The Acute Deficit Phobia – Malady Spreads

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Jcorb

Acute Deficit Phobia: The Malady Spreads

Since the election in May 2010 that brought the Tory-led coalition to government not one major political figure in England has publicly disagreed with the austerity doctrine, that the first priority of fiscal policy must be reducing the budget deficit.  I have called this astounding cross-party degeneration into economic illiteracy the “acute deficit disorder”, a pathological fear of public expenditure exceeding public revenue, a phobia in its purest form.
There seemed no party leader or would-be leader with any immunity to this neoliberal malady until this summer.  Jeremy Corbyn asserted unambiguous opposition to the theory and practice of fiscal austerity, and by doing so emerged from the depths of the backbenches to take a commanding lead in the contest for the Leadership of the Labour Party.The sudden and unexpected emergence of Corbyn at what appears to be the choice of a large majority of Labour Party members has one overwhelming explanation — his rejection of the ideology of austerity.  It is astonishing that Corbyn may be on the brink of winning the leadership.  Even more astonishing is high-profile supporters coming forward to assure us on Corbyn’s commitment to deficit reduction,  albeit in a manner quite different from the Tories (see analytical article by Jeremy Smith).The clear purpose of these unexpected interventions is to reassure people that Jeremy Corbyn favours “sound fiscal policy” and, therefore, can be trusted to manage the country’s economy.  The fundamental problem with this attempt at reassurance is that the great burst of enthusiastic support for Corbyn results from his explicit rejection of deficit reduction as a necessary priority.   A few weeks ago in a speech on economic policy he reinforced his anti-austerity message, when he stated “austerity is a political choice not an economic necessity”.   It is such statement that bring people flocking to his rallies.In the same speech also referred specifically to the budget balance, “Labour will close the deficit through building a strong, growing economy that works for all, not by increasing poverty.”For the victims of the phobia the words convey an “austerity lite” meaning, a promise that a Labour government would take direct steps to reduce the deficit; that the time scale would be longer and the deficit reduced by a combination of tax rate increases and cuts that do not harm the poor (e.g. Trident).This “progressive prudence” position is more than mistaken. It is fundamentally wrong because it perpetuates the neoliberal myth that fiscal deficits are a bad thing, that they are an imbalance that must be corrected through policy action.  The retro-reaction, “Jeremy really is for getting the deficit down, but in progressive manner”, is totally wrong and requires going back to basics.

A fiscal deficit is not prima facie a problem.

A fiscal deficit is not an imbalance that needs eliminating (or even reducing).

A fiscal deficit is a compensating response to imbalances elsewhere in the aggregate economy.

To further dispel confusion and misrepresentation before going into the analytics, I can state the central point — the public budget need not balance in the short run, long run, or over the economic cycle.  Indeed, a government can practice “sound fiscal policy” without ever balancing the public budget and without the budget ever showing a surplus.  Yes, I am a “deficit denier”;  being one is sound economics (see the excellent “confessions of a deficit denier” by Malcolm Sawyer).

Market economies expand when total (“aggregate”) demand exceeds the aggregate production of goods and services, and contract when demand falls short of supply (leaving part of production unsold, unintended inventories).  These dynamics of the aggregate economy become clearer when we divide it into three parts, the public sector, the private sector and the export and import or trade sector.

For an economy to expand the sum of the spending across the part must exceed the sum of the “non-spending”.  The familiar terms for non-spending are 1) household and business saving (private sector), 3) taxation (public sector) and 4) imports (trade sector).

During 2000-2007 the growth of demand was sufficient to drive expansion of the UK economy at a rate between two and three percent per annum.  During these years imports exceeded exports, meaning that the trade sector made a negative contribution to expansion of the economy of about -3% of GDP annually.

Had the private sector “balanced its budget” and the public sector done the same, the economy would have contracted, not grown.  The economy expanded because both the private and public sectors had net expenditure that more than offset the negative demand generated by trade.  That is, the private sector and the public sector engaged in deficit spending during 2000-2007 (by about 1.5% of GDP each).

Then, the global financial meltdown hit.  As a result, business investment collapsed.  Net private spending went negative (household plus business saving exceeded investment).  Businesses were very much “living within their means”, and as result, the economy contracted.  It would have contracted even more had the government sector not increased its spending, which stimulated a nascent recovery in late 2009 and early 2010 (Gordon Brown’s fiscal stimulus), which George Osborne aborted with his fiscal cuts.  Attempting to “balance the budget” and “have the government live within its means” was unsound fiscal policy.

This brief excursion into the theory and practice of “sound fiscal policy” produces important lessons.  A government practices sound finance by using the public budget to compensate for expenditure shortfalls and overruns by the private and trade sectors.  If the economy is stagnant or contracting, sound policy requires that the government increase net expenditure — a larger budget deficit.

This generalization, public demand should compensate for private shortfalls, holds even if the economy is at or very close to full capacity.  Indeed, the reason that the UK economy was close to full capacity in the years just before the great financial collapse was because it had a small deficit.  The deficit was not a problem, it was the solution to insufficient private demand.

The message for the foreseeable future is clear.  Until private investment and exports are sufficient to keep the economy near full capacity, a fiscal deficit is the appropriate policy.  Following the “balance the budget/run a surplus in goods times” can mean that the good times never arrive, because demand from the private and trade sectors can be too low to take us there.

The reverse is also the case.  When private demand is robust and booming sound fiscal policy requires a surplus in public budget.  Thus, we have the “sound fiscal policy” generalization:

 

Policy makers should aim for a fiscal balance that compensates for the sum of net private and trade demand when the economy is at their desired level of capacity and employment.  This explanation of fiscal policy is not “Keynesian”, though Keynes would probably have agreed with it.  The more accurate way to understand the difference between neoliberal budget balancing and sound fiscal policy is an analogy with the differences between alchemy and chemistry, or astrology and astronomy.

Each of the three sectors (private, public and foreign trade) of the UK economy run deficits at some times and surpluses at others.  The conviction that the public sector should have a special status such that a deficit is a problem that needs solving is based on ideology not analysis.  It is not an ideology that a Labour Party leader should adopt in any form or variation.

It is self-defeating to pay lip service to the ideology because the Tories have convinced a large portion of the public to believe it.  This belief is a relatively recent phenomenon, dating from 2010 at the earliest.  Attempting to dispel it is more likely to bring to success than further indulging it.

 

Economics ‘like astrology’ – John Weeks explains the myths underpinning all modern economics

Published on Apr 7, 2014

Watch the full episode here: http://bit.ly/PSPRUS

John Weeks, Professor Emeritus at the School of Oriental and African Studies, talks to Going Underground host Afshin Rattansi about the myths underlying modern economic theory. In his new book, he states that it is like astrology because it’s ‘based on a concept of the world that only exists in the imagination’ — it assumes there is full employment which has no basis in reality. This means that supply and demand does not work and public sector debts are not inflationary.

Mourning for the NHS and “The Sell Off” movie.

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Mourning for Our NHS

The NHS is  a beacon of achievement brought in by Aneurin Bevan in 1948, and the nation is rightly proud of it. Both recent Conservative and Labour governments have been complicit with efforts to move aspects of our NHS into private hands. In 2002, Blair himself had toyed with the idea of user charges or ‘co-payments’ for public services. (1)

While it has been Labour’s greatest achievement, the introduction of Private Finance Initiatives (PFI’s) by New Labour has been Labour’s greatest betrayal. The politics of recent general elections have often have focused on the issue  of ” wasteful” public expenditure , and claims of inefficiency,  yet resources have been wasted on marketisation. There is now considerable evidence countering the principle of “public bad, private good” .

Jeremy Corbyn has never supported the plans to bring the private sector into the NHS.

He said at his recent rally in Nottingham,”If I said to you , do you all value the national health service, you’d say, “why is he  the asking the question, it’s obvious we do!”

Of course it is. The NHS is the most civilised, greatest achievement politically ever made in this country. It was the culmination of those who fought for the right to vote, those who got the right to vote for women, those who campaigned for all the things that brought about the 1945 Labour government and it was an amazing achievement.

