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Next: QE2 - and if that doesn't work it's a currency war

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Paul Mason | 15:00 UK time, Wednesday, 22 September 2010

On both sides of the Atlantic we are now looking at what economists are calling QE2 - a second bout of "quantitative easing" in which the central bank prints money to sustain demand in the economy, which is faltering.

In the UK, the Bank of England's MPC minutes show the majority as minded to have a go at this sooner rather than later; here in the USA (I'm in Atlanta, GA) the Federal Reserve have already spelled out both the possibility and the limitations of a further bout of QE. It's worth revisiting the latter: first, Fed Chairman Bernanke warned, we don't know how to calibrate the effects of the existing QE; second there is a risk that the markets lose condidence in the central bank's ability to exit from QE. Bernanke concluded that further QE might not have much impact because the best time to use it is when everybody in the market is panicking.

The problem with QE as enacted in the UK is that much of the money printed has been taken by the banks and deposited back at the Bank of England. It has not flowed into circulation.

It's worth bearing in mind that when the central banks started to consider QE, nobody knew how to do it. Indeed, many of the economists inside the Bank of England warned their bosses it could not work, according to the accepted theories. On both sides of the Atlantic the bankers took a leap of faith and did it - but the fact they now have to consider doing more means either the policy did not work, or that other policies designed to back it up have failed.

QE purists, those who've studied Keynes in the 1930s and Japan in the early 2000s, always said it should be done as follows: you announce that interest rates will be zero for a fixed period (thereby abandoning inflation targeting); next you announce a target yield for 10 year government bonds (say 2%) - creating market knowledge that you will now intervene continually to achieve that target by printing money; next you take micro-economic powers to force the money through the banking system and into circulation.

Neither the Fed nor the BoE did this - though Bernanke is now considering both lifting the inflation target and announcing a long-term cap on interest rates.

The problem is that some 12% of GDP has been pumped into the economy but we're not sure how much that has translated into demand. If we are now looking at QE2, you would have to ask whether the stated aim - getting the banks to lend instead of hoarding money - could not have been achieved by some more hands on measure.

One option would be to accept the long-term state ownership of RBS and HBOS and to place their loan books in the hands of a state-directed investment commission (this was discussed but rejected under Alistair Darling in favour of a hands off approach to the nationalised banks). In the last Labour and first Coalition budget, both banks were set net lending targets - but this also happened in 2009 and they failed miserably to meet the targets.

Ultimately what policymakers are wrestling with is the fact that the economy is not responding to stimulus, and that's because both the UK and US economies are configured for consumer-driven growth. The Coalition has stated the aim to transform the UK economy so that private investment and exports fuel growth but that's a long-term and uphill task. The US policy debate on this remains at the position of rhetoric: the USA already has a good export and manufacturing base, but it is consumer demand that is ailing.

Both economies have one unstated monetary tool that will now come into focus: devaluation. Mervyn King is said by those who were on the inside to be privately proud of the fact he "talked down the pound" in 2008. The USA is gnashing its teeth about Japan's devaluation efforts and China's currency manipulation. (China's currency policy means the USA cannot devalue against its main trading partner). Meanwhile in Europe it's likely that the net impact of all the austerity measures will be cancelled out by the depreciation of the Euro. (UPDATE: See the FT, five hours after this post, for the basics)

The former boss of Intel, Andy Grove, called in July for a US trade war with China:

"If what I'm suggesting sounds protectionist, so be it. ... If the result is a trade war, treat it like other wars--fight to win."

I've heard this quoted approvingly by left-wing Democrat steel trade union men - and by people in the Teaparty movement. It's provoked outrage among the orthodox pro-globalisation lobby but it was Bernanke after all who educated us that, in the 1930s, it was countries who devalued first that recovered first.

Comments

  • Comment number 1.

    QE2, protectionism, trade wars and currency deflation were all discussed at Davos last year so no surprises there.

    QE2 will be followed by more public sector austerity followed by QE3 etc. (I've already said that we're all turning Japanese).

    There is one of two things that should be done with QE in the UK (and getting the banks to lend isn't one of them) Either Merv should print £1tn and start spending it thick and fast on armaments (this would provide a stimulus for all nations) or my favoured solution of print that trill and spend it quickly on building sufficient nuclear and renewable power stations, enough to make us capable of powering most of europe cheaply.

    As none of those in power have any vision as to what they want the future to look like in the UK then we will get the no growth/slow slow growth, small stimulus/half baked austerity cycle that Japan is mired in.

  • Comment number 2.

    Leave the Chinese alone. It's still very much a poor country by Western standards. China is essentially an assembly plant for the other richer countries.

    What we have is global shift away from the working people to private transnational capital. Capital is incredibly mobile while labour isn't.

