Merkel isolated as preacher of reactionary austerity

May 18th, 2012

It is almost incredible that faced with the very real likelihood of a slide into world slump, as Obama is now warning, Merkel continues to parrot the reactionary monetarist mantra that “there can be no growth through borrowing”.   There can certainly be no growth through prolonged austerity, though she didn’t admit that.   But leaving that aside, she totally fails to recognise that there is all the difference in the world between on the one hand borrowing to increase  consumption, which is unwise at the best of times and utterly reprobate at the worst of times, and on the other hand  borrowing to generate public investment which will create jobs and sustainable growth.    That is what private business does all the time, borrowing on the basis that the investment is soundly based and will create jobs and growth.

But what the reactionary monetarists don’t understand, or refuse to recognise, is that there can be public investment to create jobs and growth without borrowing.   According to the Sunday Times Rich List published last month, the richest 1,000 persons in Britain, just 0.003% of the population, increased their wealth over the last 3 years of austerity by no less than £155bn, a sum considerably greater than the entire UK budget deficit.   If those gains were taxed at the current capital gains tax rate of 28%, it would raise £43bn for the Exchequer.   That would be more than enough to generate the public investment needed, primarily in house-building and infrastructure, to create 1.5 million jobs in the next 1-2 years.   That would unquestionably turnaround the economy and begin the virtuous growth spiral.   And with no public borrowing at all.

All ways round that is a vastly more sensible strategy for cutting the deficit.   At present it costs £7bn to keep a million people on the dole, when with the same money we could create 400,000 jobs.   How much better, instead of paying them to remain idle on the dole, to employ them building the houses that Britain desperately needs (with 1.8 million households on Council waiting lists) together with repairing and improving Britain’s degraded infrastructure including major new energy and IT developments.   And a million more persons in work would hugely increase tax receipts (income tax, national insurance, and VAT) which is the quickest way to cut the deficit. 

 

 

2 Responses to “Merkel isolated as preacher of reactionary austerity”

  1. Kay Fabe Says:
    May 19th, 2012 at 5:41 am

    Do we have 400,000 builders on the dole that could do the work? Or would we end up with a situation like the olympics where you’ve got a handful of British workers earning a living and all the rest are Eastern Europeans sending the bulk of their earnings home? Jobs are no good if we don’t have the right personnel to do them.

  2. Roger Simpson Says:
    May 19th, 2012 at 3:42 pm

    The recovery of this country lies in the hands, and pockets, of the super rich people and international corporations. I heard a Welsh politician on Question Time say that there was £143 billion in uncollected taxes. That total plus your proposed £43billion tax would put an end to the crisis. Plus closing all tax avoidance loop holes. Why aren’t Labour shouting this from the rooftops? Could it be that Labour are “Quite comfortable to see people getting super rich”?

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