Tuesday, May 1, 2012

Great Al Jazeera Piece on the Failure of UK's Austerity Experiment

Posted by on Tue, May 1, 2012 at 9:14 AM

AL Jazeera:

While the UK economy was growing rapidly at the time the Conservatives came to power in May of 2010, the economy is now smaller than it was in the summer of that year.

This is all very bad news for people living in the United Kingdom. There has been no job growth since the summer of 2010 and the unemployment rate has risen from 7.7 per cent to 8.1 per cent in the most recent data. It seems certain to rise more in the months ahead. If anything, the situation is likely to worsen over the course of the year as more of the spending cuts take effect.

But the bad news for the British people can be good news for the United States. Thanks to their generous offer to experiment with austerity, people in the United States can now see more clearly than ever that austerity does not work.

If Romney takes power in 2012, all you need to do is look at the UK to see exactly where we will end up in 2013. The lesson in all this: Rich people do not know how to create wealth; but they do know how to wage war on the classes beneath them, and they are still winning this costly war.


Comments (27) RSS

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Not sure why a country tightening it's belt for a short time and then not experiencing an economic boom is any evidence that austerity is a bad idea.

I'd like to ask you & Goldy: What is your favored plan for dealing with our rising national debt to GDP ratio?
Posted by ScruffyBallardMan on May 1, 2012 at 9:32 AM · Report this
That's not just Al-Jazeera, that's Dean Baker, who's done yeoman's work from the first tremors of the crisis through today. Props to Al-Jazeera for commissioning a piece from him.
Posted by gloomy gus on May 1, 2012 at 9:46 AM · Report this
chinaski 3
Depends on where you tighten the belt. Not occupying foreign countries in unwinable wars seems like a better place to start than increasing the burden on the lower classes, does it not?
Posted by chinaski on May 1, 2012 at 9:48 AM · Report this
Urgutha Forka 4
Rich people DO know how to create wealth. But only for themselves and their heirs. They don't know how to create it for anyone else.
Posted by Urgutha Forka on May 1, 2012 at 9:50 AM · Report this
OuterCow 5
@1 A short time, really? You think the type of people that would implement an austerity plan are the type of people that ever want to see it stop? They're paid by their corporate masters to squeeze the lower classes for all the can, and they'll only say "when" when the checks stop cashing.
Posted by OuterCow on May 1, 2012 at 9:51 AM · Report this
@1 Because it isn't "short term belt tightening." It's a wholesale gutting of social safety nets and diverting that money over to private interests who in return don't invest in the country but only in themselves. That's what is happening.

The only thing I'd caution Goldy about in comparing the two differing approaches is he doesn't seem to realize the banking systems in the UK (and France and Germany) are way more monolithic. Yes. Imagine that. Even worse than here.

They have a handfull of HUGE way over leveraged banks that basically run everything (think Deutsche Bank and HSBC). It's much less diverse money ecosphere over there We have a couple dozen bank over leveraged by 20-60% they have one or two banks over leveraged by 250% and a fraction of our GDP!). So there is no way to bail them out and if they fail there are no banks to take their place. That's why the Europeans are fucked and why they rolled over and did what the banks wanted and went with austerity.

There is no way the banks were taking a loss over there. I'm not even sure they could. So the governments are putting the public sphere on fire sale. And it won't come back.

I'm pretty sure the Eurozone can't print money like we can to do stimulus like we can because nobody is buying the equivalent of European treasury notes from a banking system so fucked up.

Plus countries like Greece and Italy (and to a lesser extent Spain) societies have driven this race to the bottom because they have the deadly combination of endemically NOT paying taxes, borrowing from these giant banks, and abusing the social safety net while gutting it. They are not these responsible socialists like the Northern Europeans. In fact Italy and Greece are on their way to yet another crazy far Fascist Right Wing resurgence.

Gee, sound familiar? That's called the Tea Party platform.
Posted by tkc on May 1, 2012 at 10:02 AM · Report this
Supreme Ruler Of The Universe 7

What British product have you consumed lately?

What British (or European) technology product have you purchased lately?
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on May 1, 2012 at 10:03 AM · Report this
douchus 8
#1 - why do we even need to deal with the national debt to GDP ratio at this time? That's a stupid thing to do in a recession.

