Entertainment For Lively Minds
Is the "Debt Crisis" a lie?
Posted by Raymo on 31 March 2011 - 6:01pm.
According to Johann Hari it is. His analysis can be found here:
http://johannhari.com/2011/03/29/the-biggest-lie-in-british-politics
According to him: "As a proportion of GDP, Britain’s national debt has been higher than it is now for 200 of the past 250 years."
Is he right? If he is, why does everyone seem to accept the need for drastic cuts in public expenditure?
- More from Raymo.
- Login or register to post comments
-
yep.
He's absolutely right. It's not even debatable. It's a matter of historical
fact, easily checked and verified.
There's no reason to destroy services in this way apart from an ideological one.
I don't suggest Cameron is evil. It's worse than that. He thinks he's right.
No, he's not.
He doesn't understand the difference between debt and deficit. The government isn't trying to shrink the debt, they're trying to shrink the amount it's growing by.
Mind you, Hari's no wronger than Cameron and Osborne. They're both wrong, in their own way. They both misrepresent to suit their agendas in their own way.
That article is partially correct but mostly reliant on irrelevances and dogma. Bit like everything that comes out of Osborne's mouth.
Treat both with utter caution: they're both ideologues, cut from precisely the same cloth.
Major difference, I suppose...
...is that Hari's just a posturing journo, albeit one who strikes me as a very nice chap. The other misrepresenting ideologue is in charge of the Exchequer.
Debt and Deficit
So, once the difference between debt and deficit is recognized, what becomes of Hari's argument? Is it completely undermined? Is the *Deficit* Crisis real? Is the deficit worse than it has been? And does it necessitate drastic cuts in public expenditure?
It's just a bit irrelevant.
Our current net debt is about comparable to the early seventies. Baddish, but not disastrous. About 58% of GDP.
But the deficit - the negative yearly difference between what the government is spending and what it's paying out - is currently about 12% of GDP and will rise to perhaps 15% next year before starting to fall.
The debate is whether cuts - which ARE necessary in some form - should be as deep or fast as they are. Osborne paints us as being in a bad hole, as if we can't service the debt. That's bollocks. We are AAA credit-rated, and the bond markets show no sign of wanting to downgrade our rating. The world, in short, knows we're good for it.
There is also the distinct danger that front-loading the cuts will destroy consumer spending and make the problem worse.
We need a balance of reduced public spending and real-economy growth. It's not one or the other.
Very informative thread this
Many thanks gents.
I think I, along with Johann, may be guilty of a degree of wishful thinking.
Thank you
A nice encapsulation of what is actually sitting inside my head.
The argument that the only way we can reduce the deficit is by taking the axe out and swingeing (and swinging) through vast swathes of the economy is just risible. This is because the damage done to the wider economy is probably going to impact on the exchequer's tax take (basically, their income) making things even worse. Look at the growth figures, inflation and some of the other indicators. They're not looking that great.
Some cuts are inevitable, but that also needs to be paired with some sensible ideas to target money where investment is likely to generate significant growth. That was actually part of Labour's investment plan, though continuing on the route started in the 1980s, making us so dependent on the financial services sector always made us more vulnerable (and plenty of people have spent the last 30 years saying so) if the markets went tits up.
I see them this way.
If I was adrift in a lifeboat with the pair of them, it's fair to say I'd probably have to gag Hari after the first hour or so, or at least threaten him with the long cold swim, but I'd sure as hell use Osborne as fish bait, which is all he's good for.
Fish bait?
What the fuck have the fish done to upset you?
It's not the size of the mortgage
It's that we can't make the repayments. And our arrears are increasing day-by-day.
I don't swallow this
That its a "lie" I mean.
They are jeapordising the Health Service, sacrificing years of investment, to put it in the hands of private enterprise. They are forcing people, regardless of background, to go into huge debt to get an education. At the end of their four years, are they going to be tremendously unpopular for having made these decisions? you bet they are. Politicians don't do that unless they have a reason. Right or wrong.
my impression
...is that it's a high stakes gamble. The only need I see for making such severe cuts so swiftly is that they hope to see the deficit fall visibly within their term. If it does, not only do they stand to get re-elected, they have also served their ideology. If they don't they can rely on labour's continued unpopularity to attempt another win. Given that whoever won the previous election was inevitably going to make cuts of some sort and face unpopularity, the gamble isn't as risky as it might seem at first.
If they're relying on
"Labour's continued unpopularity" perhaps they ought to look at the opinion polls.which have had a solid Labour lead for the last few months. I think this is unlikely to reverse once the cuts proper (as opposed to the warm-ups we've already had) really kick in.
