SATURDAY ESSAY – The benefits of neoconservative economics:

Rising government costs, rising debt, falling exports and a culture falling apart

Time for me to point out another slight flaw in the neocon desire to shrink, slim-down and generally reduce the role of nasty, expensive Big Government. Since the process started around 1980, the cost of Government in the UK and America has risen. And the debts of those behind that government have risen. And you’ll never guess, who’d’a thought it, but the services provided by those governments have worsened considerably, the cost has risen, and….well, you get the idea, I’d imagine.

Globalist neocon ‘thinking’ has always been riddled with contradictions, double standards, discredited assertions, and kettle-calling-pot-black accusations.

Just one example of each in turn: the jobless recovery; big business is just as self-seeking as big government; trickle-down wealth; and grumbling about public sector monopolies while creating as many as it can in the private sector. In a recent essay on neocon elites and wannabe social democratic superstates, I dealt with this at some length – concluding that both approaches to running a sovereign are unworkable. But the ‘more wealth for less cost’ promise is probably one of the biggest of the myriad carelessly balanced buckets of drivel that make up the neo-conservative construct.

Taking the best published global public money statistics available on net sovereign borrowing since 1980, only during Thatcher’s genuine fiscally disciplined, mega-growth 1982-87 period did the figure of borrowing drop below 2% of gdp. She got the PSBR down to nil (an amazing achievement) but since deregulated, less-Government politics started (and was then adopted but further perverted by New Labour) the UK has never once been in the black on an annualised basis. The cost of governing lawless Britain and bailing out brainless banks has cost as much if not more than it did during the mixed-economy years from 1945-1978, when we were bailing out overmanned public sector white elephants. In the US, the lowest deficits by far appear during the Presidency of Bill Clinton. Since 1990, deficits have been skyrocketing in both nations.

Much of this problem is down to the costs of government rising  steadily over time. The public sector that’s remained in Whitehall and elsewhere has been driving up its share of gdp for decades both in the UK and the US. By April 2010 in the UK, civil servant pay represented more than 40% of government spending, and had escalated to such an extent that the 6 million in the UK earning it were costing only 10% less to run and pension than the 24 million who work in the private sector. During the deepest recession since the 1930s – in one year alone, 2009 – the increase in the public employee’s lead over wealth-creators was 5%.  At the end of that year, Edward Leigh (Chairman of the Public Accounts Committee) pointedly said: “There is not a shadow of a doubt that you can deliver the reduction in the deficit that we require by imposing massive efficiency savings and job cuts in the bureaucracy.”

Thatcher herself made no inroads at all into Whitehall headcount (it went up throughout her three terms in office), and George Osborne has battled in vain for most of the time since May 2010 to cut Civil Service costs by £800m. Needless to say, with total government expenditure currently running at £514bn and rising, £0.8bn is less than 0.5% of the total cost of the civil service. In the military arena alone, The Slog has used informants to learn that the Chancellor made personal visits to senior MoD mandarins three times between August 2010 and December 2011 to read the riot act.  Less than one half of one per cent of bureaucrats have gone: but the front-line fighting men have been cut to the bone.

“Ahah,” says the neocon, “but that’s nothing to do with us”. Oh, but it is: as the Olympics has just shown, while commerce and big business achieved enormous sponsorship exposure through the 2012 Games, the taxpayer has borne most of the costs run up by incompetent  twerps in Locog, and the failures of private sector security. Further, a substantial proportion of pinstripes are made necessary by what neoconservatism costs us – most notably in the Employment, Social Services and Treasury areas.

The last of those brings us to the cost of adopting the one thing that has allowed mad Friedmanism to get even this far: the out of control credit and derivative insurance costs involved in extending spending-money to consumers, businesses and banks.

The UK’s post-bailout banking liabilities alone still stand at £1.1 trillion, and have multiplied both national deficit and debt substantially. This is before one takes into account the permanent offshore movement of jobs both in the US and UK, and the welfare costs of keeping those folks going at an average cost of £26,000 a pop. Whether that’s generous or not – and it’s far more than I live on – is irrelevant: it’s what it costs, and it’s a direct result of neoconservative shrinking-government, lower-headcount, financial deregulation ideas.

The quantitative easing and zero interest rate (zirp) policies have pushed up the costs of both Treasury spend via the Bank of England, and State pensions to the burgeoning ranks of retired. In both the US and UK, the long-term costs can and will only be a compromised currency and consquent higher costs to import raw materials, enerby and foodstuffs.