The deficit, for most Americans, is way lower on the list of priorities than jobs, health care, mortgages, and even (apparently) women's health.

This deficit argument is just a straw-man being put up by the richie-riches in order to funnel ignorant people's support towards the concentration of wealth in the hands of those same richie-riches.

The only people who should be worried about the deficit is those who own our debt, such as the Chinese. Therefore, those who worry about the deficit are COMMUNISTS! Are you a communist, comrade? ARE YOU?!?!?!?!?!?!?!?!?!?!?!?!!?

Posted by douchus on May 1, 2012 at 10:13 AM · Report this
@5, 6. I mean "short term" because those measures have been in place for (so far) a short time. They may have long term consequences, but I'm just saying you can't judge a policy based on what happens next quarter.

I kind of wish everybody would stop calling this "austerity". Austerity is reducing deficits by cutting services (not just to the lower class, by the way!) and raising taxes. I don't think this is the policy proposal being put forward by Mitt Romney.

Again though, nobody has answered: what is the Goldy + Mudede-approved measure to solve our debt to GDP problem? Is the answer to just grow the living hell out of GDP to make the debt relatively small? I can't personally square that with my anti-overconsumerist and environmental beliefs.
Posted by ScruffyBallardMan on May 1, 2012 at 10:18 AM · Report this
balderdash 10

No, seriously, A-J does good work. I wish it got wider distribution in the US.
Posted by balderdash http://introverse.blogspot.com on May 1, 2012 at 10:20 AM · Report this
@8, the environment polls extremely low among Americans' priorities. Should we invest in renewables? Should we worry about the long-term game we're playing with the planet? No, that's a dumb thing to do during a recession... apparently.

This is worth a watch, by the way (skip to about 15:00):
Posted by ScruffyBallardMan on May 1, 2012 at 10:25 AM · Report this
@9, austerity is cutting services not just to the lower class? What services does the upper class need? Does Romney need services? No, he and others like him are their own world; they need nothing from the world of the 99%, except political office to feed their egos.
Posted by sarah70 on May 1, 2012 at 10:51 AM · Report this
@8: China only owns about 10% of our debt. Over 50% of it is owned by American citizens and municipalities.
Posted by digitalwitch on May 1, 2012 at 11:08 AM · Report this
Sure, it's obviously a "Great Al Jazeera Piece" when it conforms to your thinking. Is this a good piece on the UK austerity?


"Leave aside the violence you need to commit against our two great nations’ shared language to define "austerity" as a five straight years of increases in outlays."

Posted by cliche on May 1, 2012 at 11:13 AM · Report this
keshmeshi 15

Mudede posted this one.
Posted by keshmeshi on May 1, 2012 at 11:15 AM · Report this
Will in Seattle 16
@4 and in China.

A recent study in the UK showed that incentives for wealthy people to "save" in retirement accounts resulted in an INCREASE in capital investment OUTFLOW out of the UK and the EU to other nations by those individuals.

Tax cuts for the Rich make it WORSE. Better to tax them at 90 percent on earnings over $1 million with capital gains at the 50 percent level if we're going to fight the Five Wars of Opportunity (Iraq, Afghanistan, Drug, Drone, and Iran).
Posted by Will in Seattle http://www.facebook.com/WillSeattle on May 1, 2012 at 11:21 AM · Report this
malcolmxy 17
Romney is a douche, but he's not an idiot. It's not like even conservatives don't know that Hoover's advisers, and his following of their advice about choking off spending in the 30s, are the things that most caused the great depression to be so "great".

But look at us now...some of the $2 trillion yearly budget deficit needs to be dealt with. (Until the last 2 years of Bush's budgets and the 1st 3 of Obama's, obviously, we ran deficits of @$300 billion since the Reagan years and @$50 billion before that...)

We're running massive budget deficits (which, during a recession is good...you sort of have to spend your way out of these things), but none of that spending is making its way to infrastructure, long term capital investment, short term capital investment, bank lending, etc, etc, etc (the things that would actually help improve an economy and also ready it for expansion).

So, Romney would screw things up? I think you meant to say that Romney would screw things up slightly more.
Posted by malcolmxy on May 1, 2012 at 11:23 AM · Report this
Gay Dude for Romney 18
President Obama's Secretary of State, Hillary Rodham Clinton, said that the US debt has hurt our ability to protect our security, to manage difficult problems and "to show the leadership that we deserve.

