HEADING FOR DISASTER: A FAILING BRITISH ECONOMY, AN UNREPAYABLE DEBT, & AN UNREPENTANT POLITICAL CLASS

oscunt  GEORGE, THERE ARE GOING TO BE TEARS WELL BEFORE BEDTIME

Precisely as the right-wing Institute for Fiscal studies predicted before the Election, George Osborne is now under pressure (from the Institute of Directors) to “slash spending”. The IoD has gone one on from “cut”: perhaps next time the verb will be “decimate”. And then “obliterate”.

Note that few if any of the IoD’s members will suffer a jot from the cuts. Also note that the IoD is specifically ruling out tax rises….which would, of course, hit most of their members very hard indeed.

The Chancellor has promised yet another budget in the summer (we might just as well make them quarterly and have done with it) and has said it will be “a budget for working people”. This is another little weasel phrase invented by the Aussie spin doctor Lynton Crosby; what it means is “people in a full-time contractual private sector job”. As only 22% of us are these days, it isn’t going to be terribly good news for the unemployed, the State retired, or indeed the NHS: get out of that, Jeremy Hunt.

I think a few more people need to take time out here and study what exactly is going on rather more fully. In a nutshell, it is this: because the ConDem coalition spectacularly failed over the last five years to (a) wipe out the UK deficit (b) diversify the UK economy out of financial services and (c) gain new export contracts beyond the EU, those people out of jobs as a result of that failure, or on benefits, or ill will be asked to cough up. The business organisation members who aided in this abject failure, however, won’t be asked to cough up. They’ll just see their salaries and bonuses continuing to go up.

So, Government screws up and business acts as its accomplice; labour force, the ill and the poor foot the bill.

Sorry to repeat the question for the 50th time, but you see so far I haven’t had an answer. As a neoliberal economy is based on eternal consumption and a ready supply of credit, how are lower incomes and dried-up banks going to produce more consumption?

They can’t, period. But still the financial press calls the UK’s Q1 slowdown ‘disappointing’ (to whom – idiots?) and still the talk of China being ‘back on course’ gets blown off course every time data emerges from Beijing….a deceleration rate of 5.2% YOY being the latest one last Friday.

Look around at the overall situation and think: until very recently we had a situation where people were paying governments to borrow money off them. Banks are still offering ‘savers’ virtually no interest on their savings. There isn’t a Western economy booming anywhere: not one. But not a single Western bourse is reflecting that fact: not one. Every week another lunatic (usually German) insists that the eurozone is turning the corner. No it isn’t: it’s in the ER room with severe brain damage being kept alive by experimental drugs.

A 2% rise in interest rates – just 2% people – would move US debt management expenditure from 2 in 5 of all tax dollars to $2.50. In 1976, the UK’s deficit to gdp ratio was 6%…but we had to call in the IMF to avoid insolvency – because interest rates were a staggering 14.25% average during the year.

The latest UK projected deficit in 2015 is 4.8%. BUT that’s with near-zero interest rates. Just a rise of 1.5% would would take our deficit higher than it was when we nearly went bust under Labour. An even remotely normal level at 4% would double it. At that point, bond yields would go into orbit around Saturn.

When the Conservatives came to power in 2010, the national debt was £900bn. It’s closer to £1.6trillion today…80% higher in five years.

No matter what any politician tries to tell you, our current woefully negative trading account means that the UK National Debt is as unrepayable as that of Greece. The big difference being that we have far, far more to lose than they do.

There is no way further spending cuts can have any effect on that, because the welfare and health bills for government aren’t the real problem. The real problem is an unreformed economy ludicrously overdependent on financial services, and a Conservative administration with almost no commercial experience in its ranks to switch to high-margin manufacturing and retraining of the workforce to make stuff.

The money saved by Osborne was a minute part of even the deficit reduction. In relation to the debt, the best analogy I can offer you is that more expenditure cuts now would be like putting one pipette into the Pacific in an effort to stem rising sea levels. The idea that austerity on the one hand is part of the cure for long-term British commercial and business failure is obscenely infantile.