Paying more for raw materials in turn inflates the cost of our finished exports, but here too, in the larger developed nations, adopting neocon policies (and no way could Germany, the most successful exporter on the planet over the last six years, be placed in that class) has reduced the West’s share of world trade. The U.S. market share of world merchandise exports in 1980 was 12%. It dipped gradually during the Reagan era, and has declined sharply since to the point that, by 2010, the share had dropped to only 8.5%.

As for the UK, its trade in goods account has been in deficit since 1983. In 1970, our share of world trade was 11%. It fell sharply between 1981-83. By 1990, it was 6.4%. The Treasury’s ironically titled ‘Plan for Growth’ of March 2011 sums the situation up well: ‘Our share of world exports has fallen from 4.4% in 2000 to 2.8 per cent in 2009. These trends are not inevitable for an advanced economy: look at Germany whose share of world exports was 9.0 per cent in 2009 compared with 8.5 per cent in 2000…..we export just a third as much as Germany.’

The obvious mega-reason for neocon failure in the West is the dramatic growth of Asia and South America. But the model itself has exacerbated this, harping as it does on regular ROI, shareholder dividends and the bonus culture. Just when our generic output of cheap goods should’ve switched to higher margin craftsmanship durables, a combination of Bourse demand for results and accountancy nibbling at product formulation quality led us into a head-to-head fight with Asia on price: a hopeless war we could never win. Instead of selling upscale, well-made products to the new millionaires of the East – made rich by knocking out cheap clothing and solar garden lights – we’ve been trying to flog increasingly badly made and overpriced designer clothing and cars alongside bizarrely dangerous financial services.

The three biggest causes of failure for the West have been lack of radical reinvestment, lack of new product diversification, and lack of courage in new export markets. The obsession with bottom line has led us closer and closer to the bottom of the trade league. Germany’s exceptional success has been based on ignoring the worst excesses of neocon greed, and taking braver risks with better quality products.

There remains, of course, a final cost of neoconservative economics to which nobody has, as yet, managed to attach a price tag: long-term, so-called ‘structural’ unemployment. Fundamentally, the switch away from community manufacturing (from US auto workers to British miners) in favour of globalised accountancy has steadily destroyed a social fabric already wearing thin as a result of fluffy liberal indiscipline introduced during the 1960s. Taken out of the stabilising culture of traditional familial and employment values, idle hands have turned to uncontrolled sexual reproduction, crime, drugs, drunkenness, and thus more crime.The cost to any government of controlling crime (and to the consumer of insuring against it) combine to produce an increase in both direct and indirect taxes.

A good third of the available labour forces of both the UK and the US are now unemployable; and those who could do a job have had them removed by the unimaginative, tramline, production-volume greed of a world dominated by remote shareholders and corporate finance directors. Not only will it now be horrendously difficult to retrain and remotivate the human flotsam resulting from all that blind money-adoration: as QE is showing us only too well, it becomes near impossible to restart an economy where the only growth any longer can come from domestic consumption.

That domestic consumption of cheap imports makes the deficit and debt position worse still, but in 2012 the US and UK economies cannot even get off their knees to achieve that: people lack the confidence to take credit and spend, and banks lack the stability to lend to them in the first place. The 3% can get as rich as they like, but they have neither the will nor the clout to drive economic recovery. In the end they will – literally – eat their own source of wealth, and then be consumed by those who resent it.

So here we are, just over three decades on from the economics of Joseph, Freidman, Reagan and Thatcher. We work harder and harder to earn less and less while paying more and more tax on less and less government service coming from more and more civil servants. And it’s about to get much worse on a number of key dimensions….this time to do with the equally delusional ideas of multinational investment banking and mercantile business globalism.

Yes, on balance, I’d say the flaws in neoconservative economic ideas are obvious on commercial, human, social, geopolitical, and familial/individual bases. There doesn’t seem to me to be a lot left after that: but that won’t stop the bare-faced gluttony and content-free assertions of those who peddle the illusion.

They are doomed, be in no doubt. But the collateral damage is going to be truly horrible before the ‘developed’ world finally regains its ethical and communal health.

