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March 06, 2018

Comments

windsock

Well, I regard them all with abject contempt - Cameron, Osborne, Duncan-Smith, Green, Gauke, May, Hammond - and Miliband and Balls who went along with the crap. That is why Labour did so badly in 2015. And members of the community groups with which I am involved also regard them with abject contempt. The problem is that austerity has not been felt in the shires. Yet.

Luis Enrique

under what conditions do you ever think there is a case for cutting public expenditure because, in some sense, the public finances are up against a budget constraint?

I think it's reasonable to assume that material public expenditure cuts will always cause hardship and even deaths, so the question is: when should the state (almost literally) commit murder?

I don't have in mind a political choice of the sort "the people have decided they want a smaller state" - I'm interested in whether you think it ever makes sense to say "we can't afford this".

Reason I am asking is that I guess some people might genuinely have thought that in 2010 if we did not cut expenditure then we would be forced into larger expenditure cuts later, in some sort of public financial crisis. In which case the choice would be between more or less murder, but no murder was not an option.

I should probably stress I am not among those people, although I would be uncomfortable claiming the government faces no budget constraint (please MMTers, don't jump in, I know your answer).

I guess it's hard to ask that question without having a view on how high taxes could go, of course some direct money financing could be done, more borrowing of course, and then there's where you choose to cut too, so maybe this is too large a question but I would be interested to know if you'd have chosen some austerity in 2010 (albeit of a less dramatic nature that the Tories did)

e

You're letting self styled 'centrists' off the hook – one of the more glaring reasons why – Windsock above is correct (though I would be kinder to ED Miliband). It really is a wonder Labour MPs who argued against Gordon Brown (he said we'd lose a decade), and then in support of welfare cutbacks, don't burn with shame. They should cross the floor to the LibDems where they perhaps belong, or sit in on SWL lectures and learn what they seem not to know.

e

@Luis Enrique: You seem to be ignoring pace. Following which, an earlier 2010 question for policy makers on considering where any necessary cuts might fall, would be what's the end point? I think I'm right in saying Cameron is on record somewhere saying “continuing austerity” might be better put as continual transfers from poor to rich – we work (and die untimely deaths) for them yes?

Matthew Moore

'Why are they not universally regarded with abject contempt?'

Isn't the simplest and most likely reason because you are wrong?

Luis Enrique

e you're right of course, speed is part of the equation too (and presumably safe to assume slower equals less suffering)

Dipper

We can only prove this policy has cost lives by comparing to the alternative. Fortunately for us Corbyn, as well as the likes of Diane Abbott and Owen Jones have been very clear that the alternative is demonstrated in Venezuela. So what does the comparison with Venezuela look like?

And my personal choice would be for a north-European model with substantially more private involvement through a state-insurance style model. I believe that would be more efficient and hence save lives. So if the government are to have any blame attached to them for excess deaths in the NHS, surely it is for failing to challenge the notion that soviet-style organisation can deliver efficient solutions?

Mike W

'under what conditions do you ever think there is a case for cutting public expenditure because, in some sense, the public finances are up against a budget constraint?'

It is a very good question Luis,for Simon Wrenn Lewis above. I say this, as I am left wondering about this bit of your post:

'I would be uncomfortable claiming the government faces no budget constraint (please MMTers, don't jump in, I know your answer).'

This attitude seems strange here, but is in fact embedded in the Wrenn-Lewis blog too. You may like it. He writes essays about 'understanding the Heterodox economists',even, and all credit to him on this, uses the K word: stating the Economics discipline, as a whole, was close to a Kuhnian shift. He suggests this, on the one hand may well be progress,then, in his next paper concludes there is no alternative: deficit reduction is just a logically deductable rule; its just economics mate!

'Reason I am asking is that I guess some people might genuinely have thought that in 2010 if we did not cut expenditure then we would be forced into larger expenditure cuts later, in some sort of public financial crisis.'