Maybe not full throttle austerity, but we got to tap the breaks a bit don't we?
Posted by Gay Dude for Romney http://mittromney.com on May 1, 2012 at 11:30 AM · Report this
Vince 19
@18 We did. The tax breaks for the rich were Bush era. That means they didn't pay the trillions it's still costing us for the war THEY wanted to enrich themselves further with oil from Iraq.
Posted by Vince on May 1, 2012 at 11:36 AM · Report this
malcolmxy 20
The oil they want is from the Caspian Sea, not Iraq (though, I'm sure they wouldn't toss it away if we could get it on a boat bound for a US refinery), and Obama PROPERLY extended the Bush tax cuts (yeah, they don't have a huge impact on the economy, but if you get rid of them, the impact would have been larger because of the impact people would have thought it had...so much of economics is perception...if you could get people to think the economy is good, it would be inside of 30 days.)

There is little that Bush did, militarily, tyrannically or economically that Obama hasn't done, though...
Posted by malcolmxy on May 1, 2012 at 11:47 AM · Report this
Joe Szilagyi 21

"I'd like to ask you & Goldy: What is your favored plan for dealing with our rising national debt to GDP ratio? "

How about we redirect 50% of our military spending toward debt reduction?
Posted by Joe Szilagyi http://www.zombo.com on May 1, 2012 at 11:50 AM · Report this
malcolmxy 22

A public option for health care would help out quite a bit as well, but I'm all for your plan as long as it doesn't immediately cost jobs in the military or government sectors, since those are, unfortunately, pretty huge economic drivers for us at the moment.
Posted by malcolmxy on May 1, 2012 at 12:04 PM · Report this
Regardless of whatever noises Romney is making in favor of austerity what we would much more likely see under him is what we have seen under other Republican presidents of late: even bigger deficits on account of more fat tax cuts for the oligarchy minus off-setting spending cuts.

What the Democrats have to harp on relentlessly is that what the Republicans are all about is further concentration of wealth and power in the hands of their paymasters. Sure they also want to shred the safety net but what they dream of is to eventually force a Democratic administration to take that inevitably extremely unpopular step by bankrupting the government through starving it of revenue.
Posted by Rhizome on May 1, 2012 at 12:20 PM · Report this
malcolmxy 24

Are you just saying that you prefer the DNP paymasters (big pharma and internet companies) over the GOP paymasters (telecom industry and oil companies)?


I don't like the oil companies either, but I'm not sure there's a huge difference between the two parties when it comes to sucking corporate schlong.
Posted by malcolmxy on May 1, 2012 at 1:51 PM · Report this
@24 I think the difference is pretty clear to anyone who is paying attention: The Democrats have other constituencies they must answer to besides the antediluvian segment of the ruling class that seemingly believes they can maintain or enhance their current position by driving most of the rest of the population into serfdom. Other than harassing immigrants and the urban underclass and maintaining a state of international bellicosity the Republicans don't have to do much for their only other constituency.
Posted by Rhizome on May 1, 2012 at 2:53 PM · Report this
keshmeshi 26

Perhaps so, in which case it may be a good thing that the Democrats consistently propose measures to reduce the deficit by greater amounts than anything the Republicans put forward. Too bad your party won't consider any of those proposals because they include tax increases and don't completely shred the social safety net.
Posted by keshmeshi on May 1, 2012 at 3:33 PM · Report this
malcolmxy 27

The Democrats have become adept at making you believe they have other constituents, but corporate money is split nearly down the middle (last I checked, it was 53/47, in favor of the GOP), so if you believe that the GOP is beholden to corporate interests, why have you become of the belief that the DNP is not?

There are a select few true patriots in each party, but they are typically silenced on a national level (but usually loved by their constituency, like Dennis Kucinich...until his district was moved around for this election...or Olympia Snowe, who I do not necessarily agree with on all things, but she at least wasn't a party hack).

Each party has been able to entrench themselves and are now nearly irreplaceable, and even sometimes help the other to ensure that fact.

Power corrupts. Absolute power corrupts absolutely. Works the same for donkeys as it does for elephants.
Posted by malcolmxy on May 1, 2012 at 10:39 PM · Report this

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