38 thoughts on “SATURDAY ESSAY – The benefits of neoconservative economics:

  1. I see a consistent goal in neoconservatism, the engendering of human die-off in a multigenerational eugenicist plan that seeks oligarchic control over a diminished human population. H.G. Wells saw it in “The Time Machine”. The Rockefeller and Gates Foundations espouse eugenics. For further support to this assertion, please see Michael C. Ruppert, “Crossing the Rubicon” and Michael C. Ruppert, “Confronting Collapse.”

    • The problem with that scenario is that the Oligarchs (who consider themselves brighter than the rest) are breeding at a lower rate than the thickies that make up the majority, in fact the wealthiest have a very low TFR and will be the first to die out. (I don’t think they have thought it through properly)

      • Bob
        I think you’re right: the self-styled ‘elite’ are in reality just a tiny minority who simply haven’t thought through the maths.

      • Not true BobRocket, how does a farmer control his thousands of sheep?

        The people you are referring to are not visible to you, you don’t know who they are, and they are not wealthy in any form you can imagine, the people to whom you refer own almost the entire planet via corporations whose real ownership can never be discovered. Virtually all of us are just tenants, paying the rent via taxes and fees.

        These people make Bill Gates look like a poor tramp, but the likes of Bill Gates, Zuckerberg etc are massively important to the owners, for they give the illusion to the great herd of slaves that anything is possible, if only you just work a bit harder.

        The vast majority of humans are controlled by peer pressure and conformity, and the fear of ridicule of non-conformism. If that doesn’t work TPTB use the police, the law, and every other apparatus of state, who rely on TPTB for their (enhanced level of) daily bread and who are conformers.

        So, they already do control everybody while they are in fact very few in number. The problem they have is how to stop the resources they want being plundered by their tenants.

  2. Great post, but.. but today Swervin’ Mervyn sees a little light at the end of the tunnel!
    Cartoon images of a fast approaching express come to mind.

  3. “They are doomed..”
    I’d always hoped that this would be so, but am beginning to have serious doubts about it, and that depresses me.

  4. The end will not come without some pain.
    They know we would never survive without our basic needs: reality television and season tickets.
    Take both those things away and they will have an enemy to contend with.
    Course, they know that, too.

  5. Dare I say it, kfc?
    when accounts are to be paid and history has indeed revolved around Isabella and Ferdinand then we shall have our calm Sunday afternoons along the English canal with things we happily recognise with people we love?

  6. Excellent piece John. I have posted my opinions many times and though not all see things the same way I do………..the end result will likely be the same.

  7. Excellent piece. IMHO combines well with another one i read in VOX:

    http://www.voxeu.org/article/doomsday-cycle-turns-who-s-next

    It’s depressing that this roler coaster is probably unstoppable now…and we’re on it – till the end of the line.
    I remember reading “elder’s” comment a few posts back – and the urge to do something. Many times i thought of taking a gun and head for my country’s rat-house (in the literal meaning – not the German). Chances are, i wouldn’t make it close enough….
    I don’t know what to do, except trying to educate the young on how we came to this position – the young generation is they who will probably change this (or at least try to) in the end.
    Seems history repeats itself and every now and then we hit the same walls – then revolution, turmoil, and another cycle. IMHO it’s not the same. Every time it gets a little bit better. If only the little steps of progress were just a bit bigger – or the climbing pace faster….

  8. Excellent post John.
    We need the Big Picture in front of us as often as possible.
    We know more or less most of these things separately and apart – but the real challenge lies in stepping back and pulling it altogether. You’ve done this brilliantly. Bravo!

  9. What a brilliant piece loved it. Society needs people to do their best by themselves to help others do the same. The lesson from history is clear. It’s a bit like a mates agreement from my drinking days, the drunkest was got home first.

    Failing to take the weakest with you has incalcuable costs. there is no such thing as a scrounger.

    • “Failing to take the weakest with you has incalcuable costs. there is no such thing as a scrounger”

      Agree with the first part Bill but have to disagree with the second. There are those who make sure they maximise on receipts from everyone else whilst contributing the minimum, if anything at all. They are at the least scroungers and often much worse. But they are not to be confused with ‘the weak’.