For whatever reason you don't want to discuss your problem/questions in the form of a social science like, sociology, where there is more than one school of thought, but in the form of Neo Lib Econ 101, I will respect the rule you impose on us here.

But thinking of imposing rules, you may like to ask Wrenn Lewis, when you pop over, which branch of enquirey provided the intellectual underpinnings to the, 'you do know, don't you, Government is just like big old household, only a fool says otherwise' public meme, that Osborne and co trotted out?

Just to add, not a MMT 'stormtrooper', never tweet, never posted on his blog, not even a sociologist talking his/her subject. Although it would be intellectual progress if Wrenn Lewis's economics school was consumed by the sociology department of his university :)

Daisuke Aramaki

How did the Tories get away with Austerity, or "murder" as you say it? There is an unsettling explanation and that is its unfortunately in our natural survival instincts to endure whatever hardship unless the situation completely overwhelms and incapitates us. The Tories haven't really done anything of the sort yet with their Austerity policies, hence saying that they are "getting away with murder" may be true for a minority, but not for the majority yet enough to cause day-to-day disruption.

Furthermore, most of the lower class see themselves as "temporarily embarrassed millionaires", because they have the ingrained belief that they too can become rich and part of the elite if they only just worked a little harder. Hence the reason why they would rather support/praise tax cuts for the rich but instead vilify an increase in unemployment benefits for example, even though it may ironically help them.

Cognitive dissonance amongst the lower classes is a tough wall to break, which unfortunately can only be swayed by rhetoric, not facts. Austerity is a seductive policy which the average person can intuitively rationalise, and in turn, not bother to do any actual research behind it. Since the Tories have generally been winning the argument for the last 8 years, they would have to do something really disastrous that changes the narrative. But even then, austerity will not be blamed. Its a part of zombie economies that will keep getting resurrected again and again purely for political reasons.

e

@Daisuke Aramaki: Your exclusive “us” with “survival instincts” may not be overwhelmed but plenty beyond a minority you acknowledge recognise a damaging direction of travel as others are forced to experience it. On the other hand, a few – generally well-fed contemptuous dullards – will forever remain oblivious until the wall hits them personally..such is life.

From Arse To Elbow

I think it's important to remember that the Tories failed to win a majority in 2010 with their pro-austerity platform, and only secured a majority in 2015 because of the LibDem collapse (and, arguably, a timid Labour). At best, they've fooled some of the people some of the time.

Since 2015, they have relegated austerity as a concern behind Brexit. This obviously wasn't intended to be a cunning distraction, but that is what it has become.

Ralph Musgrave

Two further reasons Tories have got away with it: first, the political left world-wide (i.e. not just in the UK) has been forced to go along with the daft "we must balance the books" story because that is a very plausible story. It appeals to lefties and "righties" alike.

Second there is grotesque incompetence at the top of the economics profession. Indeed that's where the real scandal is. That is, the IMF and OECD were spouting nonsense about the need to balance the books at height of the recession. Plus there is a clutch of economists at Harvard (e.g. Kenneth Rogoff and Carmen Reinhart) who were spouting the same "balance the books" nonsense.

e

@Ralph Musgave: Accusing economists is a cop-out. God forbid we should expect them all to agree, such a thing could close off more than just a few good books. Its precisely because there was/is abundant, persistent, and loud controversy (but truth be told held within places inhospitable to average voters) that we can and should blame our corrupted mass media. Most particularly the BBC.

Luis Enrique

Mike W

I think you are projecting a lot on to me.

I do not think asking not to have explained to me (at length, usually) something I am already very familiar with is a strange attitude.

And when you write "which branch of enquiry provided the intellectual underpinnings to the, 'you do know, don't you, Government is just like big old household, only a fool says otherwise'" in reference to what you call " Neo Lib Econ 101" you are wholly and verifiably wrong.

Here are three differences between government finances and household finances:
1. there is feedback in both directions between expenditure and income
2. the market for government debt differs from the market for household credit
3. governments can finance expenditure by printing money.

you will encounter all three of these ideas in the first year of undergrad econ. You will likely be told that 3. is a bad idea, which you may not agree with.


