Friday, November 15, 2013

Eternal Austerity Makes Complete Sense – If You're Rich

Mark Blyth
Common Dreams
 
'David Cameron’s claims simply don’t add up to a coherent explanation as to why “more with less” – perma-austerity – is a policy worth pursuing.' (Photograph: Oli Scarff/Getty Images)The prime minister's speech at the lord mayor's banquet was notable in part because its main message, that "we need to do more with less. Not just now, but permanently," was delivered from a throne bedecked in gold to applause from members of the financial elite. But it's the other less commented upon aspects of the speech that signal why the government feels confident enough to reveal its true colours.

David Cameron's claims simply don't add up to a coherent explanation as to why "more with less" – perma-austerity – is a policy worth pursuing.
First of all, he insisted that "the biggest single threat to the cost of living in this country is if our budget deficit and debts get out of control again". Yet while the deficit rose to 11.2% of GDP in 2010, the markets that fund British debt never once thought the situation "out of control". Quite the contrary occurred as the interest payments due on UK bonds have gone steadily down since 2006, and have only risen now, when the UK is supposedly in recovery. A much more likely culprit for the drop in living standards is the fall in British real wages of over 5% since 2010 coupled with high price inflation, but that doesn't fit with the story of "out of control" spending needing to be reined in for the common good.

Second, when you have a deficit, you can either raise taxes or cut spending to fill the gap, and the coalition have favoured the latter. And because of these efforts British government debt has gone up, not down, despite the cuts, from 52.3% of GDP in 2009 to 90.7% in 2013. This is hardly a surprise given that exactly this same pattern of cuts leading to more debt as the underlying economy shrinks has been the story throughout the Eurozone too.

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