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Tuesday, January 7, 2014

Austerity Works! UK's Economy Is Growing!

Posted by on Tue, Jan 7, 2014 at 8:54 AM

The Guardian:

Britain's manufacturers will enjoy faster growth than those in Germany or any other western European economy this year from rising demand at home and abroad, according to a report.

In its annual survey of companies, manufacturers' organisation EEF found 70% of firms forecast an improvement in the economy in 2014, while just 5% thought conditions would deteriorate. The balance of 65% compares with the sombre outlook at the same time last year when the reading was just 7%.

The balance expecting a good year for manufacturing is 52% – up from zero this time last year.

The UK is in the process of implementing even deeper cuts in its social services. But the economy is recovering, which proves that austerity is working, that it's cementing business and consumer confidence. More austerity will only help the economy more.

Well and good. The lesson in all of this? We on the left must not attack austerity on the grounds that it hurts growth. That position is bad because it does not address the core problem, which is the ruling ideology of growth itself. Why does the UK or US need to grow forever? And it's a growth that only adds more carbon to the footprint of individuals in advanced capitalist societies. Keynesianism and neoliberalism are the same in the sense that they face the same obstacle: Finding a way to endless economic growth.


Comments (21) RSS

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I expect economic growth will eventually cease, but there's no reason to think that it will stop in our lifetime. Economic growth is ultimately driven by improving technology, and the limit of what's possible is still a long way off. Figuring out how to live without growth is a problem to be solved when we get there. Doing it now would be pointless.
Posted by I have always been... east coaster on January 7, 2014 at 9:22 AM · Report this
sloegin 2
A dead cat bounce. But even that would require data. There's no data in the article, just predictions and forecasts.
Posted by sloegin on January 7, 2014 at 9:24 AM · Report this
I imagine that the fast growth rate is because their economy was so incredibly damaged that any improvement will be a huge percentage.
Posted by NotYourStrawMan on January 7, 2014 at 9:26 AM · Report this
I would be very hesitant to concede that austerity helps growth, as the immediate follow-up is the argument that a growth (a bigger pie) helps everyone. The argument goes that it makes no difference if the 1% are enjoying a greater percentage of the pie than the 99% if such an uneven distribution results in the 99% having more total than if they had a larger percentage of a smaller pie.

*If* that theory were correct, I would agree -- I would rather live in a society where the poorest still had food and housing while the richest drove solid-gold rocket cars than one where the divide between rich and poor was closer together, but where the poorest went hungry. The problem is that I do not believe that such an uneven distribution really provides growth for everyone, and that is why it is important not to concede the argument.
Posted by Fr0zt on January 7, 2014 at 9:33 AM · Report this
TomJohnsonJr 5
Krugman warned that people of various stripes would try using this to debunk Keynesians and/or as a justification for the austerity programs that have brought heartbreaking, needless suffering on the heads of hundreds of millions worldwide.
If 2014 is a year of relatively good growth, you know that many people will take that as somehow refuting Keynesianism — hey, didn’t you guys predict that the economy would never recover without fiscal stimulus?

No, we didn’t:

"In the long run, we will have a spontaneous economic recovery, even if all current policy initiatives fail. On the other hand, in the long run …"

The fact that things eventually turn up is neither a refutation of Keynesian analysis, nor a reason to excuse the vast economic and human costs of bad policy to date — just as it’s not a vindication of austerity policies in the UK.…

Posted by TomJohnsonJr on January 7, 2014 at 9:41 AM · Report this
mkyorai 6
@3 Yes. It's great that their economy is improving. On the other hand, countries that avoided huge austerity measures never tanked their economies so severely to begin with.
Posted by mkyorai on January 7, 2014 at 9:41 AM · Report this
Pope Peabrain 7
It works for the wealthy and the kleptocracy.
Posted by Pope Peabrain on January 7, 2014 at 9:49 AM · Report this
Sargon Bighorn 8
I've always thought the "growth" was in the wrong places. Like #1 Ms. East Coaster touched on (with those lovely painted nails), growth in technology would seem to do little harm to the planet, while growth in the mining and timber and oil industry, big harm. The "maintenance" and "repair of the broken" sectors of the economy can grow for decades I would think.
Posted by Sargon Bighorn on January 7, 2014 at 10:00 AM · Report this
unknown_entity 9
WOW Charles, this is an impressive, morally bankrupt low. In the name of ideological purity for your no growth agenda, you are willing to consign more people to poverty in the hopes of .... what exactly? You have drunken the free market Kool-Aid that austerity works (fact: it does not) and are now apparently more horrified by economic growth than the most vulnerable people in society being sacrificed on the alter of austerity.
Posted by unknown_entity on January 7, 2014 at 10:24 AM · Report this
Posted by retrogrouch on January 7, 2014 at 10:33 AM · Report this
AFinch 11
First, I'm with @2 - this is a sentiment survey - not real orders. I'm for waiting to see the real orders are rolling in.

Second, @4, I wonder if Charles' concession is snark? Clearly the logical fallacy nobody ever questions in the free-marketeer-uber-alles model is the implication that all productivity gains are distributed equitably across the population. While technology does improve productivity, it also empowers rent-seeking-monopolists (monopoly of the means of production - whether land, capital or whatever). Basically technology allows an ever shrinking pool of people to replace other people in production with robots and thereby have a monopoly on all productivity and revenue gains.
Posted by AFinch on January 7, 2014 at 10:34 AM · Report this
Many of Mudede's posts read like a single-paragraph attempted summary of Lasch's The True and Only Heaven from the early '90's, which essentially points out that using eternal growth as an economic and political theory foundation not only does not hold up in the face of global environmental and resource constraints, among other factors, but was debunked by critics across the entire political spectrum from its beginning.
Posted by kw65 on January 7, 2014 at 11:12 AM · Report this
@2, calls it correctly --- all the financial/econ data I've been reading points to major problems in the UK, not the least of which is housing for the populace in general, and the working people in particular, thanks to policies implemented back in Thatcher's reign (note to Dr_Fulsome, that is the proper usage of "reign").

