Friday, 15 April 2011

A Rally for Cuts and Debt.

The TaxPayers' Alliance have pledged to lend the Rally Against Debt the 'debt clock' it paraded through the streets of London last year in a bid to secure a Conservative victory at the General Election. Ironically this populist rally for less government debt is effectively a rally for more debt per household. The household debt is set to rise from £1,560 billion in 2010 to £2,126 billion in 2015 which would represent an increase of 36%. Since the decline of the workers' share of GDP began in the late 1970s and social mobility has stagnated, the loss in wages had to be substituted for in debt by a great deal of working-people. By 2015 it is projected that public debt will be reduced by £43 billion whilst household debt will have skyrocketed by £245 billion. This should not be a surprise given the situation in the economy, the process of financialisation which was undertaken in the 70s and has intensified over the years. With the 'Big Bang' of 1986 in which Thatcher liberated the financial markets from regulations and taxes, of which UKIP and the TaxPayers' Alliance are admirers.

The fall in aggregate demand created by the financial collapse of 2008 will be made up for through an even greater reliance on debt. Credit is the only way for consumption to increase in a time when there is mass-unemployment, high inflation, stagnant wages and a VAT hike. The cuts will dispossess millions of people of an adequate safety-net which has the potential to force a lot of people to fall back on credit and take on even more debt. Since the financialisation of the economy began in the late 1970s and early 80s debt has been used to substitute for the losses in wages. The economic crises over the last 30 years have been a result of this process of financialisation. The austerity measures are part of an attempt to ensure the survival of the financialised economy we had before the Crash of '08. The prevention of a turn to social democracy, or worse socialism, along with the destruction of the welfare state are a part of this process. The public has to flip the bill for this process at a time when the population has been left jobless by the recession.

The current line about the national debt and the budget deficit exacerbated by the recession blames New Labour for "irresponsible" spending and giving "too much" to benefit claimants. This line reeks of bullshit. Even though public spending is low when compared to the rate of expenditure in the social democratic era which spanned from the 40s to the 70s. The amount of debt is also small compared to the immediate aftermath of WWII, when it was around 260% of GDP and today the debt is 70% of GDP. As right-wingers like to point out, in a war the national debt and budget deficit increases due to the impact of war on a country. This is often used to defend the position that the amount of spending under New Labour was unusual and irresponsible. It is conveniently left out that it is the norm in a recession for a deficit to emerge as public spending, which would normally be sustainable, becomes unsustainable as tax-revenues fall due to the economic collapse. The amount of debt incurred by such crises is then used to justify a series of deep cuts, this has been standard practice for over 30 years.

The joke about tuition fees and cuts to higher education is that the national debt is 70% of GDP and spending on higher education is 0.7% of GDP. So to pay-off less than 1% of the debt students are expected to take on around £30,000 in personal debt. Naturally, the subjects - science and math - prioritised are potentially valuable in Canary Wharf and Wall Street. Similarly absurd are the cuts to benefits which amount to £18 billion over 5 years, supposedly to deter benefit fraud (which costs £500 million a year) and to reduce the deficit. All the while defence has been essentially ring-fenced and the Trident missile programme is being renewed, even though it is under the control of the American nuclear command system and will cost £80 billion to renew. All the while there are billions being accumulated in offshore accounts at the expense of the public, various loopholes in the tax system allow the ultra-rich to get away without paying their full share. The estimates range from £25 billion to £125 billion as to how much this costs the Treasury.

Not that the Labour Party offers an alternative to cuts, it is totally on board with the cuts agenda in a less extreme form. Ed Miliband has only jumped on the back of the anti-cuts movement and sought to use it to further his own political career. Labour stands for across-the-board cuts of 10% rather than 12%, which would hit front-line services and working-people. It should also be remembered that it was New Labour under which the financial crisis came about, as a result of policies which are supported by the Conservatives and Liberal Democrats as well. If there had been a Conservative administration in office the Crash would have still occurred. Down to the disillusionment with Labour, as well as the Establishment in general, and the usual herd behaviour amongst voters the outcome of the election was a hung Parliament. Those who claim there is a democratic mandate for a Con-Dem Coalition along these grounds are mistaken, a minority Conservative government maybe but not a coalition.

There may not be an alternative promised among the political class, but there is an actual alternatives to the cuts. At the Glasgow Media Group, Greg Philo has researched the possibilities of a one-off wealth tax of 20% which could wipe the deficit and replenish the government's coffers. It could rake in £800 billion to the Treasury from the £4 trillion in wealth accumulated by the richest 10% in this country. It would stabilise the stock market and the 10% would get their money back in the long-term. Even without this tax public spending can be used to supplement the fall in consumption and investment. Once the economy has recovered and growth is rising, tax-revenues would recover as employment increases and businesses recover. The country's debt could be paid off over time as spending which was temporarily unsustainable once again becomes sustainable. These are just two alternatives to the cuts, which do not exist according to the BBC and the mass-media.

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