My latest Forbes column is here.
As there sub-editor summarises it:
The austerity plan is severe on both the tax and spending fronts and will constrain consumption.
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If the title is a fair reflection of the article – you are going to look a complete tool if the UK avoids depression.
Richard – it does seem a little ironic that the banner ads around your article feature “5 Best Canadian Trusts” and another for Barclays Capital. Coincidence or has someone at Forbes got a wicked sense of irony?
Osborne is relying on exports to deliver growth. Our main market is Europe who are being told (or are quite happy) to follow our austerity measures and look for recovery via exports. China is ramping up its export production too. Who is going to buy our exports?
@James
The man without opinion is not worth talking to.
The man with opinion takes the risk of being wrong.
Being wrong is the price of being interesting.
I can live with that risk
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Here is a thought nobody has yet had. But if being interesting means you risk being wrong, stay with me…
Would a depression be a bad thing?
We are a very different world from the 1930s. There is social support. We have universal healthcare. If, by depression, we mean that the majority of the population curbs their expediture and that a large number lose employment, might that not have some beeficial effects?
Might it not actually be a necessary step towards a low-carbon, environmentally sustainable future? Might a large number of those who become unemployed realise that their long terms goals are better met not through getting a job at a call centre but through doing “odd-jobs”. How often have people said how difficult it is to get people to repair things, from shoes to furniture to bikes and TVs.
As long as people have healthcare, food and accommodation, might not the collapse of big employment be a positive thing? After all, most people these days – in my experience – do not hugely enjoy their job or feel defined by it. I think it is universally agreed that work has become too important in the Anglo-Saxon world. Perhaps a “depression” could be the way to realign society and to build a community where we try to interact and trade with our neighbours rather than as part of a huge global economy.
Or in other words, if we are to move to a sustainable future, doesn’t that mean, almost by definition, that we need a zero-growth future. A future where the emphasis is on quality of life rather than financial results. Could a depression – if (BIG IF) it is accompanied by government policies that support the move to a sustainable future – actually assist this process? Or, as someone more relevant once said, do we actually have anything to fear other than fear itself?
@Mad Foetus (well named)
Ask the young people who lost all hope of having a decent job in the 80s if they think that unemployment is a price worth paying.
@mad foetus
You do make an interesting point here: to the extent that economic depression reduces carbon emissions, it is a big environmental benefit. However, there are much more progressive ways to move towards a low carbon economy – see the Green New Deal work which Richard has been involved in for instance.
Our social support is very weak for certain sections of the population – disabled people and working age jobless adults without children for example. These benefits are already a long way below being adequate to live on, and the budget decision to uprate by CPI rather than RPI makes them even more inadequate. When combined with restrictions to housing benefit, it’s a recipe for destitution and abject poverty. We seem to be heading back to the Victorian era of the workhouse. People still have free healthcare, but many of them won’t have food and accommodation. But maybe this is the Coalition’s plan – balance the books by killing off the weak and unfortunate. Scary stuff, if true.
Would a depression be a bad thing?
There is a difference between taking a risk being wrong and being reckless about it.
Is there a single example of depression being having ever been a good thing?
If you want the nicer future you describe, that requires political decisions to acheive thse goals. I cannot believe that they can arise as a happy side effect of extreme economic dysfunction.
@Howard
The more you read of the plans the more likely this seems
Richard
No one would want to take away benefits from those who most need them, despite the propaganda that is put about. The situation would be far worse if the capital markets stopped lending to the government – that would then see the total breakdown of the welfare system or any of the other systems that are in place to protect the vulnerable in society because we wouldn’t be able to pay. Whether we like this or not is beside the point – at the end of the day all governments need to borrow money and the capital markets provide the vast majority of it.
@Richard
And as the likes of Martini Wolf, Paul Krugman and others point out – there is not a chance they would do that. None at all
By perpetuating a lie you show you actually do want on the basis of a falsehood to harm the poor
Read Wolf today – we don;t even need to borrow a penny. We can borrow it all from the Bank of England if we want.
That markets have no power at all.
But Tories find them a might convenient weapon to impose their vile plan for social engineering which you appear to endorse
“Ask the young people who lost all hope of having a decent job in the 80s if they think that unemployment is a price worth paying.”
