitalism instead.
We should compensate for the budget cuts by developing local currencies.
One thing that really bothers me is the complete lack of ‘thinking on your feet’ in the Labour team. EdM is particularly bad (indeed I don’t know why he went for the leadership when he must know that he does not have this vital skill). It drives me mad when I listen to discussions, particularly on the radio, which is more focussed for me, and they just let the blighters off the hook time after time. Yesterday ‘the tory’ was saying how important it was to get over the economic competence of the tories – when it is glaringly obvious from polling that the electorate already believe this to be the case. But there was no comeback from the Labour side. There are, of course, some good’uns. Chris Leslie, Andy Burnham and Lisa Nandy come to mind. But EdB is as useless as the other Ed. And come to think of it, when was the last time you heard a contribution from Hilary Benn – whilst bleeding Pickles always has his mug in the media?
Grrrrrrr