By Peter Wrigley on April 8, 2010
Tags: Peter Wrigley
This is my first entry into Quakernomics: indeed my first attempt at any sort of “blog” so I am not really sure of the form. Am I supposed to follow up on someone else’s comment? If not, how do I introduce a new one? Below is a space for a “tag”? What on earth is that? (If “The Archers” is anything to go my, it’s something graffiti artists use to identify their efforts. If “tag” means name or signature, why doesn’t it you say so?)
My economic point is that all three major political parties seem to accept that there is a crisis in the public finances, and that this must be tackled by “savage cuts.” F irst, there is no crisis. The debt to GDP ratio is a modest 61%. Throughout the 1990s the “Qualifying Rate” for joining the Euro was no more than 60%, so, even after bailing out the banks we are still close to what is thought to be reasonable. By contrast of Greece (120%), Japan (107%) Italy (102%), the US (69%)and Spain (66%)
are deeper in debt and France and Germany (57%) are slightly less indebted that we. (figures from a graphic in the Guardian, 14/12/09)
It is true that the level of current borrowing is high (about 12% of GDP compared with a preferred maximum of 3%,) but those who are not quite so deeply in debt can afford to borrow more. The idea that this level of borrowing will endanger our AAA rating is dismissed as “scaremongering” by no less an authority that David Blanchflower, the member of the Monetary Policy Committee that got it right.
So why all this talk about “savage cuts” which will harm the weaker members of society. And if politicians are so worried about the state of the public finances, why isn’t there much more talk about higher taxes from those who can afford to pay?
I’ll stop there in the hope that there is some response to assure me that this is how blogs work.
4 Comments
Thanks, Peter – an interesting (and very salient comment). Echoes a bit what I was trying to say in my contribution ‘Avoiding the pain of thinking …’ – but yours puts some facts on my ranting!
Having lived through more economic ‘crises’ than I care to think of, you contribution Peter exactly confirms my own instincts. I notice today that the FTSE is approaching 6000 and my own modest annual pension statement shows very little sign of a ‘dip’ against which to measure any hypothetical ‘double dip’. Although as alwasy there are thousands of individuals who are in real financial trouble, I would need to be convinced that the situation overall is anything as like a bad as it was in the early ’80s. For many others, the only way they know of any ‘crisis’ is by listening to the media. I daresay I sound complacent …………………
Thanks, Tony and Flying Stag, for your comments. One of the problems with this “crisis” is that for most of us it is not a crisis at all. Things are cheap in the shops, with low interest rates those with big mortgages can be something like £500 a month better off, and pensioners not dependent on the interest on savings are protected. The sufferers are that bottom 20% who have become disconnected from mainstream society. The government has tackled the problem through “quantitative easing.” but, as Flying Stag points out, the money has gone into stocks and shares rather than the pockets of the poor. What is needed is money to those who will spend it: higher welfare and unempyment benefits, for example. But no political party is advocating that.
Dear Peter, I am with you all the way on the matter of the poor. But – and this is where it starts to get controversial – I was converted some time ago to the idea of a “citizen’s” or basic income. And it is to this end that I believe quantitative easing should have been directed.
The big problem to my mind – as I try to suggest in “Imagine a land …” – is that the monetary system makes money scarce, and money in turn has a sort of mystique which it shouldn’t have.
This goes back to my hobby horse, though. We are never asked – and probably don’t know – what (in the 21st Century) we want the economy to do for us. Somehow, the argument runs, we must produce “stuff” so that we have “the money”. Some “stuff” mightbe useful, but not enough is what we need to meet the challenges ahead. “We haven’t got the money” is an inadequate argument!
But poverty is (I am sure I need hardly say) more than just a lack of financial means. but that’s a debate for another day.