And it was quite moving when we had a rally in Tredegar, a week and a half ago on the very spot where Aneurin Bevan used to speak to his constituents, and in the window of Nye Bevan House, he questioned rhetorically.  He said, ” Can a society that denies medical care when it is available, to those that cannot afford to pay, call itself civilised?”

aneurin1

Nye was right, and it’s very dangerous what’s happening to the NHS at the moment.

The internal market, the bringing of the private sector to run whole sections of it, the profit-taking out of the NHS, the continual limiting on the availability of expensive special medicines and all that, leads me to think that the Tories have got their real eye on making the NHS a privatised service of last resort, in order to promote a private medical system of first choice for those that can afford it.

And so, we have to defend that principle of an NHS free at the point of use. We have to defend that principle and also end the internal market, repeal the health and social care act, and be proud of our NHS.”

The Sell Off

Sell-Off is a full length Movie. It is essential viewing and sharing for people who want to keep the NHS out of private hands, and recommended.

If you want to know a bit about Peter Bach, who produced the film, you can watch the second half of this episode of The Keiser Report.
http://rt.com/shows/keiser-report/200435-episode-max-keiser-673/

Published on Nov 5, 2014

Donations welcomed: http://www.selloff.org.uk/nhs/default…

For more information: www.facebook.com/selloffnhs

  1. Tony Blair”Where the Third Way goes from here, Progressive Politics, Vol 2,No 1, 2002
  2. NHS PLC – Allyson M Pollock, published by Verso
  3. YouTube Clip: “The Sell Off”
  4. The Keiser Report
  5. Government proposes inquiry into moving to a ‘pay NHS’
  6. Who said, “The NHS will be shown no Mercy?”
  7. For Richer, For Poorer, In Sickness and in Health
  8. The Systematic Dismantling of the NHS.

Why is the Tory Government Hammering Green Industry?

GREEN TORIES? IS THERE SUCH A PHENOMENON?

sunWhy is this government so intent in trying to destroy the planet? There is no logical reason for their energy policies.  While they are heavily subsidising fracking against scientific advice, they have made massive cuts to the budget for renewables. Blatantly, rather than ‘the greenest’, husky-hugging government ever; they are certainly behaving like the most foolish, selfish  government in living memory – if not ever.

Renewable UK’s Director of Policy, Dr Gordon Edge, said: “We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected. “The Government had already announced an end to future financial support for onshore wind – even though it’s the most cost-effective form of clean energy we have. Now they’re imposing retrospective cuts on projects already up and running across the entire clean energy sector.”   Osborne is intent on increasing taxes on renewable energy generation.

RE tax jpeg

Margaret Thatcher’s government cut back manufacturing industries  in the 1980s leading to soaring unemployment, an industrial wasteland and an economy which became over dependant on financial services.

Now, with signs of unemployment on the rise again, the Conservative government are  proposing to slash the feed-in tariffs for photovoltaic solar panels, (PV),  rather than looking forwards and investing in modern, green technology, and renewables.  It is highly likely that this will result in the end of the solar panel industry, which was expanding when it came to power in 2010. Introduced by Ed Miliband, this  was a sound policy, both on environmental and economic grounds.

The government wants to slash by 87% subsidies for householders who install solar panels on their rooftops, in a move that renewable energy experts warn could kill off a promising industry.

The potential reductions in the level of feed-in tariff (FIT), contained in a long-awaited consultation document released by the Department of Energy & Climate Change (Decc), and are far larger than expected.

The assault on solar power comes after ministerial decisions to remove financial aid from new onshore wind farms and slash home energy efficiency measures. There is even speculation that Decc could be wound up as a standalone department.

The technology is available to provide one million green, sustainable jobs, as Jeremy Corbyn says. We should be investing in the future, expanding this industry, not looking backwards, endangering the planet in the meantime. There is some irony in that it was Thatcher closing down the mines, while Osborne is attacking the green alternative. The Labour Party’s heritage may have been built on coal but the 21st Century’s future is renewable. ‘Coal was our heritage, green is our future‘ We can’t go back to coal. We don’t need to. The future is renewable.

