When neoliberals go on about ‘the debt’ and that we’re skint, it is good to remind them that the largest chunk of debt is owned by one UK government branch to another. The Bank of England holds around 300 billion of our current one trillion debt. This fact is just one reason to assume that when one enters a discussion about the country’s economy, one has entered into a twilight zone of unquestioned assumptions and agenda driven selection.
How many times have we heard the charge that ‘labour ruined the economy’? How many times have we heard, by now, that austerity is the only way forward? Both those statements depend on a non-understanding of national finance. Both those statements are wrong, because in the end, debt or surplus depends on which column you put something in your head. This was the basis of an argument I got into. Someone was wrong on the internet, and I had to respond. And I responded with the text below. Reading it back, it is disconcerting to see how my dad is being channeled through me…
Whether something is debt or a surplus depends on WHEN you look at a sum. And, sometimes debt is good. Sometimes it is bad. Sometimes surplus is good. Sometimes it is bad. Whether debt is bad depends on HOW you look at a sum. Like with the case owed by the UK Treasury to the Bank of England. Now tell me, is that debt, which if it were to disappear would suddenly make the UK one of the least debt ridden countries in the EU as a percentage of GDP, good or bad?
Tomorrow, David Cameron could come out of No 10 and say “we will introduce legislation in the next parliament to clear that debt because one part of government owing money to another part is just silly, and parliament decides the rules of government”. Technically, that debt exists only because someone somewhere says that the debt exists. That debt exists only because on the numbers in the ledger. As if someone in a household had decided that the salary coming in from the wife would go into a special account, and that account would be debt.
The neoliberals would have us all believe that it is like the UK has taken out a mortgage, and that if we don’t pay we lose our house. Actually, it is more like that husband above has borrowed loads of cash from his wife, and have convinced himself that they must all sell the house, the car, serve gruel to the children instead of nutritious food, and forego any trips to the relatives until his debt to the wife is paid in full. This is austerity in a nutshell. In order to increase wealth, the income streams that build up the wealth must be severed, and the consumption of the family must be reduced by a lot.
A poor analogy, I know, because state finance is never like a household budget. Those who claim so are like the husband owing to his wife. State finance is more like a jigsaw puzzle. Except the finished puzzle doesn’t show a nice picture of the countryside. It’s more like a mind-map of the collective madness of neoliberals.
So, here’s a financial solution: stop contracting the economy by making Johnny Public so skint that he can’t patronise local businesses like the pub and the hairdressers and the grocery store. If the hairdressers and the publicans and the grocery store owner, who can’t outsource to China by the way, gets more cash they’ll hire more people. And they will, because they want ever more if they can get it. Two sales clerks sell more than one, and the proprietor can pocket the margin from two sales rather than just one.
They will also look around for services, like accountancy firms, who can’t move to China either. Now the well paid Johnny Public carries small business, and medium business, as well as restaurants and cinemas and night clubs and hair dressers and builders and… the sky’s the limit.
The neoliberals would have you believe that the important actor is the guy at the top. If Alan Sugar is happy, then Johnny Public is happy, they say. It doesn’t work like that. Alan Sugar is impossible without Johnny Public, in fact.
There never was a trickle-down economy. It was just a self-serving fantasy dreamed up by people who wanted to restore wealth as a marker for human value. There is however a very real trickle-up economy, and that’s what this government and the Labour opposition, and the Liberal Democrats are doing their very best to destroy. With predictable results. Tax taxes are down, the deficit is up, and the kippers and the loony right and the “red tories” are is flailing about to find someone to blame that’s not them. Immigrants, the EU, etc are handy targets.
It’s not the fault of anyone but those who believe in austerity. Austerity is the cause of their ills. Austerity is the reason for the stagnation. Austerity kills off the nourishing soil at the base, and thus, eventually, the forest that the soil nourishes.