The Conservatives know this, but don’t know what to do except take away our right to resist. The Labour Party doesn’t even understand it in the first place. Nigel Farage probably gave up on this piece after paragraph six. And Nicola Sturgeon cares not for any of it just so long as she gets independence for the Scots.

That is the depth of our political crisis in 2015. Only a drastic change in socio-economic culture, education and our Constitutional processes can even begin to change it.

Earlier at The Slog: Rabidly avid business secretary in new hypocrisy shocker

42 thoughts on “HEADING FOR DISASTER: A FAILING BRITISH ECONOMY, AN UNREPAYABLE DEBT, & AN UNREPENTANT POLITICAL CLASS

  1. Things are not going back to the way they were, that’s for sure. We are moving ever closer to what was, a couple of decades ago, a horror movie which depicted the future world as a grim, unpleasant place to live. We are very nearly there, we could actually be there in less than a decade and probably will.
    The Hunger Games doesn’t seem so unreal any longer.

    Like

  2. There is an air of desperation among QE promoters. The attempt to use what can only be described as neo-fascist attempts to control consumers, to get them to spend more by banning cash in one proposal making the rounds today is bound to fail. I’ve written about this in ordoliberalism today.

    Like

  3. Absolutely. The budget has nothing to do with rewarding hard-working families and everything to do with making sure the cracks are quietly papered over for a little longer before they become too gaping. As you rightly say, we have debts that could not be paid back even with the most draconian spending cuts.
    The biggest lie of the election campaign was that the Tories are economically competent. In fact, they are better able to hide their incompetence than Labour because they are better connected and have the propaganda machine that is our national press to all upon. A silver lining of the Tory election victory is that they are running out of places to hide, though.

    Like

  4. John, by living in France and relying upon reports, statistics & comments from mates you may be missing what is happening on the ground. Those companies still in manufacturing are seeing bigger order books; employing more people & gradually having to raise salaries. You try hiring an engineer south of Preston and you’ll be pulled up short by the salaries now demanded. Construction is increasing; it fell back in Q1 because the UK ran out of bricks can you believe and the Peterborough based suppliers are now working 24/7; I can see the smoking chimney stacks from my home. So it is not all unremitting doom & gloom. What is needed now is a steady hand to nudge it all along and expand the effort. JCB; Dyson and many others are investing and expanding and manufacturing can revive. But first there is a need to properly educate our youngsters so that they can aspire to a good job and not just finish up in a call centre. But then every time there is an attempt to improve education in the UK the teaching unions fight it tooth & claw. Another story.

    Like

  5. Stan, there will always be sectors that are in demand, and salaries in that sector rise accordingly, conversely if you were looking for a Company Secretary with a Law degree for example you would find that salaries are not so high at present, and that’s in a traditionally higher salary bracket sector.
    Supply and demand and that.

    Like

  6. The Tories ought to pay the tuition fees of students studying engineering and science. Here in India there are so many engineers. Its amazing. Mechanical, electrical, marine.. there are thousands of them. As there are so many they are cheap to employ.

    Like

  7. The Western banking system and its false neo-liberal ideology has wrecked economies and corrupted the legislative and political systems for the benefit of a few.
    As usual the mug citizen taxpayers will pick up the bill, enforced by their corrupt Govt, who are obviously economically ignorant or in collusion with this failed system.
    As long as the private banks have the power to create 97% of the money out of thin air , as debt, when issuing loans, and control the regulatoty process thru’ a suborned political system, we will never recover or progress from this downward spiral of debt.
    The citizen is a debt serf from cradle to grave.
    There will be no legislation passed to improve the system. It will implode vioently before a reset. This can not be far off, the can kicking days are numbered.
    Another point to consider is that money creation is infinite. We live on a planet with finite resources. These resources have been exploited to the ‘maxed out’ position, to generate profit for the money system. This is one of the contradictions of Capitalism.
    Environmentalists should take note that the root cause of our failing planet is the debt money system, as profit is required to repay interest on borrowings.

    Liked by 1 person

  8. @ Stan .You could also mention Renishaw, Castings , Spirax Sarco,Fenner, Oxford Instruments etc. The notion that the UK does not ‘do’ manufacturing is nonsense.

