Cut cut cut. They’re all saying it.
It’s why a summer of discontent is looming for whichever party is victorious in May. It’s why we run the real risk of dipping back into recession: our media and our politicians are obsessed with the deficit and have convinced themselves (and many others I must add) that cuts are inevitable, desirable and necessary. This election is running the risk of becoming an election all about when Thatcherite cuts are brought in, and not about if they should be at all. This is an error.
Of course any alternative strategy is not easy. But it is essential. The Left Economics Advisory Panel has published a very useful pamphlet titled ‘Breaking the Cuts Consensus’ that explores this question in admirable detail.
On the first main issue, Labour is taking the correct position out of the main parties: any cuts agenda must not be deflationary. The Conservative position on this is the most nonsensical and actually could well be the issue that they lose the election on.
But it isn’t as if deflationary effects of cuts will vanish as soon as the economy starts to revive. Not at all. That danger continues to exist years after the election. So ’savage’ cuts from Lib Dems, or ‘deep’ cuts from Labour or Tories will have a basic impact on the economy: not just on the areas they cut from but on other areas too. The people who lose their jobs in the cuts might not be able to find new jobs because of the multiplier effects of those cuts and that becomes a vicious circle. It isn’t sensible economics.
Furthermore, it isn’t as if our public services are brimming with wealth at the moment. Anybody who works in the public sector will tell you that their area is short of money: I work in FE colleges – no money; others will say the same about other areas I’m sure. People talk glibly of cuts but can our public services really survive cuts? I’m not sure they can. Can our industrial relations survive cuts? People talk about the Winter of Discontent of 78/79; this was not caused because unions were too powerful and influential (this is the common Tory line, but it makes no sense – powerful unions don’t need to strike) it was caused because of the IMF-induced cuts agenda of the Callaghan government. If people are concerned about their travel plans today, they will need to be much more concerned about all manner of services over the next 6-12 months, if the sorts of agendas set out by all the parties are carried out. Again this isn’t a sensible, manageable or sustainable approach.
So why do all the parties seem to agree on a path that will likely:
a) Keep us in recession / send us back into recession
b) Hugely damage and possibly kill some of our most valued public services
c) Increase unemployment (and therefore require more public expenditure / borrowing, etc, etc)
d) Lead to disastrous industrial relations and paralysis?
The answer for the Tories is easy: this is what they believe in. It is class politics of the crassest kind: we should all pay for the massive crisis their people (by that I mean the super-rich) created and we should protect their people from the effects of it, while we feel the effects straight in the face.
But why Labour? It is the inordinate fear of the deficit and, perhaps more to the point, the media portrayal of the deficit. In fact, if you look at the IMF’s accounts of government borrowing today and projected to 2014, there are many other countries with far more eye-watering figures (we are borrowing more than three times less than Japan’s figure as a percentage of GDP, for example). The budget deficit, at 12.6% is high, but not unprecedented nor unmatched around the globe.
Now nobody would argue that this is a good way to manage your economy under normal circumstances: that you should spend years trying to have the deficit as low as possible then for it to rocket at a time of crisis. Some countries that have had a different overall approach to their economies over a protracted period have faired rather differently through all this (for example Sweden).
As such this is a two phase project, but the first phase is to avoid panic. Panic measures will create their own crises – underfunded services, new economic difficulties, etc. But we also have to restructure the way we do economics as a country. The problem with the agendas of all the main parties is that they seem to be trying (in their own, rather unthinking ways) to get things back to normal. And normal is what got us here.
So: no panics, followed by new, radical thinking.
But I fear what we’ll have is radical cuts born of panic, followed by tired, old schemes that bring us right back here in a few years time. And that is a tragedy.
Will anybody dare to break from the cuts mantra and from the tired, old, failed Thatcherite policies that governments of both hues have followed for thirty years and which have led to this?