Firstly, that was an asinine misreading of my post, which was making a difficult but serious point. But I’ll try again, differently. If we are to move to a society that is not based upon growth (which I think we need to do for both environmental and psychological reasons), then such a society will not be the product of any planned political process: politicians are wired into the growth is good mantra.
Such a change would only come from the “bottom up”: from people saying that they don’t need to be part of a complex multinational business but can get by reasonably well – and with a much better quality of life – by living a less structured life. Doing odd jobs for friends and family, a bit of bartering, the sort of business that seems to thrive in most of Europe (small, family owned). And my point is that perhaps you need mass unemployment as a pre-condition to generate that sort of change. Otherwise, don’t we just go back to business as usual.
Second point: the myth of the 1980s. More manufacturing jobs were lost under Labour between 1997 and 2010 than under the Tories in the 1980s. I know it is a pity that we can no longer shove the working classes down mines for a pittance in wages but I’ve heard that (secretly) they didn’t actually like it much anyway.
That is the central contradiction to the whole ’emergency’:
We must cut spending to reduce borrowing or we will not be allowed to borrow.
We cannot print the money for ourselves but we can borrow the money at interest which the capital markets print.
Of course there are exceptions, its ok to print money and call it ‘quantitative easing’ as long as it is used to ‘sterilise’ the toxic assets (remember them?) on financial institutions balance sheets. But heaven forfend that printed money actually gets into general circulation.
Before any libertarians (who only seek to be liberated from externalities such as the cares of others within the society that supports them) start mentioning Robert Mugabe; The UK is not Zimbabwe and even hayek regretted his early enthusiasm for ‘disciplinary’ contraction.
Take a look across the water, Irish contraction and a rising debt. Not much of a solution. Its the national accounting version of an insane office manager who puts a clean desk policy above the good of the department.
Again,I would say its a question of political will, but its hard to see what the desired end point is.
The rich man in his castle and the poor man at his gate is the only one I can see.
mf:
You can see this sort of bottom up self organisation in the direst housing estates across the country. Cash in hand work, drug dealing etc. Of course most there struggle to do their best in these situations, but the results you desire do not seem to emerging.
Central planning is required for a developed economy, it’s just a question of who does it.
As our elected leaders have explained they are doing what that nebulous entity; ‘the markets’ require, central planning has been assigned to them.
The news is full of anxious speculation on what ‘the markets’ are ‘thinking’ and to be honest I wonder why. A system that can’t decide what a going concern is worth from minute to minute is probably not worth worring about.
If you are serious about what you desire, you should have a plan to achieve it, not just hope it will emerge out of economic implosion.
“Second point: the myth of the 1980s. More manufacturing jobs were lost under Labour between 1997 and 2010 than under the Tories in the 1980s.”
If you pursue the same policies (pro finance, anti labour)in both governments, then that is hardly suprising.
“I know it is a pity that we can no longer shove the working classes down mines for a pittance in wages but I’ve heard that (secretly) they didn’t actually like it much anyway.”
This is a classic example of (deranged) political will. Miners struggled long and hard to achieve god wages and safe conditions in exchange for hard work, only to see their industry closed down through sheer vindictiveness against industrial democracy.
We know send Polish working classes to dig up coal in less favourable circumstances and have its supply mediated by commodity markets rather than our own national interest.
@Mad Foetus
I concede that my comment was not well considered (I don’t think it merits the ‘asinine’ label, however). I do not hold out much hope of your utopia. There is a school of thought that ‘the revolution’ will only start when the state withdraws welfare benefits, leaving the populace with no option.
@mad foetus
I’m not sure I agree with you
But I admire the courage it took to ask this question
Thanks
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Clearly no doubt that this is a purely ideological budget designed to entrench a 19th century Manchester Liberal ‘small state’ economy. If we are lucky the coalition will only have taken us back to Edwardian-era level social and income divisions before they get their marching orders.
The biggest irony of all is that a Tory-only administration would never dared have attempted a *one* term 100% deficit reduction strategy- only the ‘yellow cover’ of the Lib Dem human shields and the navel gazing of Labour (until the winter) is allowing them the room for manoeuvre