    Like

  9. +1

    I would love to see a televised “one to one” debate between the fair Cameron and John on a Sunday afternoon. Pot of tea, plate of sandwiches to one side, I would settle down to a pleasant hour or so of watching that daft complacent prat being taken apart by John’s incisive and pungent questioning. It would, perhaps, be necessary for some pitiless third party to be on hand with an electric cattle prod for those moments when Cameron tried to waffle – in which capacity I would selflessly offer my services and deny myself the tea and sandwiches mentioned earlier.

    Like

  10. Stan
    The reason the UK has/had a brick shortage is because the majority of kilns have been mothballed in the past 6-7 years. I understand there is no one kiln left in Scotland.

    Like

  11. That is actually UKIP policy. Students of STEM subjects, to have tuition fees cancelled as long as the students work 5 years in UK after graduation.

    Like

  12. It’s not a lack of education that’s the problem, it’s a lack of long term investment, and off-shoring that is stifling manufacturing.

    I would agree, though, that we need a more skills based curriculum, and more vocational options post-14.

    Like

  13. Have to agree, this is a short but devastating critique of the current paradigm, which won’t be current much longer it seems.

    Like

  14. …but you only need to look at the numbers….there is the odd exception as listed above…but…
    balance of payments deficit, national debt, wage levels, productivity statistics….how long can this last
    who can fix it ?
    No.

    Like

  15. too true kfc1404 – and it seems certain to continue. although i do not rant on about overpopulation, the truth is with robotics and computer functions (AI) we simply will not have employment for a large percentage of our population going forward. Add the continual move by industry to the next cheap labor supply around the world and you have a recipe for the grim, unpleasant place of science-fiction fantasy.

    Like

  16. Life still goes on. The pessimists and lefties, like yourself, John, seek to drag everything into their depressive state. only happy when able to boast “I told you so”. I’m with Stan and would urge you to get a life, John. It never lasts forever.

    Like

  17. @Stan Sorry, couldn’t stop myself from replying to your last sentence. Such statements may be popular at the bar in your local golf club, but it is, (as usual), laying the blame on the popular target rather than identifying the real guilty parties. State education in the UK has been the plaything of politicians of all stripes over the last few decades, nearly all of whom have contributed to its decline. The unions have opposed most of the poorly thought out policies pushed by ignorant and partisan idealogues. I consider they have performed an admirable, if ultimately ineffective service to the nation. There was a reason that it became almost impossible to recruit those with good numerate degrees into the profession during the 90’s – teachers were villified and became everyone’s favourite whipping boy. The introduction of league tables, the quack pseudoscience promoted by Ofsted, the dumbing down of public examinations, the pushing of “parent power” – none of these were supported by “the unions”. The major problem with state education in the U.K. is that those with power do not have to rely on it. The vast majority of the elites educate their own spawn in private institutions that are completely insulated from the crackpot schemes of their puppets. I remember well twenty years ago chatting to someone who had just landed a job at Eton. He was chuckling as he told me that Eton had a policy that no parent could ever talk directly to one of their child’s teachers without it being approved by the House Master. No such approval had been given in the last 50 years. This is really at the core of the problems that beset state education in England and Wales.

    Like

  18. …and the inability of Governments the world over to deal with overpopulation…
    er, hang on a minute…what about a big war to depopulate the planet…= great, incisive government!
    Yippee!
    We are doomed.

    Like

  19. @IP
    Ah, that word paradigm again:
    The most annoying and misused word in the English language: used intentionally by stupid people to sound smart or by smart people to sound unintentionally stupid.

    Like

  20. @Oldrightie
    And I would urge you to start a blog to tell us all about you having got a life and how great it would be if everyone else did.
    I am not one given to insults but I came very close to calling you a kn0b…but I resisted.