Diarmid Weir

Luis Enrique

The simple answer is that unless you are up against real resource constraints, no 'rationing' of public provision is justified. Indirect indicators of this in a monetary economy will be rising prices and interest rates. If these are absent and people are dying the verdict should be 'guilty'. http://www.futureeconomics.org/2017/05/bad-targets-for-policy-1-government-debt/

Luis Enrique

at least you were succinct Diarmid, so I shan't grumble.

Mike W

Luis, I am sorry to offend. Perhaps you should say, not so much my 'projection', but YOU did not appreciate my bit of 'theatre' on what you saw as only a matter internal to the economics profession. Fair enough. But the rule thing - my god – the bitch monster -economic rules in the hand of ministers, is the issue Luis. Google ‘functional finance’ or Abba P. Lerner.
But, ‘olive branch’ here. Do you think Wren Lewis above, is correct, Kuhn's, Structure of Scientific Revolutions, 1962-ish, has something to teach us about ‘rules’ and economics today? Better economics as a branch of sociology?
On being 'succinct' I bet my post, minus your quotes about what your rules were, is the shortest 😊 I also meant no offence with the misspelling of our man's name as 'Wrenn', a the now defunct British toy firm. I accidently pressed publish without checking. The rule here Luis will be reply in less than 192 words, even though I don’t know what you have to say on the matter, what the results or outcome of your answer to my olive branch may be. Or you could ignore me.

Luis Enrique

Mike, no offence was taken but I am afraid you have lost me. I don't know what I "saw as only a matter internal to the economics profession" or what my rules are

Blissex

«unless you are up against real resource constraints, no 'rationing' of public provision is justified.»

Is a large trade deficit a clear-cut indication of "resource constraints"?
(when answering please considering carefully the difference between "general glut" and "partial glut").


«If these are absent and people are dying the verdict should be 'guilty'»

What if the people who are dying are in Sudan or Laos because they don't have access to the NHS "free at the point of service", isn't every UK taxpayer then "guilty" of causing their death?
Or is is that the deaths of people in Sudan or Laos don't matter because they look different?

Ralph Musgrave

e,

It is complete nonsense to say that accusing economists is a cop out. The fact is that numerous economists at the top of the profession were advocating austerity during the recent recession.

As for your suggestion that some disagreement among economists is inevitable, that’s almost as daft as saying we can expect disagreement among mathematicians as to whether two plus two makes four.

I.e. any economist who argues for holding back on stimulus during a recession is grotesquely INCOMPETENT.

Jo Park

Still looking for evidence that real public spending per head today is lower than the last complete year before the crash ( 06/07 given that recession started in Nov '07 iirc ).
And when that evidence is not forth coming, could people wailing about government spending being insufficient recognise that it's been plenty sufficient, just spent on the wrong people.

Keith

No almost, totally successful; just like thatcher before them.

Keith

Of course the real issue is not incompetence but one of morality. When is there a real budget constraint? If you are short of nurses and equipment today you have a real constraint today on medical provision. But if you merely have a deficit in trade because you are importing TVs or some luxury goods the state can reduce imports by raising taxes, credit controls, or even tariffs or rationing to increase the supply of medical equipment and train more nurses. Austerity in the UK simply means increasing the consumption of the well off by tax cuts and monetary creation partly financed by cuts to social security and public services and investment. It does not involve any real constraint but an immoral choice.

In contrast the austerity of the Attlee government was actually caused by real import limitations created by the national import surplus and debts created in war time. The way Attlee and his cabinet handled this problem was to cut the consumption of the well off via taxes and rationing, placing the burden as far as possible on to those best able to bear it to loud protests from those people. I would prefer this approach should it be required to that of our recent tory liberal shambles.

Dipper

"Of course the real issue is not incompetence but one of morality. "

and we are back to politics as goodies vs baddies.

Surely morality would oblige us to implement the most efficient health service available, which is a continental-style state insurance service with more extensive private sector involvement?

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