Tag Archives: debt

Why haven’t there been riots about endless austerity? That may be about to happen

One of the most remarkable facts about the British public’s attitude to prolonged austerity is the lack of the kind of open revolt which has been seen in so many other countries.   In Greece it has led to the dramatic rise of Syriza under the dynamic leadership of the radical Tsipras who now has a poll rating ahead of all the other parties, including the government.   In Spain the resistance led by originally the indignados has crystallised into a new party named Podemos which was formed only 10 months ago, but now is equally challenging the government.   In Italy the prime minister Renzi has achieved the highest rating for his Democratic Party (39%), but second is the party of the comedian Beppe Grillo in the mid-20s%, well ahead of Berlusconi’s Forza Italian on 15%.   So where is the equivalent in the UK?   UKIP hardly counts as a serious alternative to government, though both the SNP in Scotland and the Greens in England could be seen as in the initial stages of a challenge to the main parties, significantly both from the Left like Die Linke in Germany.   The dramatic rise of almost all these movements have been sparked by deep public resistance to austerity.   So why not in the UK?  It may be about to happen.
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Cameron tries to blame foreigners for UK ‘recovery’ fizzling out

It’s a bit rich for Cameron, in his statement toriseday from Brisbane, blaming the world out there, particularly the eurozone, for the fading UK recovery when those countries are pursuing almost exactly the same economic policies as he is.   That is relentless and unending austerity, which he conspicuously failed even to mention.   Now that the blip in UK economic growth between Q2 2013 and Q4 2014 is manifestly deflating (was this part of the long-term economic plan that Cameron-Osborne continually talk about?), the prime minister needs an alibi.   It’s easy to pick on the eurozone which has indeed only avoided falling back into recession because of a surge in the French government’s public spending (please note, Mr. Cameron), but the reason the eurozone is in such a bad way is that Merkel has enforced unrelenting fiscal austerity – exactly the Osborne programme.   That euro-austerity has crippled the euro southern periphery and has now undermined the German economy itself which depended on that same euro periphery for its export-led growth.
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The case for abandoning austerity is a no-brainer, mathematically, financially and politically

Labour needs a game-changer to settle the result of the next election once and for all.   As it happens it has the perfect opportunity ready to hand.   Osborne is foolhardy enough to announce 6 months before the election that he intends to impose further cuts of £25bn to get on track to eliminate the structural deficit by 2019, which an FT analysis suggests may have to be nearly double that, or around £48bn.   This is an utterly reckless pledge which Labour should be exploiting for all its worth – as opposed to the actual silence with which it greeted this faux pas.   There are 4 powerful reasons for Labour to go on the attack.
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The Osborne forked tongue is already cranking up for the Autumn Statement

The Chancellor’s response to the £1.1bn windfall handed to him by the fine on the banks is a classic in Osborne double-speak.   We’re told the money will be “used for the wider public good”.   He means tax cuts as an electoral bribe.   He says “today we take action to clean up corruption by a few so that we have a financial system that works for everyone”.   Today?   Why not when the corrupt manipulation of the £3.5 trillion a day foreign exchange markets was uncovered years ago?   “Taken action to clean up corruption”? – almost nothing has been done to prevent another banking crash and the foreign exchange market remains, breathtakingly, unregulated.   “Corruption by a few”? – the truth is the whole industry was (and still largely is) rotten to the core as the chatroom exchanges between the traders of all the main banks clearly reveal.   “A financial system that works for everyone”? – one can only wonder at Osborne’s gall in spitting out a lie with such bravado, which he knows is a lie, and probably knows too that everyone else knows it’s a lie.   The bankers’ bonuses, overseas speculation, contrived tax avoidance, and mortgaging of prime property in central London works works in no-one’s interests except their own.
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Osborne’s 3 Big Lies

In the last week Osborne has staked out three positions which show the character of the man – duplicitous, machiavellian, dishonest.    First he claimed that he had turned the £1.7bn EU budget bill into a triumph by factoring in Britain’s budget rebates in Europe which halved the amount due.   This canard unravelled almost as soon as Osborne uttered it.   Several other ministers at the EU meeting insisted that no-one, including Osborne, had actually contested the £1.7bn charge and that no discount had been awarded.   What actually happened is that Osborne rushed out of the meeting, immediately made his statement to the press (which the BBC sycophantically, but wrongly, repeated almost verbatim) , and then left to return to the UK without taking any questions.   The truth is that Britain’s automatic rebate on gross contributions to the EU budget, which have operated since 1980, would have been granted anyway and had nothing to do with Osborne’s arguments – or rather non-arguments since he never raised any objections anyway.   The whole exercise was simply an Osborne ploy to pretend that he had fought and thwarted the dire plans of the EU.