A specious article.
Posted by sgt_doom on January 7, 2014 at 11:46 AM · Report this
treacle 14
east coaster @ 1 is wrong. Growth isn't caused or driven by technology. It's abetted by technology sure, but it's caused by the rule-set of our economic system. Positive-interest.

Why do you think you receive interest payments on your savings account merely for keeping money there? Because the bank loans out your money to other people, with interest, to make extra cash themselves. The catch is that all money is loaned out with interest; with new money being loaned into existence by banks, again, with interest.

If all money is originally lent out to borrowers (loan), then where does the money for interest payments come from (loan+interest)? Since interest is typically compounded, debt increases on any amount of unpaid loan. The fundamental problem is that there will always be more debt than the money to pay it off. And that disparity only increases with time.
So then, how is this really basic problem addressed?

The answer is two-fold:
(a) Bankruptcy/insolvency/etc.: Where some people are unable to pay back their loan+interest & default. Their money is already out in the economy, being used by other people to pay off their interest payments. Or,
(b) Growth: Where new money is created & circulated in an effort to stay ahead of the increasing debt-hole, so that borrowers can go generate (win/obtain) money from other people.

A third option exists, but it's not pretty:
(c) Recession/depression, or War: Where economic value & debt is lost or destroyed, and people have to pick up the pieces and start over.

And a fourth option used to exist:
(d) The Jubilee: Where the monarch would declare all debts cancelled, and people could start anew with a clean slate.

The neoliberal program of the IMF, World Bank & others is essentially a form of economic "mining" of other economies, so that value can be extracted in order feed the debt-hole in our economy (by circulating the extracted "new" money). The IMF goes in, offers loans, then requires interest rates of up to 30% & gov't austerity. This is great for the original loaners out there, they get their loans repaid, and handsomely so. They can also buy up previously State-owned enterprises at fire-sale prices, obtaining more value; & privatizing industries along the way ;-) ...

But the average person on the street there sees job losses, price hikes on basic needs, and widespread austerity as their government diverts a large % of its budget (aka 'tax-payer' money) to pay off their new+old debts, now with staggering interest rates, to these global players as "debt service" (a very apt term).

Eventually the people get fed up with suffering and the lack of money, and they riot. (cf. "IMF riots"). These people are the losers, the ones who get to go bankrupt, while their value (tax-payer money) is exported out of the country and touted as "savvy economic growth" by the invader economy.

The explosion of credit cards and "consumer" debt is also a symptom of this aspect of 'growth' created by financialization: New money is created via the artificial extension of our income with instantly available "credit" (aka debt+interest), spending is increased, the circulation of this new money benefits the economy (as it always does), and economic debt responsibility is effectively off-loaded onto citizens via the automatic loan-teller in their pocket called a MasterCard.

In short, Growth is required by our economic system, which is predicated on positive-interest. Positive-interest is a particular rule-set of all national/state types of currency.


(Fun fact: What happens when you pay off your loan? A: The money disappears from the economy! Like matter vs. antimatter, it is annihilated by the debt it represents. This is a bad thing, because less money circulating makes for a weaker economy. So more debt is mostly good for the economy. A fundamental paradox within our system.)
Posted by treacle on January 7, 2014 at 12:01 PM · Report this
Sure Chuck. Zero growth. That means, do not repair the infrastructure. Do not improve it. Less overall resources over time for each in a growing population. You must not be Kshama's economic adviser because your ideas are even dumber than her Party's.
Posted by hmmmmm on January 7, 2014 at 1:03 PM · Report this
Will in Seattle 16
Take London out and you can see why Scotland is leaving the UK
Posted by Will in Seattle on January 7, 2014 at 1:10 PM · Report this
Phoebe in Wallingford 17
Economic growth is not a forever continuum, it is a cyclical dance of expansion and contraction over time.
Posted by Phoebe in Wallingford on January 7, 2014 at 1:40 PM · Report this
Pope Peabrain 18
@17 Expansion for the rich and contraction for everyone else.
Posted by Pope Peabrain on January 7, 2014 at 2:38 PM · Report this
If the Guardian article were believable, then why are the Brits so quick to pass this into law?…

The UK's proposed new Antisocial Behaviour, Crime and Policing Bill creates a new kind of injunction, the Ipnas ("injunctions to prevent nuisance and annoyance"), which judges can hand down without proof of wrongdoing to anyone over ten, and send them to jail to violate them (kids go to young offenders centres for up to three months). Along with the Ipnas comes "dispersal orders," which police can use to order anyone to leave any public place for any length of time, for any reason, on their own say-so.…
Posted by sgt_doom on January 7, 2014 at 2:52 PM · Report this
@5 Paul Krugman is the Dane Cook of economists.
Posted by William F. Fuckley on January 7, 2014 at 3:47 PM · Report this
When economic performance and growth is measured in fiat currency that is perpetually losing value it is less clear whether things are really growing or not. That said, excellent point. Cut down a forest and the economy has grown. Make cheaper plastic crap that people need to replace more often and overflows out landfills with toxic waste and the economy grows. People need to realize that economic growth is not an indicator of the quality of life we share!
Posted by Upchuck on January 7, 2014 at 7:05 PM · Report this

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