Sunday, 19 June 2011

Summarising economic policy over the last 6 or so years

A thing that confuses me is why the main thrust of economic policy isn’t summarised in ways that are honest, open and easy to understand. It’s a pain because if they were, then the rationale behind them could be considered more readily along with their objectives and outcomes. Plus those who stand to win or lose by them would be better placed when it came to elections. It would also provide a useful means of responding to the usual charge of politicians being all the same.

Partly, I reckon, the problem is to do with the Oxbridge way of presenting everything in guarded, coded language. However, the main thing is the political process wherein a third of a party’s MPs are too thick too understand and aren‘t in a position to do anything anyway, a sixth oppose “it” on dogmatic grounds because whatever “it” happens to be doesn’t fit in with their world view largely on point of “principle“. Another third don’t understand it, but do have a sense of there being “something” in place, its just they’re too busy climbing greasy poles to question anything the party machine turns out, which leaves a final sixth who are both in the loop, understand what’s going on BUT know a bald statement of how shit is might alienate 17% of a crucial demographic in 23 marginal constituencies.

It all hammers home the point we get the politicians and politics we deserve. Despite that I reckon the following is a reasonable summary of how shit has been the for the last 7 years or so, which you can make of as you will.

1) Pre-2007 or the Sarah Beeny years; these were characterised by low unemployment, sustained growth, Chinese cheap labour made import driven low inflation and light touch financial regulation that supported a cheap credit fuelled consumerism and asset bubbles, the assets being company values, houses and commercial property.

Ahh, the good times, when any idiot could buy a house to do up, then sell and as long as he or she spent too long cocking it up the market would have moved so much they’d still make a profit (and kid themselves it was all down to their financial acumen).

Alongside this government got taxes from property sales, construction and the financial sector to piss away on grandiose projects like the multi-billion pound Connecting for Health disaster, PFI/PPP shite and a tacit regional policy of inventing all these government call centre jobs that involved redirecting taxes paid by the London and the South East into offices located in ghastly Northern, Welsh and Central Scottish post-industrial shit holes.

2) 2007 - 2010 or Panic Stations; oh shit, the credit crunch! Even instinctive Tories I know think the Labour government handled this well. I agree with them and think its funny cos politically all the credit should go to Alistair Darling. What stands out is the extent to which government was (a) creative in its responses, most obviously with the Asset Protection Scheme, when to address the crisis of confidence in banks it drew an insurance policy line under them, and (b) did so while avoiding the moral hazards seen in Ireland and the US, by making the banks pay for the insurance AND building in one fuck of an excess.

Alongside this government spending was maintained in a counter-cyclical type style to the point where these few years will probably be considered a golden age for public sectors workers - they had job security, good pensions, pay rises and even better benefited from monetary policy.

Monetary policy here had a coupla strands. One was the quantitative easing experiment, a thing economists, then economic historians will be arguing about for the next hundred years. Essentially, this - based on what Bank of England bods have said at shindigs I’ve attended - propped up corporate asset values. Err great.

Alongside this the Bank slashed interest rates to 300 year lows, which meant existing debt became fuckova cheap i.e. more affordable, to avoid hunners and thousands of personal and corporate insolvencies. It also encouraged people to spend cos they were getting fuck all interest on their savings and meant all the fannies that were balls deep in debt were let off the hook as long as they were on a variable rate mortgage.

Sterling was also made to take a tumble because the Bank was hoping to make exports more competitive/prompt an export led recovery because that’s kinda all they know what do to in response to an economic downturn (see fer instance the post Exchange Rate Mechanism experiment period and also devaluations prior to Sterling moving to a floating exchange rate in the early 70s).

3) 2011 onwards - Now is the winter of our …… fucked up discretionary spending and real household disposable incomes gone tae buggery; except, counter cyclical spending can only ever last so long, which is why now that financial markets are volatile, but relatively stable compared to what we saw in say 2008 and 2009, we’re entering into an age of austerity when public spending gets the big, bad, rough wahoo.

Here is when shit should get interesting because the real ideological differences should start to emerge, like this Tory fucktard speaking out in favour of flexing the minimum wage.

Now this is a lovely example of ideology, except, of course, single issues have the tendency to get picked up by and run with by politicians so as to blow them out of all proportion to avoid any debate about the big picture (just like during the election when there was all that pointless shite about how to most effectively tinker with VAT).

But, fuck it. In this new age of austerity lets try and do some big picture stuff. Like in the 6th biggest economy in the world is it right that the wages of thousands of people should be so low they need to be subsidised via tax credits? And why the fuck in such a large economy, relative to the population, should pensions and car for the elderly be an issue? Why is inequality increasing alongside the emergence of these questions and is there any connection between this and the ongoing assault on pensions, employment conditions and what no?

Just some random thoughts I guess. Oh and this Ed Balls shite about is the public sector being lured into a trap - the grotty wee cunt should ‘fess up; Labour doesn’t want to be associated with (a) strikes and (b) explicitly preserving decent terms and conditions of public sector employment. By contrast, the choice the public sector is facing is straightforward - get fucked or get fucked after putting up a fight.

As a P.S. the 1926 General Strike was a bag of shite. The tragedy for the left is that the only general strike to have worked in Britain was driven by Northern Irish bigots, which is why it is perpetually swept under the carpet.

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