    China merely assembles the sophisticated parts and components that are made by companies based in richer countries. However these exports count as being from China. That's why the US trade deficit appears to be going down with other Asian countries while China is on the way up.

    Also China does not hold most of the US debt - that trophy belongs to Japan.

  • Comment number 3.

    yes and its china that started the economic war many years ago. we are obliged to trade against them or see our economies dissolved and our people into jobless poverty by the chinese currency manipulation as they seek to use our floating exchanges to enrich themselves.

    in an economic war factories and lives are destroyed just as if they had been bombed. which is what has happened to us. the uk is going through a blitz that is destroying jobs right through the economy. The trouble is the hayekists in govt believe this is normal 'market forces' and that the market is the holder of all wisdom. which is just fundamentalist ignorance of how it works. If everyone is playing by poker by the rules except for one person then that one person can easily fleece everyone else through their marked cards. its not 'market forces'.

    china is forcing an economic war on us. they have launched a pearl harbour on our economy. the logic is it will either lead to china backing down or a real war.

  • Comment number 4.

    ..orthodox pro-globalisation lobby..

    and who is that? why not unpack that? which vested interests? why do they have 'white hats'?

    globalisation is a con. a jedi mind trick word that sounds impressive but means nothing. like carbon trading is a con as the solution to climate.

  • Comment number 5.

    pro globalisation lobby

    The two most prominent pro-globalization organizations are the World Trade Organization and the World Economic Forum.

    World Economic Forum, started by Klaus Schwab , a private foundation, best know for Davos meetups [ although every year ten regional meetings take place] and the concept of "Davos Man" [by American scholar Samuel Huntington] referring to a global elite whose members view themselves as completely international.

    The WEF is funded by its 1000 member companies, the typical company being a global enterprise with more than five billion dollars in turnover.

    Corporations exercise privileges that human citizens cannot:

    1. moving freely across borders,
    2. extracting desired natural resources, and
    3. utilizing a diversity of human resources.



    They are able to move on after doing permanent damage to the natural capital and biodiversity of a nation, in a manner impossible for that nation's citizens. Which influences their model. So this has been called 'globalisation from above'.

    it is seen as promoting "turbo-capitalism" (Edward Luttwak), "market fundamentalism" (George Soros), "casino capitalism" (Susan Strange), "cancer-stage capitalism" (John McMurtry), and as "McWorld" (Benjamin Barber). ie the hayekist beliefs of the uk government.

    if you are a davos man who has the wealth and influence to see themselves as 'international' ie having no allegiance to any country or people and can move freely around the world without regard for law then they are playing by a set of rules no one else can play by. They are detached from the real world. So what if jobs are trashed in the uk. we make them in china. We still make money.

    globalisation is making money the highest idea of the mind. The WEF motto might be 'imagine there's no country, its easy if you try'. Which is just a hippy dope trip.

  • Comment number 6.

    So if something doesn't work we have to keep doing it until it works? Seems a bit like that sketch of Basil Fawlty beating his car.

    This just looks like another quick fix from the quick fix fixers who got us into this mess in the first place. Perhaps that old joke that there is nothing thicker than a quick fix fixer is more apt than we think.

    All that has happened so far is that the corporate world has hoovered up all the available money from QE1 and put precisely nothing back into the pot. They haven't even had the decency to say thank you. Why should they if there is going to be another shed load of free money on its way from the quick fix fixers?

    Personally, I don't think anybody has a clue what to do. It is a bit like waiting for Godot without buying a theatre seat. Something is due to turn up but we don't know what. Things might be worse or they might be better. We just don't know and neither does anyone else. Does the suspense excite or depress?

    So let's expect nothing but proceed vigorously to restructure the economy away from government and away from the banks, so that all those empty workshops get used and all those empty shops can be open for trade. Even if we just looked busy we might feel better.

    The idea that we can continue with an economy devoted to borrowing money from China so that we can buy their consumer goods is just plain silly. Change it has to come! Let's run forward and embrace it: the only problem is that we don;t know what it looks like.

  • Comment number 7.

    2

    the classic chinese internet warfare team line.

    in what way is a country with 1 trillion surplus poorer than the uk which is 1 trillion in debt. how can their currency be weaker than gbp?

    the illusion of wealth is due to debt. if you took away everything in the uk that is on tick then the uk would look like tibet.

    it is not an assembler but a dissembler.

  • Comment number 8.

    #7 cyclist

    in what way is a country with 1 trillion surplus poorer than the uk which is 1 trillion in debt. how can their currency be weaker than gbp?

    the illusion of wealth is due to debt. if you took away everything in the uk that is on tick then the uk would look like tibet.


    Well if you look at it like that then you could argue that the USA is the poorest nation on earth! Moreover, Britain, since the creation of the Bank of England has, most of the time (regardless of being at war or at peace) been in debt. It has been in debt at far higher ratios of it's GDP then it is at present. In fact one can argue that the British Empire was built on debt.

  • Comment number 9.

    Mason wrote: "the USA already has a good export and manufacturing base, but it is consumer demand that is ailing"

    Nonsense. This was true up until 1985, the last year when China and the USA exported approximately the same value of goods to each other. In 2008, the ratio of China's exports to the USA versus the reverse was 6:1. If you graph the data over time (http://www.census.gov/foreign-trade/balance/c5700.html), the trend is obvious. Take a drive through Detroit, Cleveland, or any other former industrial city and you will not see many operating factories.

    One thing that Mason and the other economic writers fail to understand is that outsourcing changed everything. In the past, the USA would go into a recession, people would run out of products and start buying, inventories would be depleted, factories would be forced to hire more Americans to fill the increased demand, and the recession would end. Now the progression is: the USA goes into a recession, people run out of products and start buying, inventories are depleted, and foreign factories hire more Chinese, Indians, and others to fill the increased demand. Actually, even this is false, because formally employed Americans no longer have the money to buy products, so demand is much less.

  • Comment number 10.

    QE has done nothing - not a thing - to help the UK economy.

    QE1 was just a giant scam to get tax-payers' money to make bankers richer.

    They could not believe they got away with it.

    Now they are going to do it again.

    The banks should have been allowed to go bust. That is how Capitalism works. The World would not have ended, the Government could have stood guarantor of the debts of the broke banks and new businesses - new banks - would have risen up to replace the bankrupt ones.

    I will say it again - that is how Capitalism works. That is how it is supposed to work.

    The damage that Brown and Darling have done to the ordinary majority of the British Public is truly scandalous. They aided the banks in the biggest daylight heist in the history of the country.

    I trust Brown will go down in history as not just one of our worst Primeministers but also as a man who betrayed the people he claimed to represent.

    As for trade wars...

    Grove is half right - the only way out of this mess for both the US and UK is a new Cold War. One this time with China. I think before this decade is out we will have seen that the first bricks, which are now being laid, will have been built into that wall. Isn't that what the Tea Party is partly about? America likes to have a clear enemy and Bin Laden ain't cutting it for them anymore.

    I also think that by 2050 there will be moves for a new economic union - not one between European nations this time but between the EU and the United States & Canada. It will be the only way for Europe and North America to complete economically and militarily with an ever-growing China.

    The crystal ball is getting murky now... I can barely see the lotto numbers... Is that a 7?

  • Comment number 11.

    8

    In fact one can argue that the British Empire was built on debt...

    no. it used fractional reserve banking and basically robbed other countries of their natural resources through military means. BP was know as Anglo-Persian Oil Company. many of the country houses that people idealise these days are symbols of the slave trade. That's what empire are. They exploit other people.

    the usa unlike the uk has massive natural resources. the uk has to trade. the chinese are no different to the somali pirates. who yes are successful in what they do. should we allow them because they are 'poor'? should we allow housebreakers, drug dealers and all other crimes because people are 'poor'? China needs to give up its crimes in copyright. patent, human rights, environmental conditions etc.

    Is it not astonishing that the vast bulk of the carbon trading tax we pay through our energy bills goes to china who builds a new coal power station every week? which is why they argue against abolishing it. China is not a force for good in the world but at the root of many of its ills and imbalances.They unleash economic war on us. what do they expect? we should sit meekly and watch our country become an economic desert and our people beggars?

    basically people forget they are communists and not western liberals and so do have nationalist imperialism mindsets.

  • Comment number 12.

    Jaunty - a weak Renminbi means low wages for the Chinese. We have chosen to "enrich" ourselves with various plastic consumables that are not real assets.

    If the Renminbi got stronger it would make products in the UK more expensive, which would mean a reduction in UK standards of living (as many put an iPhone above many other "essentials"). How many parts in the computer you used were made in China, assembled by workers who would love to have the time to chat online but sadly work all day every day to survive?

    You think people in the UK want to work in a factory putting microchips in place, one after the other? If the Chinese work hard then good luck to them. Nothing other than bottoming out will shake our childish population into action. We have no right to a better life than the Chinese. Every generation has to re-win it.

    ps what jobs? we imported cheap goods (and inflation) from China whilst stoking a housing bubble and spending the unrealized profits on clothes and holidays. That is not a foundation.

    I think that you are only looking at one side of the equation in lamenting a weak Renminbi.

  • Comment number 13.

    Look at the size of the bank bailout.

    40 billion to failed normal banks - not casino banks

    The reason is actually quite simple. The banking regulator, Gordon Brown, didn't regulate. In particular he set the capital requirements too low, and did not monitor systemic (domino) risk at all.

    OK, mistake one. Next, the crash happens. Some banks are up the proverbial, and what happens. They stop lending money, in particular to the government, and they are suffering losses so are not paying taxes. Economy goes south and the taxpayer stops paying too. The government that has been on a binge of spending needs the cash. So what does it do?

    It loans your money to the banks, raises capital requirements, which forces the bank to loan back to the government.

    i.e. QE isn't about the banks. It's all about the government and its desperate need for cash to keep the ponzi going.

    It's the same with Vince and his bash the bankers. 40 Billion for a few banks let to run wild by Gordon Brown. Why are they so keen on bashing the bankers?

    The real reason is the mess in government finances. Something that the BBC repeatedly gets wrong and admits too when complaints are submitted. However, it doesn't broadcast the fact. I've had two complaints upheld about erroneous reporting.

    For example, that government debt is 175 billion. On money box, a program that should know better. It's not the debt, its the deficit.

    Next is that debt = gilt borrowing. That excludes PFI, nuclear decommisioning, the bank bailout (small in comparison), guarantees, and the biggies dwarfing everything else, pensions. State, second pension and civil servants. The real total debt is well over 5,000 billion. Compare that to the bailout.

    ie. Vince and co are desperate to distract people from their incompetence and away from the real disaster of state debts.

    Things to watch out for are.

    1. Other countries are worse off. It's irrelevant. If your bankrupt, what does it matter if your neighbour is too. It doesn't solve your problem.

    2. It's only x% of GDP. As if the government earns any money in the UK. It's all private sector at the end of the day.

    3. Cuts now are bad. They are. However, cuts in the future are bigger cuts that they would be now, because you have to add on interest.

    4. Public sector cuts are bad. No mention of the cuts in your spending on your family if you have to pay for the largess.

    ...

  • Comment number 14.

    @9 I broadly agree with this, and with Tawese57 @10 about letting the banks go bust.

    QE could then have been used to reflate via a National Investment Bank. In the UK in particular, increasing demand without an industrial strategy will not help us, it will just fuel imports and compound our problems.

    Free Trade is a luxury we can no longer afford, because it isn't free. How many get killed in Chinese coal mines every year, providing the energy for our consumer goods. We cannot have free trade with countries where life is cheap and wages and working conditions are poor - unless we become like them.

    My father was born in 1919, his elder brother Freddie in 1912. Freddie went into the blastfurnaces at the age of 12, dying in 1928 at the age of 16 of "galloping consumption". Globalisation means we can't protect wages or working conditions - or improve them in other countries. Time we admitted it and looked for a differnt economic model.

    PS in the news media, Davos is sometomes misspelled "Davros" - very amusing!

    http://www.youtube.com/watch?v=HHfIU799TIo

  • Comment number 15.


    Nobody would have to fight about anything if those whom have unjustifiably gained from the existing global economic system and power base it supports release their strangle hold on maintaining it so a new model based on sustainable technology for everyones basic needs can emerge, with a trade system on top of that based on a re-definition of value.

    In theory democracy should be able to unlock that dynamic, but democracy via leveraged media has become the plaything of a super class of political, economic and media elite. Not a deliberate conspiracy, but a silent one, with the sum total of thier actions as individuals naturally tending towards protecting the status quo via greed ... or our hard wired pre-disposition to try to accumulate in order to protect ourselves from bad times... we are just clever monkeys after all..

    It is all so simple.

    It is simply the age old human cycle of accumulation until the point of sustainability is breached, followed by a period of collapse, chaos and, hopefully, a new system emerges slightly better than the last.

    It would be nice though for once, just once, if we could prove ourselves smart enough as a speciaes and suffciently in touch with ourselves to avoid the 'collapse and chaos' bit of the cycle... especially given our modern technology and the enhanced capacity to do damage to each other.

    I have to say that thus far the signs are not looking too good that humanity has reached a level of maturity consumate with our technology.

    Cup of tea anyone?

  • Comment number 16.

    Paul,

    the problem is that all these economists, just like the generals, are fighting the last war. Not one of them has come up with anything new, the best they can do is try to compare today with the 1930's.
    What happened in the 1930's was a unique series of situations that were only resolved (displaced) by events in the 1940's.

    The reason for the 30's comparison is that that slump was global (the only similarity).


    '...the best time to use it is when everybody in the market is panicking'

    but the markets aren't.

    'QE purists...'

    yes but that structured response only works when the markets are panicking, and they aren't.

    '...some 12% of GDP has been pumped..'

    pump 12% into the economy and see no result means that the real economy has deflated by 12% (it is more like a 17% reduction as it was growing before the downturn)

    'One option...'