    Like

  21. @oldrightie
    I would suggest that you read the following:

    http://www.amazon.com/Smile-Die-Positive-Thinking-America/dp/1847081355

    It details how it was just the blinkered approach to reality that you espouse that led directly to the financial crisis a few years ago. Those that share your ideology would do well to reflect on just how much life for the majority was elevated from serfdom during the twentieth century, not by positive thinking, but by the blood and sweat of non-deluded individuals who managed to wrench a reasonable standard of living from a stubborn, vicious aristocracy and their agents. Unless your forebears were all in the landed classes, you are undoubtedly the beneficiary of the actions of ‘lefties’ who you disparage so readily.

    Like

  22. Stan, whilst Dyson does all its R&D in the UK, actual manufacturing is in the Far East. Whilst that’s fine for Dyson PLC, it’s still a big lose for UK PLC.

    Like

  23. My two’pennorth! as a project manager working in the bio chemical industry. The company manufactures biocides which are exported to the world but are owned by a Swiss company. I am having to drag retired engineers out of retirement to fulfill our forward plans with the one exception of a fully qualified Polish graduate found working as a show salesman. Why? The local careers advice organisation has engineering BOTTOM out of 800 identified careers. The majority of young adults coming out of education either want to be tv or pop stars or are content to be out of ‘satisfying work and rewards’ with enough to live on with a tatoo and nails/hair done every month. There is a lack of ambition and aspiration amongst the majority of our young people.

    Like

  24. @wiggles
    You’ve raised a very good point imho.
    The youngsters today are up against it in many ways. Who can blame them….
    Ignorant teachers, enormous university debts to fund unemployable people in the private sector with useless degree at the end of it, unpaid internships, overpriced housing starts, minimum wages, discriminatory motor insurance, overpaid and incompetent management, ……….
    Let’s hope they don’t wake up and start the next revolution…

    Like

  25. Good post again John. Interesting we are officially in deflation and still they are trying to spin that as a great success.

    To the optimists out there I hope you are right and we are wrong. Things can suddenly fall apart very quickly, for example the 3rd Reich was still firing off V2’s and producing me262’s and Tiger tanks pretty much well into march1945 and the remnants of the army were still fighting , the people were starving but they did not matter, nor have they ever to the elites.

    Final thought on the election what effect did the government’s outrageous new pension bribe have on the 600k+ people who signed up for it and how pissed off are the general taxpayers going to be when they see us pensioners getting another huge bung from the taxpayers and how many voted Tory to keep their bung.

    Like

  26. My suggestion John get s life was meant as a reasonable alternative to wallowing in the negative, constantly. As for my own life, my upbringing was a nightmare, my adulthood hard won despite huge knocks, many via socialist government economic failure as well as life’s vagaries. Serious illness, death of a daughter, terrible but survived cancer of my dear wife.

    To blog constantly on the negatives and how Mad Max is just pure prescience is fine Just not every single minute of every day. JW extolled a beautiful day and the natural beauty of his domicile only last week, I believe. To rail against the human condition when we are helpless to change it, as individuals does not make for more frequent moments of joie de vivre. Just saying, that’s all.

    Many of my blog followers have a knowledge of my wife’s affinity and my little contribution to making the best of our own life in her garden, by the way.

    Like

  27. Pingback: HEADING FOR DISASTER | Doomstead Diner

  28. No one says we don’t manufacture,only in India China & many other nations they don’t have bankers extortionate pay to factor into their pricing or the leverage of those cost on every part ,like a car & then the rental cost or borrowing cost it takes to get that machinery/part & because this has not been stopped are markets are dwindling as austerity destroys them

    Like

  29. Taking even more money out of the economy – via cuts to in work and out of work benefits – is going to cause severe problems: it’s ‘economics 101’ as you state because poorer people tend to spend any disposable income rather than saving.

    For example, my Local Authority stopped funding transport and the small weekly socialisation allowance for ALL disabled people. As a result, the taxi drivers in the area have taken a bad hit in their incomes, and some are having to work 7 days a week just to break even; similarly local venues that the disabled people might visit. That’s just one area of local income that’s disappeared, but businesses across the country have similarly been affected due to cuts in housing benefits, council tax benefit, sanctioned job seekers and ill people, reductions in working tax credits.

    Further cutting such benefits will further damage growth in the UK.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s