On the radio this morning the new SNP leader Nicola Sturgeon pointed out what is patently obvious to almost everyone except the leaders of the other parties: that "austerity has failed." Yet all the others can offer is "more austerity."
Sturgeon advocates that, rather than further cuts, there should be a "modest " increase in public spending of 0.5% which, she claims, will free up an additional £180bn for "investment in the infrastructure, innovation and growing the economy."
Hurray!
I'm glad the penny has dropped for at least one leading British politician. I could almost wish there were SNP candidates standing here in Yorkshire.
Alas, her interviewer ("Today's"James Naughtie?) pointed out that this would involve further public debt and would "ask future generations to pay for our profligacy " (or something like that). And the Tories accuse the BBC of a left wing bias!
M/s Sturgeon didn't respond to these canards: maybe she didn't get the chance. But here, for the umpteenth time:
- with interest rates at an historic low this is a good time for governments to be in debt, and there are good reasons for being in debt as extra public expenditure will help revive the economy, create growth and jobs, increase the tax take, reduce expenditure on social security and thus reduce the deficit.
- public expenditure now will not place a burden on future generations. You can't consume today what is to be produced by the as yet unborn. This, as Professor Paul Krugman puts it far more eloquently that I, is "money we owe ourselves," here and now, not at some future date. If you don't grasp this* please, please, please see::http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/
* I've tried to explain this in an earlier post by pointing out that those of us who have taken advantage of Osborne's bribe by buying the pensioner bonds now hold part of the National Debt, and the interest we receive will be financed by the taxes we pay. In this particular case that does involve a generational shift since only the elderly can buy the bonds but almost everyone will pay the taxes. However most of the Nation Debt is owned by "everyone" in one way or another, through financial institutions, insurance companies, pension funds etc
Peter,
ReplyDeleteIf you liked the morsel the BBC reported you will enjoy the full banquet!
You can view the full version of First Minister Sturgeon's speech in London on Austerity, Inequality and the Scottish Approach to Economic Growth at
https://www.youtube.com/watch?v=Sirf1TTMqd4
We have a First Minister here in Scotland that is not afraid of the slings and arrows of the right wing media (that includes the thoroughly biased BBC Scotland) and has the courage to stand up against austerity and the Westminster consensus and say that the economy needs to grow to reduce the deficit. In effect she is advocating a counter-cyclical policy of deficit spending on infrastructure projects where labour is the key factor of production. This stimulates employment and stabilises earnings. Some of the costs will be offset by an increased tax take and reduced benefit payments. This is not surprising that she should advocate this Keynesian approach as her mentor was the economist Alex Salmond. Nor should these infrastucture projects be focussed on London as is all too often the case when Westminster is left to its own devices. For example, if we have high speed rail, she thinks you should be able to travel north from Yorkshire and not just to London. There are advantages for the whole UK of a strong SNP presence in the next parliament!
She also attacks the effect of the austerity cuts on welfare, not just because of the human cost but because they all too often represent a false economy because the burden of the resulting social and human problems are simply shifted to other parts of the public purse or wider economy.
The collapse of the Liberal Democrat vote here in Scotland does not seem to be properly understood by its members on either side of the border. It is not just that they went into coalition with the hated tories, it is that they abandoned everything that their former voters and supporters, including myself, understood them to stand for including Keyne's economics and their belief in home rule as most understand it and even did so with such apparent glee.
Hope you enjoy the full speech.
Al
Thanks, Al, for your comments and recommendation. I followed the link, thoroughly enjoyed the full speech, and strongly recommend other readers to do the same. Apart from her enthusiasm for HS2 and any references she might have made to total independence for Scotland (though I didn't catch many) I am fully in agreement. Exactly what the Liberal Democrats should be arguing.
DeleteRe independence, my own favoured solution would be for complete Home Rule, including tax raising powers, for all domestic affairs, as Scotland already has for education, the legal system, and, to a large extent, the health service, but remaining in the UK for foreign policy, defence, International trade regulations, management of the currency, and the BBC and weather forecast. England too should have Home Rule, with a parliament based in York, separate from the Westminster parliament which would deal solely with the UK matters listed above, and with much further devolution to our regions.
Re the coalition with the Tories, although I agreed with John Pardoe, (I think it was) that "detestation of all the Tories stand for is the beginning of political wisdom" I do think we were right to go into coalition with them. They were and are, for now at any rate, the party with the most MPs. But the way we have handled the unequal partnership has been poor. We should have been clearer and firmer on what we could not support , such as the oxymoronic policy of “expansionary fiscal contraction” (ie austerity) and the preparation of the NHS and school system for further privatisation.
On austerity, M/s Sturgeon mentions in her speech that this could be nothing to do with reducing the deficit, but "an ideological war to shrink the state" and she could well have hit the nail on the head.
public expenditure now will not place a burden on future generations. You can't consume today what is to be produced by the as yet unborn. This, as Professor Paul Krugman puts it far more eloquently that I, is "money we owe ourselves," here and now, not at some future date. If you don't grasp this* please, please, please see::http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/
ReplyDeleteHaving read Krugman's article, it seems only to apply to debt within a closed system? That is, it's true that increasing government debt doesn't put our children in debt if the loans were made by the people of UK.
But on the other hand, if we borrow money from outside the country, which our children will have to pay back, how is that not playing a burden on future generations?
If our children own the debt which the government owe, that's one thing. But if all the government debt is owned by China because it's them the government borrowed the money from, surely that does place a burden on the future generations of the UK?
(That is, Krugman seems to see public debt as, for instance, a child borrowing money from its parent to buy a car; that doesn't change the financial situation of the family as a whole, because it just means that some of the family's money has been turned into a wheeled asset.
DeleteIn tha situation the money owed is indeed 'money owed to ourselves', or at least, money owed by the family to the family. the repayments from child to parents are not a burden on the family's future life.
But it's a different situation if the child, because the parents don't have the money on hand to lend, goes and borrows from a loan shark (or even Wonga) the buy that car. Then the family is worse off, aren't they? And the repayments clearly will be a burden on the family's future life (as, if they can't keep up the repayments, will be the broken kneecaps).
Yes, that's true and something I've tried to make clear in previous post: eg " The only part of government debt is that could be a problem is that fraction of it that is held overseas" (15th December 2014). So if the people alive now don't pay off the overseas debt during our lifetime our successors will have to. Until the deregulation of the 1980s almost all British Government debt was held internally: since the capital market was internationalised I think it's about two thirds. I suspect but can't quantify that the "burden" of debt overseas pales into insignificance compared to the balance of payments deficit, which grows and grows and grows, and no-one seems to care. That, along with low productivity and growing inequality are, in my view the really urgent problems our politicians should be tackling.
DeleteActually it is more like the parents borrowing from the child: the people who hold public debt are (by and large) rich people who don't need public money (hence why they could afford to lend the money in the first place). Money spent on servicing the debt is money that can't be spent on helping those who really need it. I think the current spending cuts have gone far enough (at least in the areas which have been cut), but if we are to finance spending increases we should do so through taxation, not more borrowing.
ReplyDeleteCertainly the bias is probably from the young to the rich, but young people subscribing to pension funds, holding insurance, having mortgages, are members of trade unions, or otherwise involved in financial institutions, hold government debt indirectly, so the situation may not be as bleak as you suggest.
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