The government’s attack on renewable energy and green industry is obsessive, illogical and unfair.

The Chancellor’s £3.9 billion tax on renewable energy generators “is a punitive measure for the clean energy sector – another example of this Government’s unfair, illogical and obsessive attacks on renewables.” As Alasdair Cameron writes, “The Chancellor has just effectively put a carbon tax on carbon free electricity, which will mean fewer renewables and more uncertainty for the industry.”

Renewable electricity will no longer be exempt from the Climate Change Levy – even though the tax is meant to encourage businesses to “operate in a more environmentally friendly way.” So why would a renewable energy generator not qualify?

This  government’s record on the environment is shocking.

In summary: To date they have:

The irony is not lost – where Thatcher closed down the mines, Osborne and Cameron are closing down green industries. The attack on sustainable industry, like Thatcher’s attack, is ideological – not logical. While the evidence is set against them, the Tories have either lied or omitted to present a true picture.

GREEN LIES ? WHAT ARE THEY HIDING? AND WHY?

Against all advice, the government stubbornly refuses to change its policy – on Hinkley Point:  Evidence of the disaster in Fukishima should have signalled an end to nuclear power as in France. Plans for Britain’s first nuclear reactor in almost 30 years have now come under sustained attack from politicians and City bankers.

Yet,  David Cameron is expected to sign a final deal in October during Chinese President Xi Jinping’s visit to the UK; the Chinese are big backers of the project.”

“Renewable is too expensive.”

But,  No – solar has won this argument. The coal based power cannot compete on economic terms. Meanwhile  the £25,000,000 Hinkley Point expansion has been criticised by a bank as ‘becoming difficult to justify.’ As The Telegraph’s Ambrose Evans-Pritchard is saying, the fossil industry faces a political and technological storm and even the IMF is saying we cannot afford the economic wastage of fossil fuels.

“Fracking and Gas are viable alternative to Coal”

A Nature report  dispels the myth that carbon emissions are reduced by fracking or gas. “Global deployment of advanced natural gas production technology could double or triple the global natural gas production by 2050”, McJeon says.
“The high hopes have been misguided” – market effects dominate.This might eventually lead to up to ten percent higher CO2 emissions by the middle of our century instead of lowering CO2 emissions.  Our article, “Corrupt to the fracking core” considers the reasons for the disinformation. Lo and behold there are vested interests at stake. Scandals abound among the toxic Conservative  Party. Lobbyists have persuaded politicians to invest in their schemes of fracking , and it’s not panning out as anticipated. The Guardian’s report of “Libor-like” manipulation of gas prices indicates the dice  are loaded.

“It’s not sunny enough in the UK”

IMG_0816PV panels were installed on my roof in 2012, on the very day which the Coalition government decided to cut the incentivising feed-in-tariff, and the tariff and energy savings have already half-paid for the installation. This graph shows  the energy produced in one day in March – the dip is because there happened to be a partial eclipse of the sun that morning. Imagine the energy which could be produced if these panels were on every public building. There are even roof tiles which can act as photovoltaic cells and recently even completely transparent ones which could be put in our window frames, making  every window a power source. Batteries have been developed which store energy produced by such systems.

But it’s not about sunniness. Because, even in sunny Australia, they are trying to discourage solar, while 15% of houses have panels, the PM Abbot government is banning investment in solar and wind power. It seems like a suicide note for the politician and the planet.  The sun is the most underused resource we have.

It’s about propping up a neoliberal world economy which is corrupt, flawed, and about to go bust. Like fossil fuels, the global economy is unsustainable. The super competitive world of the smash-and-grab society does not work.

The powers-that-be are starting to panic. Perhaps it is  lack of scientists in parliament, due to the predominance of careerists PPE graduates  – at least Thatcher was a chemist.  Denial of what is scientifically obvious and proven is very foolish, and sure to be the Tories’ undoing.

One has to wonder at the reason, but someone seems to have gambled on the wrong horse, and seems set to doctor all the others.

