The Ultimate Subterfuge

Before delving into the mysterious world of austerity and budget deficits, I think it is important that we lay out some definitions relating to austerity and public policy…

Austerity Economics :

“In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided.

Austerity policies are often used by governments to try to reduce their deficit spending and are sometimes coupled with increases in taxes to demonstrate long-term fiscal solvency to creditors.”

Subterfuge :

“Deceit used in order to achieve one’s goal.”

Budget Deficit versus Structural Deficit :

“The budget deficit is the annual amount the government has to borrow to meet the shortfall between current receipts (tax) and government spending.”

“The structural deficit is the level of the deficit even when the economy is at full employment.”

Politician:

“A politician, political leader, or political figure (from Classical Greek πόλις, “polis”) is a person who is involved in influencing public policy and decision making ”

Representative Democracy (Allegedly what exists in the UK):

“A system of government in which all eligible citizens vote on representatives to pass laws for them. A perfect example is the U.S., where they elect a president and members of the Congress. They also elect local and state officials. All of these elected officials supposedly listen to the populace and do what’s best for the nation, state or jurisdiction as a whole.

For a representative democracy to work, there are several conditions that have to be met

There has to be an opportunity for genuine competition in the selection of leadership (if people think that elections are rigged, or predetermined, there can be no meaningfully honest competition). There has to be free communication, both among the people and in the press. Voters have to believe that a meaningful choice exists between candidates and that differences in policy are honestly reflected in each.

The degree to which these three factors are present go a long way to determining the effectiveness of a representative democracy.”

Why Is Austerity deemed to be Necessary?

Austerity may be undertaken to demonstrate the government’s fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures. Austerity may also be politically or ideologically driven, or imposed by external agencies (e.g. the IMF).

The New Economics Foundation cites the following basic arguments underpinning the UK Government’s marketing of austerity as a necessity:

Dangerous Debt – The most important economic issue the UK faces is the size of public sector debt, caused by excessive public spending. Britain is Broke – The UK’s public finances are like an individual household, which has spent all its money. Austerity is a Necessary Evil – There is no economic alternative to spending cuts. Big Bad Government – The bloated, inefficient and controlling government is getting in the way of progress, interfering in people’s lives and rewarding the undeserving. Welfare is a Drug – Like drug addiction, state support is tempting, but ultimately dangerous; benefit claimants are weak, reckless, undeserving and addicted to hand-outs. Strivers and Skivers – There are two kinds of people in Britain: hardworking strivers and lazy skivers, individuals choose which to be. Labour’s Mess – All the faults of our economy can be pinned on the previous (Labour) Government and their out of control spending.

The narrative is powerful and seems to have convinced millions of UK citizens into accepting that austerity is the only option and that the Tory/Lib Dem coalition had no choice but to implement austerity measures.

Is there any Substance to the Pro-Austerity Arguments?

Let’s take a few of the points highlighted by the New Economics Foundation (I’m sure all readers have either read or heard the austerity narrative being shoved down our throats by politicians and the mainstream media) and see where it brings us….

“Dangerous Debt”

The dramatic language covers up the lack of economic substance behind these arguments. If we take the “Dangerous Debt” for example, the table below shows the main sectors to whom the UK actually owes its debt:

As of September 2012, the UK Government owed the Bank of England 25.7% of Government Debt. What happens if it cannot repay that debt given that it effectively owes itself money? That is a significant percentage of the Government Debt that it actually owes itself! Or am I missing something?

Banks & Building Societies and Insurance Companies hold another 32.4% of Government Debt – last time I checked, the Taxpayer had a pretty significant shareholding in UK banks and I suspect it is more than enough to cover any debt owed to these institutions.

The key portion is the overseas debt of 30% as this is the amount that will likely cause the most pressure. However, if the other 70% is not really that big of an issue given who the creditors are then why is everyone so focused on Government Debt? Answers on a postcard please!

“Britain is Broke”

Again, I would like to reference our friends at the New Economics Foundation who have published an article entitled: Mythbusters: “Britain is broke – we can’t afford to invest”

http://www.neweconomics.org/blog/entry/mythbusters-britain-is-broke-we-cant-afford-to-invest

They start by quoting our fearless Chancellor and Prime Minister as follows:

“We want to offer people a choice between… a Labour Government that has bankrupted Britain again, and a Conservative Government that will build confidence in Britain’s future.”

– George Osborne, Jan 2009

“The British Government has run out of money.”

– George Osborne, February 2012

“The more government borrows . . . the less confidence there is . . . and when confidence in our economy is hit, we run the risk of higher interest rates.”

– David Cameron, June 2010

All of these quotes are of course incorrect and economically and historically unfounded, as the following graphs will show us:

The narratives to explain the above graphs are contained in the NEF article referenced above but I think it is important to read the quotes made by Osbourne and Cameron then compare what you have been told with the factual evidence used in the graphs. Yep – we are being lied to constantly by the Tories but the complexity of the issues make it difficult for many people to find time to research the facts. If only we could trust politicians to tell us the truth, eh?

