Monday, 13 September 2010

Political and Economic Suicide

On the one hand, I am fortunate that have somewhere to go and live, but like many in my position I am beginning to wonder about what kind of life I'll be able to lead. Like many, there is something of a panic building that the government just elected is about to go completely mad.

My friend's mother suffers from Alzheimer's and it took that condition to ask a question looking at the TV screen at the news after the election (she probably can't ask this question any more): seeing Cameron and Clegg at the front door of 10 Downing Street she asked, "Are they twins?"

The trouble is that behind the twins, with Cameron benefiting and Clegg looking like a fall-guy, is that behind them and with them is the axeman George Osborne, who before the election gave every indication of absence of competence in both economic and political skills.

I voted for the Liberal Democrats partly because I am a liberal, but I also voted for them because I was to the left of an increasingly fantasised capitalistic Labour Party. Whilst there are some libertarian bits going into government policy, and potential for electoral and constitutional change (but watch out for the Conservative stab in the back), it increasingly looks like the Liberal Democrats are no more than a prop for a government that could not get itself elected under its own steam.

We've had a period under New Labour when we created a kind of fantasy public economy, much of it built around culture and public services. There is real value in these, and a real need, but they did not pay for themselves. They were paid for by debt, like a sort of Private Finance Initiative economy. Why did they do this? Because they could, and because the Chinese and Indians let us (amongst a few others). The Indians have moved on somewhat, but the Chinese state capitalist system forces a low currency and low wages - forced labour, basically - and produced and saved. Producing and saving allowed us to consume and borrow. The financial sector produced ever more complex and deceptive derivative products: the American sub-prime property market did not cause the collapse, but was the means to expose the imbalance in the world economy.

In this country the debt was private (consumers) and public, but here is the problem. Gordon Brown expanded the public economy and privatised it at the same time, so that the private economy became dependent upon public purchasing. The Conservatives and their prop are now going to axe so much of the public purchasing.

Now the idea is that something else, like exports, will replace this. The problem, as in the early 1980s, is that you don't open things by closing things down. When you close things down, you cause mass unemployment. If police, council workers, and the privatised public economy workers are made redundant, you get unemployment. At the same time, the government wants to spend less on welfare and wants to get people 'back to work' as if all that is needed is effort.

Bizarrely Ian Duncan Smith ended up with some good ideas regarding welfare, but they cost more initially, and allow the tax and benefits system to be hugely simplified. The Liberals once supported a negative income tax, and that's basically the idea that overcomes the poverty trap that Gordon Brown intensified. But a battle is taking place; it seems that the need for reform will fall victim to the apparent need to axe.

It doesn't add up. The solution of the axe could kill the patient, even though the patient is imbalanced and in bad health. The solution to the economic problem is international, and is because capitalism cannot handle a State regime that has discovered how to exploit it to its own growth led intentions. It wasn't that long ago that South East Asia had its own financial crisis, but money went its way, it grew its way out and has bitten the developed West on the backside. The reason the banks make so much money, and will, is because they do the trade of the imbalance - they make a profit because they need to do business patching up the imbalance.

If we in the UK lose the public led economy, we don't suddenly get back manufacturing, shipbuilding, metal bashing, coal mining and the rest. We end up with none of them. So much of technology industry is labour light, and technology industry can develop anywhere.

The government will have to do a U turn. If it doesn't, the consequences will be disastrous. It may be better if the Liberal Democrats pull the rug, if the rug isn't pulled against them.

It is right that a coalition should be a coalition, but it has to be one of some principle. There was never equidistance between the Liberal Democrats to the Conservatives and the Liberal Democrats to Labour. Whilst it was right to say that the party with the most votes gets first choice, the price had to be a high one and it has not been high enough. Also 'country' might come before 'party', but not if you are going to smash the country to pieces. That's not 'country' before party, but just a form of political and economic stupidity.

The solution is international. The Chinese have to have trade unions that count, a currency that floats, political competition, higher wages and social services that mean individuals don't have to save as they do for a rainy fortnight. The Communist Party has to come to see that it is ideologically pointless, and give way. Other regimes similarly have to give way. They all need proper welfare social systems, not the lurch to State directed capitalism.

In the meantime, which might be a very long time, you have to trip along a high wire. The best approach is to see that cheap money and all this quantitative easing without inflationary effect (at the moment) is a means to an end. But on its own it will do nothing much. Nor would handing out subsidised incomes just to cause demand - it goes on more imports. What is needed is actual physical work in the form of public programmes. This does not mean the fantasy economy of doing up buildings and having more museums. It means building houses, putting down new railways, creating new power plants - all the sorts of things that require industry, and having the industry set up and encouraged at the same time. It costs money, but it generates activity, and then there is money to be saved by treating terrorism as crime and not as war.

It won't be long now before grass grows high around our roads and the new swanky culture buildings and unoccupied offices start to fall down (unless the unemployed are forced to cut grass and paint buildings). Mass unemployment is around the corner. Let's see how this government handles the shit it is about to cause.

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