It's dogma
Lansley has been pedalling the same agenda for years; on hs website you can see stuff dating back to 2006, even earlier that are part of what he's pushing today. Their solution to the current situation is one that fits their beliefs.
Although I'd be surpirsed if any government, of whatever shade,
came up with a solution that didn't fit their beliefs.
There is a great word
to describe the current thinking, which I happened to see via a tweet by the QI Elves this morning.
Cacodoxy.
How does it differ from heterodoxy?
Great
Now I'm going to have to look both of them up. It's not like I haven't got any work to do you know. These PowerPoint slides won't draw themselves ......
heterodoxy is just
thinking which is not conventional, or conformist.
Cacodoxy has a suggestion of moral or ethical unsoundness or even evil. the Greek prefixes being hetero- for "different" and caco- for "bad"
So it comes down to a personal opinion
about whether you regard the current government as being morally or ethically unsound, or evil?
I would suggest that this is largely a party political opinion.
Possbily
I just like the sound of the word, personally :)
Oh yes... I'll be using it often from now on
when I think someone's doing something stupid - with which I disagree.
"That's a fairly cacodoxical thing to do isn't it?"
Here's…
…a friendly Scottish chap who promises to 'cut the debt by half over the next four years'. It comes at about 2:03.
Help!
I don't know who to believe any more! Is there a "Haven't Got A Clue" party I can vote for or something?
How is a democracy supposed to function when the issues that affect us all are incomprehensible to all but the most dedicated economists??
I'm a teapot! I'm a teapot!
I work on the basis...
...that anyone who sounds dead certain about a simple course of action is probably talking shite. Hence disbelieving Osborne and Hari equally, doing a bit of reading and coming down spang in the middle. Hooray! The coward's way out, I mean, middle way!
I'm not an economist, not even an amateur one...
But the amateur historian in me agrees with the thrust of Hari's piece from somewhere deep inside my gut.
Agenda
Deep down, the Conservatives have the same agenda they have always had. They don't really approve of social welfare, believing individuals should stand on their own feet, pay their own way and sort out their own problems, or if things get so bad they are unable to do so, get help from friends, relations, a charity, anyone but the state. The state has absolutely no business interfering in such things, they believe.
The latest version, lets call them "New Tory", present a softer, more caring face than the ruthless old Thatcher/Joseph/Tebbit lot and may even be actually nicer people but that fundamental dislike of government involvement in anything but law enforcement, tax-gathering, military defence and the furtherance of the capitalist economy is still at the core of Conservatism, make no mistake.
It suits the above agenda to use the current financial circumstance as a reason to shrink public spending, which they would always have wanted to do, but would not otherwise have dared to do so rapidly.
You make this sound like a bad thing.
The alternative was the increasingly high spending Labour government who used a combination of increased borrowing and extremely long term private funding arrangements to put off the day when these needed repaying.
I concede that they can't be responsible for the banking crisis which sparked the current economic woes, but nearly everyone realised that a turnaround was going to happen as the debt-fuelled spending sprees by both government and individuals based on book prices of property couldn't continue for ever, and they made no attempt to pay down the country's borrowings.
We've got to face the fact that we cant spend more than we earn, and if it was a person faced with mounting debts, the advice would be to cut their cloth to raise money to repay their debts.
As a country, all we're doing is trying to get to a position where we are spending what we earn, let alone repay a red cent.
If by doing this, we remove the nanny state that has wrapped people and organisations up in red tape and turned many people into useless slobs unwilling to participate then that's a happy coincidence. Hopefully not too many people who we genuinely need to help will be adversely affected - the cuts after all are actually quite small as a % of total spend which is about £700bn per year and only brings spending back to the levels of about 3 years ago.
Part of the problem
"Hopefully not too many people who we genuinely need to help will be adversely affected"
is leaving rather too much to chance as far as I can see. They belatedly berated Blair (not unfairly) for not having an ongoing plan in Iraq, and for not having an exit strategy. It's a bit rich to try running an economy in the same way.
Nanny state/red tape
I suspect we disagree on general strategy as well as specific points, but as a small business owner (who also works in other countries) the line about nanny state and red tape is a bit of a canard. Most health and safety legislation is important because it saves lives (or fingers, etc) - most times it is given as a reason for something not happening is because of some jobsworth who has found an excuse.
There is very little red tape interfering with my business apart from the need to pay my VAT and tax (ouch - painful cheque sent earlier in the week).
Oh, and countries aren't people. Businesses don't follow the same rules as people - many or most are in debt, having borrowed to invest - why shouldn't countries do the same. Countries surely have more in common with firms than individuals?
What we might agree on is that we should not be as indebted as we are as a country. New Labour DID pay down the debt - and then rather foolishly stoked it up again as Gordon listened to the siren voices telling him to spend (including incidentally the Tories and Lib Dems, but obviously mainly his own party).