“Austerity is a Necessary Evil”

So let’s get this straight:

We know Labour didn’t ruin the country. If anything, we are in the middle of a cycle that happens repeatedly throughout history We know the Tories are lying to us about economic facts and historical trends We know that large portions of Government Debt are owed to the Bank of England and other financial institutions of which the UK Government likely owns large portions We know the cost of Financing the debt is low as a percentage of GDP (albeit the GBP value sounds high) We know the cost of Government borrowings is relatively in line with our friends in Germany We know the Government Debt has almost doubled since the Tories came into office in 2010

Why is austerity a necessary evil now? Given the fact that productivity in the UK is too low, too many people are on low incomes and we had to bail out a Financial Sector that is about to hit boiling point again. Since nothing has changed since 2008, how about we invest in the economy instead of cutting left, right and centre to the point where inequality is rising, tax revenues are decreasing and there is increasing civil unrest in the UK?

Austerity is a necessary evil only if (i) you are blind to the alternatives; or (ii) you know alternatives exist but your agenda is not the wellbeing of 99% of people in the UK but filling the pockets of 1% of the population.

I would say (ii) is probably more accurate but I would also like to point out the George Osborne is not qualified to be a Chancellor of the Exchequer (a degree in Modern History is great but has nothing to do with Finance and I don’t recall seeing a glistening CV in Finance jobs for Osborne either!)

“Big Bad Government”, “Welfare is a Drug”, “Strivers and Skivers”

It has been far too easy for the Tories to sell their story to the UK public using anecdotes, buzzwords, sound-bites, etc. They sell you the story that welfare fraud is a huge issue and is draining the public finances when it is in fact a miniscule portion of where public funds are lost. They will tell you the story that everyone should go out and work but they will not tell you that people who are out working cannot afford to feed their families and are relying on food-banks. They will tell you that people claiming benefits should be encouraged to find jobs by threatening to cut off their job-seekers allowance and actively doing so for trivial reasons. I’m sure there are people that play the system but they are a tiny percentage of the population and that does not justify making genuine people suffer when they have done nothing wrong!

How Do We Change Perceptions and Pressure the Government with a Legitimate Anti-Austerity Agenda?

Allegedly, we live in a representative democracy whereby our MP’s are elected to represent the will of a majority of their constituencies. However, if you take a step back and look at what the current Tory Government represents, it illustrates how unrepresentative our “UK” Government actually is! For example:

1 of 59 seats in Scotland ( 69% )

) 11 of 40 seats in Wales ( 5% )

) 0 of 18 in Northern Ireland (although closely tied to DUP who have 8 of the seats) ( 0% )

) 318 of 533 in England (60%)

The Tories have a mandate in England but in no other country across the UK. However, let’s dig into the actual votes rather than seats won to see how many people actually voted for the Tories:

The Tories actually increased their percentage of the vote from 36.05% in 2010 to 36.7% in 2015

The Conservative Party increased its vote by 0.8%, but increased its number of seats by 28 seats.

The Labour Party increased its vote by a greater percentage than the Conservatives did, 1.5%, but its number of seats decreased by 24.

Most voters cast their votes for defeated candidates, so most are “represented” by an MP they did not support.

This picture isn’t quite hanging straight is it? What an absolute farce of an electoral system and one that needs to be changed fast! Effectively, the Tories have sold the austerity myth to enough people to get them a majority in the House of Commons even though nearly two thirds of the electorate did not vote for the Conservatives! So step 1 has to be electoral reform to prevent this “unrepresentative democracy” from happening!

Step 2 is to challenge people’s perception of politics and get them engaged because we need a high turnout, particularly amongst people under 65, to ensure the result is representative of the electorate.

Step 3 is a difficult one but the “Anti-Austerity Narrative” needs to be stronger, it needs to be dominant in the mainstream media, as well as social media and the message needs to be carried by credible experts and politicians. It is unfortunate that we live in a society where people are not given the facts but instead are given a story to digest (whether the story is factually correct or not). Everyone has a part to play in this step and the more voices we have and the more we use our collective power, the more credible our “story” will become!

Remember, austerity is the ultimate subterfuge. It is about transferring wealth from the less wealthy to the wealthy in society, from the 99% to the 1%. It is based on spin and lies from the Tories and the mainstream media and we are in the unfortunate situation now where even the Labour party are not standing up against the austerity myth. It is based on the premise that a country’s economy is comparable to a household’s finances. The whole concept is flawed from start to finish but the Tories tell a good story to cover over the cracks and ensure that the public blames welfare claimants, immigrants, the greedy Scots, ISIS and whatever else is flavour of the week in the mainstream media.

Our collective voice is strong and it is time we started showing the Establishment exactly how loud our voice can be!

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