OK if we have no cuts and I’ll be happy if we have another way, what is it, it seems labour and the Tories are heading back to the old global market banking and financial sector making the money for us, perhaps in ten or twenty years the banks will over cook it again, I see brown has to day stated the Post office bank will offer mortgages to people with a 10% interest rate, trying to restart the housing bubble again, so we get little or no council house building but lots and lots of mortgages.
I think the reason why all parties are saying cuts cuts cuts, is simple, they have no idea at all of any other way, and that’s how we got into this mess in the first place.
Sadly because of the lack of ideas, I think we are heading for massive cuts or massive savings depends on who you believe.
One thing that really interested me about this is how it was the private debt that caused this crisis, and yet the debate now is not “How do we sort out and regulate private debt?” but “How and when do we make deep public sector cuts?”. The real issue of this crisis has dropped off the radar, it’s been swept under the rug by both the media and the mainstream politicians. I can’t help but think it’s deliberate, to try to stifle any sort of debate about the fundamental problems in our system (that many people make a killing from).
So we massively raise our sovereign debt by bailing out the banks, and this puts us in debt to…private banks. Despicable. It’s hard to escape the idea that a small number of people are getting very very rich by frankly stealing from tax payers all around the world.
Otley and Treborc – you have got to the nub of the problem I fear.
This was a crisis built on (amongst other things) private debt. The Tories make a swift link of ‘logic’ between the private debt that caused this and the public debt that got us (and other countries) out of it, but it is a bit of smoke and mirrors really: it draws the eye away from the private debt and games that were played in financial services. Okay, so tax-payers money was used to get us away from the brink of an even deeper crisis. I suspect that was inevitable, but how that money was spent and how it should be paid for now is a whole other question.
There was an opportunity to restructure things (for example have genuine nationalisations rather than salvage jobs – nationalisations with the tax payer having controlling interests that could be built on certain principles such as eschewing bad debts, weighing up the human costs of any actions over short-term profiteering, not gambling with other people’s money… that kind of thing). We missed it. We now are told that public debt is the big problem. The scale of the public debt is not in the same ballpark as the private debt before the crisis, but the public debt is something we should be terrified of while all parties seem hell-bent on policies that can return us to the unsustainable levels of private debt that existed before the crisis. Indeed all the parties seem to want MORE private debt. People will have to take out bigger student loans; less money and support will be available through government schemes; people can expect less when they retire and expect to retire later… The cumulative effect is for people to rely more and more on the very financial bodies, banks and private arrangements that brought us to the brink of disaster.
Increasingly it looks like we bailed out the banks and we bailed out global capitalism for the sake of it, not to prevent the human cost of it. We’ve cushioned the super-rich and working people are asked to pick up the bill. This is not acceptable.
As for people getting rich off tax: it is a huge sector of the economy and we export it so people can get rich off other countries’ tax-payers too: the ‘free market’ in government services is a global scandal which one day will make MP’s expenses seem very small beer indeed.
The cause of the consensus among the major parties is because Labour has forgotten its roots. When socialism becomes a banned word along with other words like equality, the choice of policies is no longer there.
Some of us believe that capitalism has shown us what’s possible with advances in technology, but can’t take us all the way to world without poverty, hunger and war. As a species we are capable of this you know.
We know we can’t get there tomorrow, but the Labour Party was formed on getting us there in the end. The last three governments will go down in history for moving us in the other direction.
But what’s the alternative? Tax increases have exactly the same effect on aggregate demand as expenditure cuts, and are just as likely to create unemployment, and keep us in recession or send us back into recession etc etc. The point is that there is a structural deficit that needs to be dealt with and yes, there is a political choice to be made between the extent to which the required fiscal tightening is delivered either by tax increases or by expenditure cuts. The thing is though, the size of the big black hole that needs to be filled is such that you’d need to double the basic rate of income tax to make the numbers add up. If you want to stand on a platform that promises to maintain public expenditure at its current levels and double the basic rate of tax then feel free to do so.