You have set out
so much more clearly what I was trying to say.
Just as in 1976
We were told we needed an IMF bail-out which discredited Labour and led (indirectly) to the winter of discontent
Now we're told that in order to solve a crisis entirely caused by the banking industry (there was the lowest deficit for 60 years in 2007) we need to pay taxpayers' money to banks and cut vital public services
History will conclude that there's nowt so gullible as (greedy) folk
Indeed.
The interesting conundrum is working out who's more greedy; the ones doing the borrowing, or the ones doing the lending?
1976 IMF "bail out"
Please forgive my ignorance, but I thought the IMF was a financial Co op. You put your weekly shilling in, & you could draw out when times were hard.
I admit I am untrained in academic economics, but FWIIW, I thought Dennis Healey was a great chancellor & he should have been Labour party leader.
Trouble with the '76 bailout...
...is that Healey's economic wonks in the treasury COMPLETELY fucked up the forecasts. The country didn't actually need bailing out, as it turned out, and he's on record as saying that if he'd had accurate information about the state of the national finances, he'd never have gone to the IMF.
There's so much more data around these days, anyone can do their homework and draw reasonably accurate snapshots. Not forecasts, though, natch. Economists are NEVER right about what's going to happen in the future. Never.
I think
Andrew Marr's History of Modern Britain talks about this a fair bit, and rather well as I recall.
It duz.
That's where I first read about it (or rather heard about it - I've got the audiobook, which is excellent, as I mentioned on Blogger Takeover). I'm on my second listen at the moment, having first heard it when it came out.
Well we'd have avoided Blair
Healey is voted in as Labour leader in 1980, does a reasonable job of confronting Thatcher, savages the goverment's economic policy, and manages to hold onto Labour's vote despite the Falklands which happens just in time to re-elect Maggie with a smaller majority. When the economic pick-up leads to a third Tory victory, Healey stands down and John Smith becomes leader.
Labour gets back in 1992 without having to lurch to the right.
Time for this?
The Divine Comedy - The Complete Banker
Johan Hari
is like a stuck record.
He looks like he's escaped from Harry Potter world.
He's...
...one of those blokes I really want to like, but he's so compromised by being so dogmatic. Everything's so black and white all the time, he makes it impossible to trust what he writes. Even when I agree with the basic thrust of what he says - which is quite often - I know he's probably concealing some important detail or nuance to suit his own agenda.
He's just an overgrown student union president when it comes down to it.
Spot on about the student union president bit
That's how I see him. He's often hysterical about something and it's all very self-indulgent at times too, all sign-posting back to him and his hard working family.
He's far less annoying than Laurie Penny though.
There's a true student.
From the Office for National Statistics...
http://www.statistics.gov.uk/cci/nugget.asp?id=277
Sadly this graph only gives a snapshot of the deficit (left hand bar chart) and debt (right hand bar chart) for the four years 2007-2010 inc, but it does illustrate what people above were talking about - the difference between how much we have to borrow every year to pay the bills (= deficit), and the accumulated overall debt, expressed in percentage terms...
i guess as it stands, it all relates to how much money we've got ... domestic analogy: if you have a credit card debt of £1,000 it matters a lot if you're on the dole and have no marketable skills, it matters little if you earn £50k a year and can hop from job to job at will ... Big buoyant GDP with deficit & debt as a negligible percentage, then no problem. Feeble GDP with proportionately more significant deficit & debt and you're stuffed.
From the Office for National Statistics...
http://www.statistics.gov.uk/cci/nugget.asp?id=277
Sadly this graph only gives a snapshot of the deficit (left hand bar chart) and debt (right hand bar chart) for the four years 2007-2010 inc, but it does illustrate what people above were talking about - the difference between how much we have to borrow every year to pay the bills (= deficit), and the accumulated overall debt, expressed in percentage terms...
i guess as it stands, it all relates to how much money we've got ... domestic analogy: if you have a credit card debt of £1,000 it matters a lot if you're on the dole and have no marketable skills, it matters little if you earn £50k a year and can hop from job to job at will ... Big buoyant GDP with deficit & debt as a negligible percentage, then no problem. Feeble GDP with proportionately more significant deficit & debt and you're stuffed.
Further personal analogy...
If the UK was someone earning £30k per annum:
Gross annual pay: £30,000
Credit card spending, 2010: £3,060
Accumulated credit card borrowing not yet repaid, as at end 2010: £22,830
(recommended 'we're not worried' levels of deficit and debt would be more like £900 on the credit card in 2010 and overall accumulated debt of £18,000, for someone on £30k)