  10. The truth hurts John, and its depressing too. But I thank goodness you still bring it to us, handed on a plate thanks to the t’internet
    More power to your writing elbow old friend. You feel like a friend to me anyway, clearing the cloud of utter bollox we are spoonfed daily by the claptrap MSM.
    They binned me John, after 14 years as a med electronic engineer. No pension, nothing to look forward too, but a mortgage still to pay. Luckily it cost them a pretty penny to get rid, and the first thing I did with the cash was bale out to sunnier climes. I hate the UK now, with its poxy false governments and poxy attitude to the people, and its poxy jet stream fooked weather system. When I get back in 4 days time my only plan is to escape again as swiftly as possible and enjoy a winter of 15c to 18c in southern spain. Good riddance to you UK, clogg, titchell, camermoron, swervyn and the rest of the pile of shit wrecking our lives with blatant bullshit. I’m out

  11. Thatcher of course had the benefit of North Sea oil revenues to offset the fall in income/spending taxes and the increase in the benefits bill that came from increasing the unemployment rate from 5% to 11%+ between 1979 and 1982.

    Cameron doesn’t have that external revenue stream and so has to rely on tax increases and spending cuts, Osborne is discovering that not only does the welfare bill rise but income and circulation taxes fall in a recession creating a vicious circle.

    The problem the Coalition have yet to understand is that people have got used to spending less, consumers have broken the cycle of ever increasing consumption just for the sake of it.

    They’re never getting it back.

  12. Much of this problem is down to the costs of government rising steadily over time. The public sector that’s remained in Whitehall and elsewhere has been driving up its share of gdp for decades both in the UK and the US. By April 2010 in the UK, civil servant pay represented more than 40% of government spending, and had escalated to such an extent that the 6 million in the UK earning it were costing only 10% less to run and pension than the 24 million who work in the private sector. During the deepest recession since the 1930s – in one year alone, 2009 – the increase in the public employee’s lead over wealth-creators was 5%. At the end of that year, Edward Leigh (Chairman of the Public Accounts Committee) pointedly said: “There is not a shadow of a doubt that you can deliver the reduction in the deficit that we require by imposing massive efficiency savings and job cuts in the bureaucracy.”

    Thatcher herself made no inroads at all into Whitehall headcount (it went up throughout her three terms in office), and George Osborne has battled in vain for most of the time since May 2010 to cut Civil Service costs by £800m. Needless to say, with total government expenditure currently running at £514bn and rising, £0.8bn is less than 0.5% of the total cost of the civil service

    Unfortunately, the trouble is that JW’s argument is crap…

    I earn c£25k for putting dodgy company directors out of business…

    I can only dream of earning the figures JW is qouting…

    He must be on a different planet to the one I’m on..

    No doubt there will be lots of snarky and ill informed comments after stating this, but what people forget is that most of the civil service earn far less than £25k per annum.

    Not that this will stop folks from making ill informed comments..

    • Average public sector pay in 2011 according to the ONS is around £28,000 (around 6m workers).
      Civil Servants (around 0.4m workers) get much less, in 2006 a quarter got less than £15,430 and in 2010 the median was only £22,850.

      You should be able to easily earn in excess of £125k if you swap sides and sell consulting services to the dodgy directors to help them avoid being put out of business by underpaid and under resourced civil servants.
      (I agree that it wouldn’t be very public spirited but at least there would be one less public sector mouth to feed)

      • @Stuart
        It is my reasoned opinion that the civil servants who are useful and do provide a good service are those who get paid least in the civil service. Once a certain level of uselessness to society is reached the pay (meeting count and expenses requirement) goes up in order to show just how valuable they are to the public.

        Having dealt with the public sector in one way or another for many years. I came to realise that the higher a bod had risen, the less worth listening to they had become. At the end, you always had to listen to the bods at the bottom end of the scale to find out what was really needed. Of course the meetings with top end bods were regular as well as time consuming) and generated little if anything other than the next meeting date.

    • I have serious doubts about your figure for the average civil service earnings, but perhaps you were not quoting the FTE figure. If you include the legions of part timers and job sharers, maybe. It would be interesting to compare the cost of civil service pay per productive hour after absenteeism with that in private business. Not that I know the answer, but I have my suspicions. This is akin to the specious argument put forward by civil service unions. The average civil service pension is (£x, around £6000 I think). This is not because civil servants are badly paid, it’s because many of them don’t work all that much of their lives at civil service jobs. Hence the low pensions. A full time civil servant with 40 years of service will get 40/60 of the average of the last 3 years of service (say £20k), at least for the next couple of decades until the new rules bite.

  13. Poundland is booming! So are all the charity shops in the town centre. Oh and the endless coffee chains! The other shops are closed.