Second, he made a disingenuous announcement that he was improving tax transparency by letting taxpayers at different income levels know what the tax they paid was spent on.   It looked like an innocent attempt to extend useful and relevant information to the public.   He would issue an ‘annual tax statement’ to every household showing where their taxes went.   Thus someone earning £30,000 a year will be told that £1,663 goes on ‘welfare’ and £892 on ‘health’, i.e. nearly twice as much on ‘scroungers’ as on health.   What Osborne does not say is that welfare lumps together expenditures of a wholly different kind.   No less than 46% of it goes on pensions which pensioners have earned by paying national insurance contributions throughout their working lives.   Only 3% goes to the unemployed.   Osborne’s vaunted ‘transparency’ is in reality a cynical pre-election ploy to win support for further cuts and to turn voters against Labour.

Third, he reiterated yet again the need for still deeper cuts to pay down the deficit.   What he didn’t say is that as a result of the very deep cuts he’s already made the deficit this year is not falling at all, but actually going up because falling household incomes have meant that the government’s tax take is now being eroded.   What he also didn’t say is that if the rationale for austerity is to pay down the deficit, there’s no point in continuing with austerity if it’s now causing the deficit to go up.

Never take anything Osborne says at face value.

 

Why has the recovery from the crash 6 years ago been so slow and feeble?

The ‘new mediocre’, as the response from the deepest recession in post-war history is now often called, is an anomaly that cannot be accounted for by the factors that mainstream economic models normally consider important.   One explanation which is gaining currency is that excessive inequality is to blame.   Even Lagarde, IMF Director, admits that inequality is casting a ‘dark shadow’ over the world economy, on the reasonable grounds that the rich and particularly the super-rich tend to save a larger proportion of their income than the poor, so that the huge increase in inequality, at least in the G20 and OECD countries in the last 30 years, is not just a source of social tension but also a major drag on demand.   That then invites the further question: why has inequality increased so much in the last 3 decades?   Probably the most powerful underlying factor is the rise of the neoliberal Thatcher-Reagan ideology which via untrammelled markets, deregulation of finance, widespread privatisations, and deep limitations on trade union rights which then allowed the rise of excessive corporate power to dramatically expand its share of national income.
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SNP makes it imperative Labour produces commanding narrative to separate it from Westminster establishment

The Westminster establishment, to which all the three main political parties are seen to sign up, is the most toxic brew in modern British politics.   It has led to UKIP which robbed the Tories of Clacton and likely Rochester as well as almost certainly several Tory seats at the next election, and which came within an ace of robbing Labour of Heywood and Middleton.   It has now led to the SNP where the some polls suggest that, of the 59 constituencies in Scotland where Labour currently holds 41 and the Tories 1, it will capture between 47-54 of these seats and leave Labour with only 5-10 seats.   Less dramatic polls indicate the SNP might take 23-26 seats, but that could still have severe reverberations for Labour.   Next May’s election could well hang on whether UKIP does more damage to the Tories than the SNP does to Labour in Scotland.   However the 6 months still to go is a long time in politics, and for both the two main parties the counter-argument will be spread relentlessly: for the Tories, vote Miliband and wake up with Farage, and for Labour, vote SNP and you deliver yet another London-based Tory government at Westminster.   Those arguments may yet get some considerable play.


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Labour should make inhumanity of Tories a key electoral issue

The Tory government’s decision to withdraw from the search and rescue missions in the Mediterranean where tens of thousands of refugees are fleeing their war-savaged homelands is an act of pitiless inhumanity.   Already this year alone some 25,000 people have arrived in Italy, and similar numbers from Eritrea, with thousands more from Iraq, Nigeria and Somalia.   The numbers who never got there and drowned on the way are not known, but they certainly run into thousands.   To back out of this humanitarian mission is callous and despicable, especially when the motive is plainly to compete with Ukip in being hostile and harsh to migrants.   It is made even worse when the Home Secretary hides behind the disingenuous pretext that saving lives only encourages more persons to risk this treacherous escape route.   It is a shameful indictment to Britain’s reputation as a haven to the persecuted that the UK has resettled less than a tenth of the number of Syrians taken by Germany and Sweden and is now washing its hands of a fundamental humanitarian duty.
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People need hope, not more of the Tory austerity fairytale

This is the text of my letter to the Guardian published this morning.

Ha-Joon Chang (in the Guardian on 20 October) is right that “the country is in desperate need of a counter narrative” to the Tory story on the economy. I believe it should go like this.

First, Labour did not leave behind an economic mess; the bankers did. Labour was not profligate: the biggest Labour deficit in the pre-crash years was 3.3% of GDP; the Thatcher-Major governments racked up deficits bigger than that in 10 of their 18 years. So who was the profligate? It’s a no-brainer.

Second, the Tories have claimed that the reason for enforced austerity is to pay down the deficit. Yet, after six years of falling wages, private investment flat, productivity on the floor, and fast-rising trade deficits, the deficit is £100bn, when Osborne promised in 2010 it would now be next to zero. To cap it all, the deficit will almost certainly rise this year because income from taxes has sharply fallen as wages are increasingly squeezed. Austerity is now a busted policy that has turned toxic. It should be dropped.
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