The New York Times writes on the ugly truth of horse racing  “There are essentially three types of people in horse racing. There are the crooks who dangerously drug or otherwise abuse their horses, or who countenance such conduct from their agents, and who then dare the industry to come catch them. Then there are the dupes who labor under the fantasy that the sport is broadly fair and honest. And there are those masses in the middle—neither naive nor cheaters but rather honorable souls—who know the industry is more crooked than it ought to be but who still don’t do all they can to fix the problem.”

And that to me, represents the mess that is our political system. There is an intrinsic flaw in an economic system based on competitive forces, where gaining an advantage over others is the aim. In the end, no one gets away with the pretence and the lies. The ugly truth is out.

We need a government which is not frightened to make that change. We need an economy which will put people before banks. We need politicians to face up to the damage caused to climate change, and policies to address it. Jeremy Corbyn’s Environment Manifesto

We need twenty-first century economics, not Victorian ones. Let us have those one million jobs in green industries in the UK. Let us have democratic monitoring and control of our energy, transport and utilities.  Let us have  a sustainable world, and a planned economy and not leave a mess for our grandchildren.

  1. Supported cut in solar Feed-in-Tariff
  2. UK Scraps Carbon-Free Green Homes Plan
  3. Sell off of Green Investment Bank
  4. Scrapped Plans for Off shore Wind
  5. Fracking U-Turn in wild-life sites
  6. Renewable Energy Taxes to be increased (Business Green) 
  7. Abandoned Biomass Subsidies
  8. Touchstone Blog Osborne’s 3.9 Billion Tax on Green Power
  9. Government overhauling green car tax
  10. Hinkley Point -nuclear white elephant
  11. Bank hits out at Hinkley Point too expensive to justify
  12. Australian PM bans wind and power investment
  13. Jeremy Corbyn’s Environment Manifesto
  14. The fully transparent solar cell
  15. UK Opposes new EU waste recycling in leaked paper
  16. Guardian 9 Green policies Killed off by Tories 
  17. GLabCWarrany: Green Deal and 8  Policies dropped by Government
  18. Touchstone Blog: Budget Afterhsock Osbornes’s 3.9 Billion on Green Power
  19. Coal was our Heritage, Green is our Future
  20. Britain Under Siege
  21. They are Corrupt to the Fracking Core
  22. SCANDAL: There’s another toxic plot in the Conservative Party
  23. Naomi Klein on Capitalism and Climate Change

Workers Rights Attacked. “Unity is our Watchword!” : Jeremy Corbyn

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Protecting the Workers

Trade Unions. They are part of the Labour movement, and we have so much to thank them for. They gave us the weekend, the eight-hour day, and the paid holiday. Now they need our help. Yet again, a Tory Government with an overall majority is trying to crush the unions. They want to be able to use people, as a cheap resource to deliver their wealth. They have no concern for safety, health, dignity or human rights.

Think Left’s article ( 114 year workers’ rights scrapped by coalition government) reveals how long-standing workers’ rights are being eroded by the Coalition government. With legal aid cut, high unemployment and rising costs of living, everyone can see people struggling. How many are aware of how poor workers’ rights and protection in the UK really are?

protection for permanant workers

It is no doubt politics which preys on disaster politics and fear. Fear and lies. The graph shows that protection of permanent working staff in the UK is appalling. The effect of Thatcher’s attack on trade the unions leading to decreased union membership can be seen in perspective. The power of money over the individual struggling alone is immense. One can see how struggling to feed one’s family puts worker against worker, and provides an opportunity for right-wing parties such as UKIP to move in on the scene.

The erroneous lines, “we’re all in it together”, and Cameron’s patronising Keep Calm Dear , while criticised and ridiculed are tolerated by those who believe austerity is necessary, and in  the myth of the need to cut structural deficit though several economists argue otherwise.

Unemployment

Recent figures show unemployment is on the rise again. Not only is this costly, it is a waste of human resources, has  an impact on mental health, and divides working people.