    • Come to rural Shropshire. Farming prospers on subsidies, shops remain open though the crazy idea of giving a 90% business rates rebate to charity shops is of course a big incentive for them to creep into town centres, using mainly volunteer labour. Perhaps the rates rebate should be cancelled.

  14. “You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it”

    Adrian Rogers

    • This is very true. However you cannot leave the people (whether of not they choose to work) to starve (after having supplied – and even encouraged them – for so long) as they become a mass of people who rather than starve – will start tearing heads off.
      Taking a position is fine. Objecting to others positions is fine. But you have to look at reality. The reality is that people have been encouraged to depend on the state over many years. In times like these, many are trying to get work (and state regulations,interference in private matters and ‘penalties’ make taking ‘any’ job a bad prospect) but just cannot seem to do so.

      This is a reality which cannot be avoided by speech making.

      • Morningstar,

        I guess you disagree with JK Galbraith who said (I paraphrase) that he was saddened to see that some people believed the removal of help (welfare) is needed to encourage the poor to work whilst the rich need tax-breaks to encourage them to work harder.

  15. Our problem has been the competition from 1 billion new workers from china and india. We need to shrink our operating base in order to compete. This means government must shrink down, but ultimatley we need to earn less. Currently and for the last 20-30 yrs we have been using debt to plug the gap between what we spend and what we earn.

    On another note i am just in the middle of reading “The fourth wave” http://www.amazon.com/Fourth-Wave-Herman-Bryant-Maynard/dp/1576750027

    It was written in 1997 and talks about how history is divided in to generational differences lasting approx 20 yrs. The last crisis was WW2, after that comes a golden age (50’s prosperity), then an awakening (60/70’s), then an unravelling (80/90’s societal breakdown) and the next crisis period started in 2005. So we are in this crisis now and it is likley to end in a major war (as history tells us). So this is likley to happen around 2025. So we can see how much longer we have ahead of us where more shit is going to hit the fan and then we will have a big release from it and after this period we will be into new and promising times.

    Your age group in all this is relevant. So all those boomers are basically going to have a shit last 1/4 of your life. I’m of the x generation who were born in the awakening times and then was an adolescent in the unravelling times – high divorse, drug use, high crime. So i have had a pretty crap start to my life and now have to live through a crisis in my mid life. Hopefully the last 1/4 will be good, but will i be here to enjoy it.

  16. Are not other bloggers bothered as I am by the Government mantra that the UK is being held back because of the lack of ex-UK world growth?

    In my opinion it is just another way of saying ‘blame the foreigners’.

    UK exports make up circa 13% of GDP so if the rest of the world grew at a healthy rate of say 4% and the UK maintained its share (something the UK has failed to do for too many decades now) any GDP increase would certainly not get us out of our DEFICIT/DEBT trap as it infers a positive £ 8 B (very approx).

    But if the rest of the world grows at 4% I would guess our imports would also grow at least as the same pace as our exports, and as our imports have been consistently greater than exports for many years, our trade deficit would widen and our dependence on foreign vendor and general financial assistance would deepen.

    The UK obviously has to grow its exports but more urgently, in my opinion, it has to replace many more imports by home grown produce (agricultural/ industrial/tech) and become long term viable.

  17. Interesting stuff John.
    I wonder though. The pay rates for public vs private jobs [where it's possible to equate] have been changing over time. Ten years ago the differential was grossly in favour of private sector workers and the best pension around was in IBM. Then we had under labour a pay review which promised fair pay for a fair days work. My pay as a middle level manager in a hospital went up 10k instantly. It was called agenda for change and everyone in the service spent a year or so writing the most creative job description they could to get the best banding. The senior bosses didn’t care then because the Blair government had said they would cover the increased service cost. A similar thing occurred in all public sectors as far as I can discern resulting in a massive theoretical leveling of pay between public and private sectors.
    When things went pear shaped in 2008 the bottom seems to have dropped out of the private sector and wages for ordinary folks i.e below general manager levels have declined quite dramatically in some cases and yet the public sector held on to their newly acquired equivalency -but now the equivalency is meaningless.
    Agenda for change meant that for the sake of jumping through a few simple hoops my wages would rises incrementally for a decade -outwith the annual pay rises. So they stop the annual pay rises and guess what? The increments are still going on……
    They haven’t cut back on the stupid bureaucracy though, the incredible waste and I don’t think they can really, not with the box ticking mindset prevalent. I was glad to get out.

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