There is no alternative.
The rallying cry of the ConDems and their supporters. No alternative to huge cuts in public spending in order to deal with the deficit that Labour left us, and the national debt, which is unsustainably large. If we don’t make cuts then the debt will destroy our ability to spend any money at all as interest payments eat up available money.
Sometimes people talk about not wanting to pass the burden of debt onto their children.. some talk about how if a household was in debt and spending more than they earnt you’d have to cut spending and think this analogy can be simply placed onto a national economy (which it can’t – but taking that analogy apart will wait for another post).
The truth is that there are alternatives to cuts, and in fact the austerity measures being brought in are just as likely to ruin our economy and in fact end up increasing the deficit as they are to reduce them. This is the first in an occasional series of posts outlining the reasons why austerity won’t work, and what the alternatives are to them.
I am not an economics professor, or a tax accountant. I will be relying heavily on other people to provide the substance to my arguments. Some of the names that you should make yourself familiar with are
Joseph Stiglitz – former chief of the world bank, Nobel prize winner for economics 2001 Twitter Feed
Christopher Pissarides – Nobel prize winner for economics 2010
More experts speaking against austerity can be found on the False Economy website. Whenever people tell you austerity is the answer to the problem, send them to read what these experts have to say. Ask them to find examples of austerity actually working (they’ll come back with Canada in the ’90s – briefly, Canada did reduce its national debt, but its economy flatlined during a period of explosive growth around the world, especially in its main trading partner (USA) and lots of extra revenue came in from new oil finds.. a post with more detail might come on this later.. essentially austerity produced a flat economy at a time when it should have been growing, and that growth would have reduced the national debt anyway).
But it’s not enough to present people with an argument that says austerity probably won’t work if you can’t also provide a different solution. Thankfully there are other solutions to the issue of our deficit. Detail on the variety of ways in which we can proceed to provide a total solution are on the False Economy website. These include policies for economic growth (especially investment in green manufacturing); closing the £120bn tax gap; a robin hood tax on the banks that caused the crisis and taxing the rich.
The most important of these is investing in the economy, producing jobs and growth to stimulate demand – demand which then helps the private sector to grow. At this point in time, the contractionary policies of the government are, surprisingly, causing the economy to contract. People are losing jobs or having pay cuts – or are concerned, quite rightly, that they will be losing their jobs or pay in the near future. Because of that they are not spending money, and because they are not spending money we are seeing the private sector get into trouble – high street shops are closing putting 10,000 jobs at risk; the construction industry shrank by over 3% in the first quarter (Q1) of 2011 and the early indicators for growth in Q2 2011 are that it will be between 0% and 0.3%.
This is a recipe for economic disaster, not economic growth. We must take the argument to them. This is an argument we can win, and to help us win it I will be writing articles on some of the individual parts of it. In the meantime, watch this video from (yes, you guessed it) False Economy: