Now read this post on Boffy's evergreen Marxian economics blog. Don't let the coalition fool you: there is nothing unprecedented about this debt.
Monday, 11 October 2010
100 Years of UK Public Sector Debt
You know the UK's public spending deficit? The one we're saddled with because Brown and Darling used buckets of taxpayers' cash to bail the banks out, thereby transforming a financial crisis into a public spending crisis? The very deficit the Tories and LibDems think is going to eat babies once it's finished breakfasting on the economy? It kinda looks very small when placed in historical perspective:
Now read this post on Boffy's evergreen Marxian economics blog. Don't let the coalition fool you: there is nothing unprecedented about this debt.
Now read this post on Boffy's evergreen Marxian economics blog. Don't let the coalition fool you: there is nothing unprecedented about this debt.
Subscribe to:
Post Comments (Atom)
17 comments:
But the big bits are Wars
And 2000 - 2010 is similar to 1900 - 1910 but back then the UK was the heart of a declining but still significant Empire.
The significant point is the deficit was higher throughout the bulk of the post-war period, a time characterised by setting up the NHS, expansion of welfare, national industries and so on. If those years didn't require savage cuts and carried on as they did, why do we in 2010?
Deficit and debt aren't the same thing. The deficit is the excess of government expenditure over income *for a given year* - in effect the size of the deficit tells you the rate at which the debt is growing, or the steepness of the upward curve. And the steepness of the curve we're on at the moment is only outdone by the two World Wars.
You could argue that the absolute level of indebtedness is low enough that we shouldn't panic about the deficit, and I'd tend to agree. But it's the deficit that's driving (or justifying) the coalition's arguments.
Interesting that the PND graph shows that an answer to WW1 and the Wall St. crash was to spend spend spend. Releif came as a consequence to this action and only the threat of WW2 saw a further response. Again, the result was relief as the Empire waned and even throughout the boom 60's and Winter of discontent, the outlook was good. Thatcher presided over the inevitable and the bumpy years are highlighted by the free flowing money acts of Lawson and Clinton, which we now know have resulted in the banks going bust.
The further you take the graph back the better it is, as well:
Back to 1700, anyone? http://i55.tinypic.com/2d5svn.png
As Jon, says, and as I show on the blog, if you go back to 1800, the height of the Industrial Revolution, when economic growth was at its height, the figure is 250%!!!
Moreover, as I've also pointed out. Public Sector debt (including the bail-outs) is only half that of Private Sector debt. But, the Liberal-Tories do not say, everyone has to clear their debts, ebcause they are paying more in interest on their mortgage, credit cards etc., than they are spending on buying food or clothes for their kids. On the contrary, Charlie Bean of the BoE comes on TV telling people to spend their savings!
The point is Phil even though I do not present the debt figures here, the scale of the deficits during the post war boom supposes large scale accumulated debts as well. And yet the social democratic settlement was extended and sustained.
The other Phil, says that it is the deficit that is driving the Coalition's argument at the moment. I don't think that is true. The whole basis of their argument has been about Debt/GDP. It is that beyond a certain point, usually termed a tipping point, debt becomes unserviceable, because interest payments become so large that they outweigh economic growth, so no net Capital Accumulation becomes possible. That really is only applicable if the vast bulk of your debt is owed to foreigners. If, as with Japan the debt is owed, and the interest is paid to your own citizens it remains internalised.
The Coalition's argument has been that the Bond Markets might beleive that the debt would become unserviceable, and so the risk of default rises - as happened with Greece - and so either the Bond markets will not buy your debt, or only at high yields. But, there has never been any chance of that being the case with the UK. If the EU acted like a single state it would not have been the caser with Greece, Spain, Portugal, Ireland or Italy either!
Yes and the pre 20th century peak was built up during the Napoleonic wars.
This is the first time we have built up this level debt during peacetime during a recession and into a second recession with growth lower in the last two decades than in any other decade since the end of World War II.
In the next five years we have to find £540bn of new loans, renew £305bn of existing loans and pay £250bn in interest. On top of this we have £1 trillion public sector pension deficit running up an exponential amount to the deficit each year - £4bn this year, £15bn by 2015 and so on.
All this amounts to fisacl crisi as we enter a ndouble recession flamed by cuts!
Phil said...
The point is Phil even though I do not present the debt figures here, the scale of the deficits during the post war boom supposes large scale accumulated debts as well. And yet the social democratic settlement was extended and sustained.
In the post war years government spending was not as high as today. NHS spending for example is over 7% of GDP now, compared to 3% in 1960. Would you accept it if the government proposes to revert NHS spending to the 1960s level?
Its true that spending on the NHS is much higher today than in 1960, both in absolute terms, and as a percentage of GDP. But Healthcare is a commodity like any other commodity over time the percentage of household spend on it may rise or fall. We spend much less as a percentage of household income today on food than we did in 1960, but way, way more on Entertainment, for example.
Workers, pay far more in taxes today to cover their additional consumption of the commodity healthcare than they did in 1960, so Net net, the point is moot in relation to both the deficit and the total debt. It is no mor relevant than to say that expenditure on Big Mac's is equal to 1% of GDP whereas in 1960 it was zero. If you reduced the share of Healthcare to 1960 levels then to remain in balance you would have to reduce workers tax payments to 1960 levels too. I suspect that if you did that the size of the deficit would balloon.
Its an argument for workers having no faith in the Capitalist State and taking ownership and control of things like Healthcare and Education back from it, and demanding a corresponding reduction in Tax. But, of course, the same applies to every other sphere of workers lives. We should take back all the means of production and scrap Capitalism.
If you want to reduce the overall tax rate to 1960 levels, you'd have to reduce the overall government spendings to 1960 levels too, not just the NHS. I don't see how in that case the deficit would balloon, unless you want to argue that today's productivity is not as high as the '60s?
The "no faith in the Capitalist State" line comes out of no where. I don't see how you made this great leap forward from "reducing taxes = more deficit" to "capitalism should die".
I was making the point that you could reduce the pecentage of tax taken that goes to cover Healthcare, but the same point applies to the other aspects of the commodities purchased by workers from the State. That is the important point, it is the commodities that workers buy from the State, such as Health Education, Social Care. If workers did not buy these from the State, but bought them from private providers that would still consititute expenditure, it would still be part of GDP. The cost would disappear from the Government's books, but so would the income in taxes and charges.
The reason I argue that the dficit would balloon, is because of the fact that a look at how those taxes is spent would show that a large part goes towards other State expenditure, which is not matched by actual commodities supplied to workers. Defence expenditure for one thing, and the massive expansion of the State as a State standing over workers, the vast number of highly paid bureaucrats and so on.
In fact, if workers and the middle class stopped paying any tax altogether, the cost of those things like Defence,a nd maintenance of the State bureaucracy would have to fall solely on Capital, whereas at the moment Capital largely avoids tax, and loads the cost on to workers and the middle class.
That's why I agree with marx about the need for Tax to be based on direct taxation so that workerrs can see just how much they are being ripped off by the bosses state, so they will restrict its growth, and organise themselves to provide for their own needs under their own self-government.
Having done so the lesson that they can do that in the places they work and live will become obvious. They will have every reason to take over the factories and offices and shops they work in, and to organise their own democratic control over the estates where they live.
Are you seriously arguing that defence spendings are bigger than 1960s? Last year's defence spending is 3% of GDP, compared to 7% in the '60s.
Do you have an idea how much exactly we are spending on "highly paid bureaucrats"? There are 172 civil servants paid more than £150k a year. Assuming each of them are paid £280k (the top salary), that works out to be a massive £48 million. Compared to the education spending of £85,600 million.
Honestly I can't tell how you do your maths. I suggest you spend some time on this site:
http://www.ukpublicspending.co.uk/
I am suggesting that the size of the State has expanded considerably, and only a fraction of that expansion results in outputs that are consumed by workers. I am suggesting that if workers themselves had ownership and control over the production and distribution of those commodities they could raise the quality, improve the efficiency, and thereby reduce the costs of providing them.
And those suggestions are based on... your imagination?
No, on facts. Government statistics themselves showed that the trebling of inputs into the NHS did not result in a trebling of outputs for example.
A study on housing provision also showed that Co-operative Housing is the most efficient. Or take Pensions. The Mondragon Co-op pays an average Pension to its workers of £13,000 p.a. It also has revenues of double its Benefit payments so it is extremely sustainable. Yet, in Britain, with a higher cost of living the State pension comes to nothing like that figure despite the large amounts paid into it by workers over the last century, and despite the fact that most of its contributors during that time never lived long enough to draw from it. People like you frequently talk about "gold plated" public Sector pensions. Yet, despite Public Sector workers paying large sums into these Pension Funds, the average Pension for a Local Government worker is around £3,500, or just a quarter of the average for a worker at one of the Mondragon Co-ops.
And, having said all that, the fact remains that your original argument is false. There is nothing unusual about the debt to GDP ratio compared to the situation over the last 300 years, and in fact, in the 1950's when that ratio was five times what it is today, it was possible to pay out large sums to former owners of nationalised industries, to invest huge sums in those industries to make up for decades of neglect by private owners, to create the NHS etc, and to gradually pay down the debt.
Post a Comment