Recently, immigration has become an issue, because families are living in poverty, and are unable to get work.  Meanwhile, there are cuts to the social security protection because of government austerity measures which gives people no hope.  A divided working class is a malleable one. The Tories know that. Tony Benn knew. He said, “People who are poor, demoralised and frightened are easy to control.”  This whips up division and hatred like in the thirties. As Jeremy Corbyn said, “They are trying to reconfigure our society in the image of the 30s. I’m not sure if it’s the 1930s or the 1830s but certainly some kind of 30s.” And we know what that led to.

“The psychology of competition and love of Peace are uneasy bedfellows” Aneurin Bevan

Michael Meacher comments on the recent statistics

“UK unemployment, which is still as high as 1,850,000, is now starting to rise again.   Combined with the jobs standstill, the lack of momentum in pay makes this the most worrying set of labour market figures for a long time.   What is equally disturbing is that almost all the increase in employment since the 2008-9 crash has been accounted for by workers from the EU.   Employment among EU citizens born outside the UK has now risen above 2 million for the first time.   The latest figures point to falling demand for jobs, fewer hours being worked, and little or no evidence of a rise in pay.”

“In that first quarter employment among UK nationals fell by 146,000 while over the same period employment among workers from overseas rose by 91,000.   It also emerged that since 1997 the proportion of employment accounted for by non-UK nationals increased from 3.7% to 10.3%.” Michael Meacher MP

The government has just launched its latest salvo attacking our rights at work.

NUAW strikeThe government’s plans to cut rights for working people, are described in detail, in this document for the TUC (pdf link Trade Union Bill – TUC briefing )

The government expects the Second Reading on the Bill will take place in the House-of-Commons either in September of October 2015.

The main themes are listed here

  1. The proposals will lead to a serious imbalance of power within the  workplace, undermining effective negotiation between employers and unions.
  2. The Conservative proposals will undermine constructive employment relations, extending disputes and making it more difficult to achieve amicable settlements.
  3. The government is not interested in encouraging workplace democracy. Instead , they want to prevent midwives, fire-fighters, teachers and cleaners working within the Underground from protesting against cuts in jobs, pay and conditions.
  4. The right to strike and to protest are  fundamental rights which should be protected in a free and democratic society. The government proposals will impose greater restrictions on trade unions than any other voluntary secret membership organisations.
  5. The Conservatives claim to be the party of working people. However their proposals will remove  employees’ ability to achieve better working conditions and living standards.
  6. Employees will be able to bring in agency workers with a view to breaking strikes, regardless of the consequences for health and safety.
  7. Trade union protests and pickets will be subject to levels of public and police scrutiny and controls that go far beyond what is fair and acceptable in a modern democracy. These changes will also be a waste of police time.

These must be opposed, by protest groups, by trade unions, and also by the Labour Party. Jeremy Corbyn will stand alongside workers and supports Trade Unions. Unity is our watchword, within the Labour Party, and within the Movement. We need a strong opposition in parliament. It is not acceptable that MPs representing the heart of the Labour Movement are not wholly behind the defence of these fundamental rights. Following this leadership campaign, it is imperative that the Labour Party and the whole Labour movement are united in opposition. We need to be ready to oppose, because you can be absolutely certain that the Tories will be and they do not need any further advantage than they already have. Unity is our watchword. There are more of us, but we will only be heard by a cohesive opposition led by a strong leader, such as Jeremy Corbyn.

The government is trying to make it even harder for unions to collect fees from its members by banning public authorities from deducting fees-direct payslips. It’s designed to cut off yet more money from trade unions and hobble their ability to defend ordinary workers from bully boy employers.

It’s vitally important to show we will defend our trade unions from these government attacks. They’ve given us everything from the weekend to paid maternity leave. If they are hobbled by ideologically driven laws then bad employers across the country will be able to chip away at our hard-won rights.

“Sum of Us Campaign” is already nearly 80,000 people strong. Their campaign contact is listed below.

Our trade unions are worth defending. They protect ordinary workers — care workers, teachers, nurses, shop workers, cleaners — from poor conditions, low pay and unfair dismissal. But now they need our help. Share information, protest, and ensure that this time the government are countered by a strong, united opposition.

More information: