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Monday, 4 October 2010

The Cuts Agenda - What lies beneath?


The government's cuts agenda has the potential to finish off the welfare state, as it was constructed after WW2 in much worse conditions than we face today and based on a progressive state, redistributive taxes and social justice. It's important to remember that the social democratic era from 1945 to 1975 was marked by high rates of economic growth and productivity, historically low levels of unemployment and high wages. During this era government debt was high, often higher than it is today. But since these austerity measures are soon to be announced we should consider the logic behind the savage cuts that the Con-Dems are about to ram down our throats. As these cuts will significantly reduce the spending that helped drive the economy out of recession we should consider the notion of "creative destruction".


What is creative destruction? It was the brainchild of Joseph Schumpeter, an Austrian economist and political scientist, as a way of taking advantage of crises and subsequent recessions to strive for radical innovation in the economy. For Schumpeter believed that long-term economic growth would be sustained by this endogenous process. Schumpeter was deeply opposed to Keynesian economics and an important figure in evolutionary economics, he saw the Great Depression as a "cooling off" period which could enable surviving firms to take-over firms that were insufficiently competitive. So avoiding a double-dip recession might not be high on the Coalition's priorities, as it could arguably allow the most successful entrepreneurs to buy-out rivals who are less efficient and productive. Arguably it's similar to the corporate raids of the 1980s that tore apart old bureaucratic monopolies, theoretically leaving the most successful firms unscathed.

It's likely that this approach to the economy would have dire social consequences, leading to greater inequality as unemployment rises. Though the cabinet consists of around 22 white people 19 of which are male and 18 of which are millionaires, which might lead us to conclude that they do not hold the interests of the common man at heart. Especially as most come from a background of wealth and privilege, attended the finest private schools and universities in our country. Take David Cameron, he's descendant of King William IV and is the fifth cousin of the Queen twice removed. At Oxford Cameron was a member of the Bullingdon Club and spent over £3,000 on his "uniform". Cameron's first job was at the Conservative Research Department, which he was given thanks to the intervention of a Royal equerry.

Considering that David Cameron is essentially a product of affirmative action for rich-white-men, it would seem that he may not be acting for the Common Good. We can tell more about who he represents from his record as Conservative leader. As Conservative leader he raised £16 million in funding from the City of London over 4 years. Cameron also won over the support of Rupert Murdoch, and by extension 40% of the British media. In short the government has a dual constituency, the uber-rich and the rest of society, through a precarious balancing act - trying to appease both classes - the Con-Dems will try to stay in power. It will end badly of course, as it did with New Labour. Creative destruction, as leading to rapid deflation, could enable the richest of the rich to take-over smaller firms and purge the markets of competition. 

It could also be that the government is currently acting to initiate a sort of economic "shock therapy" that will dissolve the welfare state and the last remnants of social democracy over a short period of time. We may be kept in a state of "shock" by the financial crisis of 2008, the ongoing war in Afghanistan and the growing threat of terrorism. Naturally, the Conservative Party is brandishing the Union Jack on their logo and talking of the "national interest". The idea being to use exaggerated threats to justify oppression at home, to push through unpopular policies whilst the public is still in a state of "shock". We saw the same tactics under Thatcher. The Falklands war of 1982 gave Thatcher a boost in the polls as hundreds died. This gave her administration the opportunity to push through legislation against trade unions and to privatise vast sectors of British industry.


The Conservatives promised us "change" during the campaigns and "change" they will deliver unto us. But it will only be the continued shift in paradigm that began under Thatcher and was furthered by Blair. The Liberals have not "diluted" the Conservative Party and were on board for the cuts the second the Conservatives tried to forge an alliance with them. As the Lib Dems try to put a "progressive" face on the Coalition the Conservatives will appeal to Eurosceptic and anti-immigrant tendencies in the working-class for support. All the while the economic programme has been drawn up for the richest of the rich, to insulate them from the harshest of recessions and the austere follow-up to it. Time will tell if the Con-Dems will succeed, as the cuts agenda has yet to be revealed for all to inspect.

1 comment:

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