    Why not just gift the government deficit to the banks we own, suddenly their loan book is filled with AAA+ loans (which surely is a sign of a healthy bank)

    And then we get to Devaluation. What a wonderful tool, in previous recessions it has allowed governments room to reposition the currency to make exports seem cheap and imports seem expensive and thus stimulate the native economy. This approach can produce results when you are facing your own self-inflicted recession. (political mismanagement/industrial unrest/plain citizen laziness etc) but in a global recession just who are you going to devalue against ?
    (country A devalues against country B who devalues against country C who devalues against country A, unless you are going to have a secret devaluation this will not work)

    Trade Wars, Andy Gove may have been responsible for many amazing things and I liked his statement about equalising the impact of low wages on imports but war (of any kind) is fought by governments for the benefit of government. (the true victims of which are almost exclusively the people on both sides)

    I personally have no gripe with any chinese/other foreign worker who only wishes to provide for his/her family, in fact, given the internet there is no reason why me and this foreignor couldn't work cooperatively and more effectively together.

    Government it seems just gets in the way, but as it turns out, the non-governmental (black) economy hadn't really gone away during the boom of the 90's/00's, it was only resting.
    (all the builders/plumbers/sparks/mechanics I talk to are already moving over to the cash economy, one of the reasons why GDP shrinks and yet everywhere smells of fresh paint)


    Government can either get with the program, announce something so big that it takes the populaces breath away and galvanises the people into coordinated action or it will be sidelined and ordinary people will be galvanised into individual action.

    If the government doesn't take the initiative and come up with something imaginative then people will stop taking notice, authority will be undermined and people will stop funding it and start doing things for themselves.

    Time stands still for no man, this crisis has been running since 2007, just exactly what are we paying those who think that they are in charge to do ? Unless they do something constructive soon then I for one will stop paying. (and I won't be alone)








  • Comment number 17.

    Nick - you have a brain. Please emigrate immediately! I want to sit here and do one of the following on a BBC blog:

    * espouse some kind of crazy socialist debt free obfuscation which has no bottom line

    * blame some "bad bankers" and ignore the fact that the deficit far outweighs the bill from the financial crisis, which was of Brown's making anyhow (and you'd have to be a fool not to see housing was a bubble)

    * blame the Chinese for working too hard and not spending the money they make

    I do not want to:

    * eat less pies
    * buy less clothes
    * go on holiday less
    * work harder
    * retire later
    * educate myself - I must be trained!
    * pay more taxes - but people in the bracket just above me should!

    Please can you or someone else just arrange the above? I am not going to start my own company or steer the situation in any way. Kind regards.

  • Comment number 18.

    The reason that the banks aren't lending all this money thrown at them through QE is that there aren't new investment opportunities out there to make real money in the UK - if there were, they'd lend - and the marginal opportunities have too higher level of risk to them.

    And the reason why profitability is so low is because of hypercompetition from globalisation and rigged markets making it virtually impossible to achieve anything like a decent margin against near slave-labour wages overseas, other than flogging imported goods at narrow margins.

    For the ConDems to blame high street bank managers for not lending is like blaming the gardener for not producing vegetables when there is a drought.

    But V Cable is right to blame pure greed for the asset stripping activities of the City and for failing to invest when there were opportunities to do so - and he's right to seek to end the worst excesses of M&A and provate equity VC.

    Devaluation is probably a self-fulfilling prohpecy for the UK, as the £1 Tn cut in aggregate demand will give us a replay of the Irish experience - 8-10% fall in GDP plus another banking crisis casued by a crash in house prices in 9-18 months time.

    As Eire is finding out, due to the leveraged nature of bank lending when house prices fall by that much the scale of the cost of the bailout to government is likely to be greater than the level of spending cuts and the so-called "savings" achieved in the first place.

    Faced with a UK economy with 5m unemployed, GDP down 10% and increasing government debt, who in their right mind wouldn't sell the £ hard?

    In this scenario we could see the value of our houses fall by est. 40% (OECD assessment), our currency depreciate by 30% and the cost of living rise by 20% due to import price rises.

    QE is mumbojumbo monetarist dogma - it is predicated on Friedman's claim that the money supply is the ONLY factor that causes inflationary or deflationary pressure in an economy.

    We would be better off printing the money and using it to do something about our trade imbalance by investing in import substitution aimed at creating new jobs and cutting the level of unemployment. This would hardwire a reduction in our trade deficit and increase our GDP.

    The darker side of QE is that in the end creating new money debases the existing money value - ask a Zimbabwian where that leads.

    A trade war with China? The current trade imbalance is not sustainable - we cannot go on borrowing to pay for our imports - so either the wheels will come off courtesy of the ConDems' spending cuts, or reason will intervene and some sort of import controls/trade sanctions will be introduced. Either way, the end of cheap imported manufactured goods on sale in the UK seems a very real possibility because we won't be able to afford them - either because our currency has plummeted or because governments have intervened to put a stop to it.

    Unfortunately I don't see the ConDems doing the right thing - they will do the Right thing instead - drive the economy though the floor via spending cuts which then lead to the massive devaluation.

    We need a TRADE POLICY and an INDUSTRIAL POLICY - why on earth do we need to test the monetarist dogma to destruction before we realise this?

    I suspect Cable knows this and his speech today and his semi-detached relationship to the ConDem government is careful positioning for the future, so that as and when the economy nosedives he can jump ship and end the coalition, blame Clegg for being conned into going along with Cameron's cuts agenda on the eve of the election and force the LibDems back towards the broad centre left concnsus to use government to drive the realignment of the economy away from financial services and rebuild our manfacturing base.

    Will he describe Clegg's transformation as going from King Maker to Court Jester, just as he described Brown as becoming Mr Bean?

  • Comment number 19.

    #13 Nick

    there are many things wrong with your arguments but I will start with

    '1. Other countries are worse off. It's irrelevant. If your bankrupt, what does it matter if your neighbour is too. It doesn't solve your problem.'


    If your neighbour is your main/only trading partner then if either goes bankrupt it will impact severely on the other, even if your neighbour is only a trading partner twice/thrice/more removed, my bankruptcy will impact on you, personally (it's an interconnected world).

    The reality is, the hamsters stopped running on the wheel that is the global economy some time in 2007, we are feeling that impact now. The question now is even if we cattle prod the hamsters into running like billy-oh will it be enough to restart the global economy into growth ? (which adds the further question of growth into where ?)

    The whole (global) way of doing things changed in 2007

    Question: If You were in charge, what would you do ? (don't forget that you are time constrained (ie. 5 years) and implementation constrained (popular uprising))

    Because of the paradigm change we don't have to believe that the old way is the best way, in fact events of 2007 and later allow us the freedom to cast off the dead weight of history and plough a new path towards a new future.

    It's all up for grabs.

    (baggsie the one that says 'human happiness over human acquisition')



  • Comment number 20.

    Meanwhile, on this side of the planet... looks like Eire is on the way to going bust.


    From the grudnain:

    Ireland was today forced to pay big premiums as it sold €1.5bn (£1.3bn) of bonds, amid continued fears that the country's finances are spiralling out of control.

    Dublin managed to reach the maximum target for the auction, but analysts warned it might struggle to cope with the high interest rates as the government imposes harsh spending cuts in an effort to get the economy back on a steady footing. The rates were more than 6% on eight-year bonds and just under 5% on four-year bonds.


    http://www.guardian.co.uk/world/2010/sep/21/ireland-bond-selloff-fears-greece-crisis


  • Comment number 21.

    13. At 8:41pm on 22 Sep 2010, Nick wrote:

    "2. It's only x% of GDP. As if the government earns any money in the UK.
    It's all private sector at the end of the day."

    Excellent, point 2 should have been in bold. Post war we had a large public sector and government of the UK referred to something as a consequence


    "17. At 9:30pm on 22 Sep 2010, Ben wrote:
    Nick - you have a brain. Please emigrate immediately!"

    Serious heuristic questions: 1) If the average level of cognitive ability here is falling, where will Nick be going to, and 2) what will happen to those he leaves behind? Even more crucially, 3) why would he want to leave them behind?

    Finally, if most people are unable to grasp what's going on, why do people who think of themselves as intelligent think that pointing out the truth to such people will ever change anything?

    The democratic problem which forced Germany to abandon democracy in the 1930s?

  • Comment number 22.

    #17 Ben

    '* espouse some kind of crazy socialist debt free obfuscation which has no bottom line'

    Bottom line, that is accountancy talk, tell me again who was auditing the Madoff books, the AIG books, the Lehman books, who was auditing Nick Leeson when he was gambling on behalf of Barings...

    The books always balance. (winners/losers)

    '* blame some "bad bankers" and ignore the fact that the deficit far outweighs the bill from the financial crisis, which was of Brown's making anyhow (and you'd have to be a fool not to see housing was a bubble)'

    If that packet of dried tomato soup didn't have the warning 'Made in a factory that processes Nuts' and you die from anaphylactic shock, should you blame
    a. the manufacture for not telling you
    b. the regulator for not implementing/enforcing the regulations
    c. you for not knowing that a tomato soup manufacturer also make penut based products under a different trade name ?

    Banks realised that there was money to be made in an elaborate pass the parcel game, what they (as a corporate) did not realise was that their corporate buyers were also buying into the parcel game that their investment whizzos were creating.

    All of the mortgages in all of the UK do no add up to the level of debts that the banks faced (otherwise we could have called it quits) Not only does everybody have to pay their overextended mortgages back, they also have to pay back the debts on the parcels (funnily enough, if you add up all of the renumeration of the bankers/traders and their bonuses since 2005 it comes out to a spookily similar amount that the taxpayer is on the hook for) How do you account for that

    * blame the Chinese for working too hard and not spending the money they make

    The chinese government is exploiting the chinese workers as slave labour, the UK government could be accused of the same thing. UK workers are not entirely happy with this.

    * eat less pies

    I'm a northerner in exile, there are insufficient pies in the world as we know it (I dream of butter pies)

    *blah
    *blah
    *blah
    *work harder

    Not a problem, I and many like me have no objection to hard work, I'm not so keen on what seems like make work and I don't see why I should work harder (I already do a fair days work) only to enrich someone who appears to have plenty.
    (the worst thing about enriching someone who already has plenty is that they will then offshore my job to China, which means that my extra effort results in my redundancy)


    * educate myself - I must be trained!

    Just re-run all those old schools progs and the OU degree courses from the 70's/80's on a spare digital channel and I'll educate myself.

    Capitalism/Communism is the same thing on an individual level and has the same goals at a personal level, something went gone wrong when we upscaled the village market scenario to the global perspective.

    (Accountants are not perceived to be necessary until we move to the inter-village market scenario)




  • Comment number 23.

    #20 Tawse57

    Iceland went bust a while ago but as far as I can tell the Icelandics are still flush with fish and their lights are still on. The IMF would rather you didn't look upon the Icelandics as actually a resource self-sufficient people, only as debtor scum like benefit claiments

    It's a con.

    A Great Big Con.

    Bust or not, people still work, stuff gets made and rich people make/lose a fortune.

    It doesn't have to be this way, just cus' it was the way in the past.

    Think Different !.

    Think!

    The biggest failure is in people not realising that the government will/cannot help you now, you are on your own...scary at first and yet liberating when you think about it.



  • Comment number 24.

    @18 Dear Richard,

    I agree with all your sentiments - just one comment re this: "The darker side of QE is that in the end creating new money debases the existing money value - ask a Zimbabwian where that leads.

    We aren't in the Zimbabwe situation - yet. QE is deemed to be necessary because the reduction of purchasing power due to the credit crunch has left the economy running under-capacity. Credit, practically indistinguishable from cash, has vanished into thin air. Hyperinflation of Zimbabwean or post WWI German proportions occurs when the productive capacity of an economy has been wrecked, and no amount of money can induce it to provide for the basic needs of the population.

    It's true that the victory of finance and the lack of an industrial strategy have damaged Britain's productive capacity, but we are nowhere near rock-bottom - for now anyway.

  • Comment number 25.

    Hi BobRocket,

    agree the books should always balance, without fiddling. Modern accountancy is insane.

    Err - not sure about how the soup analogy maps onto the banking one.

    The mortgage debt in this country is massive. People in the UK benefited from house price rises too. It's not a one-way street, though as you rightly say in the end it is a zero-sum game. Northern Rock debts were less than the total mortgages they issued, for example. Otherwise we would be saying that every single mortgage they put out was against an asset that turned out to be worth nothing plus the running costs / interest / salaries. So that is one counter-example. I'd also be curious as to how you figure banking salaries/bonuses since 2005 in the UK is £130bn. This might be true worldwide but in the UK?

    I agree the Chinese workers are getting a raw deal. I was objecting to the other poster labelling the entire nation as crooks. 99.8% are just working like mad and good people. They have no choice. In the UK many shop for the cheapest clothes, wherever they came from, even if they can afford more. That is perpetuating the low wages in China. We are driving this. Just as the tabloids would stop writing garbage overnight if people stopped buying it.

    I too am a northerner, but not that keen on pies, though I do like them a bit.

    As for OU - totally agree. So why can't we get ourselves out of this? Why do we all sit there saying we can't get a good job? Have you ever interviewed? I have - the quality of many candidates is low for knowledge jobs. Once you interview you realise that you are praying for the next person through the door not to be below par. Employers want to hire hard working, bright, educated, British workers. Witness accountancy firms worrying about the non-EU migrant worker cap.

    ps I dare you to go and say that in Iceland. Those guys are suffering, relative to where they might have been. People there are very angry at what their government allowed to happen and they would be very angry at you saying they still had fish.

  • Comment number 26.

    tabbernabble01 -

    "1) If the average level of cognitive ability here is falling, where will Nick be going to, and 2) what will happen to those he leaves behind? Even more crucially, 3) why would he want to leave them behind?"

    I'll answer for me, not Nick, as that wouldn't be fair.

    1. Maybe abroad to a country where my young son won't have to work until he dies paying off this generation's debt

    2. I'll take my immediate family

    3. Because I don't want to work myself into an early grave trying to afford a crappy house that is 6x my wages, only to retire at 85 with no state pension having spent all my life paying large taxes to cover the state pension now.

    "Finally, if most people are unable to grasp what's going on, why do people who think of themselves as intelligent think that pointing out the truth to such people will ever change anything?"

    I think this is called education? That's a really poor question. Imagine the implications of nobody trying to help anyone learn. Britain is all about keeping your head down when you see problems, and that is itself one of our biggest problems.

    Here is a hueristic set of questions for you. Imagine it's 2000, and you are a baby boomer. I've tried to answer for them, as I imagine they saw it:

    Q1. Life expectancy is increasing. If we keep awarding ourselves final salary pensions who will pay for this?
    A1: who cares - I'll be alright

    Q2. Hmm. House prices keep going up way beyond wages. I wonder what will happen when first time buyers can no longer get on the ladder?
    A2: hey - I'm benefiting so let's just ignore that problem and hope it goes away. I'm gonna buy a bigger tv!

    Q3: I've got to vote in an election soon. The government seem to be promising everyone the earth. It doesn't seem sustainable but sounds nice. What should I do?
    A3: vote for the man who says you can have your cake and eat it. It'll be fine.

    -----

    Even if I wanted to I feel our generation cannot tip the coming demographic imbalance. We should have been shoring ourselves up for the number of old people we have coming, instead of painting the roof when it's sunny they painted the town red.

  • Comment number 27.

    Let's just recap on the big picture:

    From about the 1970s Western Industrialisation had no other way to turn but to seek lower (input) factor costs through reduced wages (i.e. lower cost of / standard of living = lower total personal consumption of energy to sustain labour reproduction). No new major and more efficient energy input was found, and indeed oil (the powerhouse of the global economy) was starting to decline in terms of net energy (energy extracted for energy invested).

    The Western myth is that the problems in the 1970s were caused because we didn't implement a sufficiently free market economy. Therefore we chose the path of rapid financialisation of the economy and a relentless focus on a service sector economy, believeing this to be the successor to Industrialisation, as it was once a successor to Agriculture (see Peter Schiff on why the service sector is a myth: http://www.youtube.com/watch?v=XTR7I_bRHsY). Indeed, we deluded ourselves into thinking that we were riding the wave of a technological revolution that transformed productivity. Regrettably, this is a myth too, as modern technology is the ultimate stealth welfare state, and opiate of the masses (see Skinner Boxed: http://www.youtube.com/watch?v=nka-_Mhp7f0&feature=player_embedded).

    China cottoned on to this in the 1970s / 1980s. They have exploited our naiveity and narcissism. Unless the masses in the West wake up to this, it will not end until China has taken all it needed from us to create a broadly self-sufficient Asian empire of its own. Currency and trade wars will signal the beginning of this end game. Most of us will have just slept through it all until it's too late.

  • Comment number 28.

    Many capitalists know the crisis is not over.
    They know they need to keep pumping up demand.
    But few understand why.
    They don't understand the 'accumulation problem'.

    Harvey, has a good collection of quotes from Marx in Chapter 3 of his book, Limits to Capital.

    Marx alluded to the 'accumulation problem':

    “the ultimate reason for all real crises always remains the poverty & restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit” (Capital, Vol. 3, p.484)

    “[Purchase & sale] fall apart & can become independent of each other. At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money,…is greater than the demand for all particular commodities…” (Theories of Surplus Value, pt2, p.504)

    Say’s law is invalid, as Keynes recognised.

    But Marx never had time to get around to explaining the ‘accumulation problem’ - in otherwords, where does the aggregative effective demand come from to realise the expanding value through exchange?

    Rosa Luxemburg took this up.

    The circuit of capital is: money capital – purchase of labour power & means of production – production of commodities – commodities sold in the market – money capital greater than original outlay (if there is a profit).

    But this valorisation of capital requires consumers.

    Workers just receive their wage; how can they be the source of the additional consumption? (sure we have debt-fuelled consumption, but this is not a long-run solution, as is plainly evident today)

    The demand exercised by the working class can never be an ‘adequate demand’ in relation to sustained capital accumulation, because the ‘labourers can never buy more than a part of the value of the social product equal to…the value of the advanced variable capital’ (Capital, vol.2, p.348)

    As for capitalists, they generate an effective demand for products as buyers of raw materials, partially finished products, etc. The total value of constant capital purchased furnishes the total demand for the output of industries producing these commodities. As with variable capital, this effective demand for constant capital originates with the capitalists. The expansion of production requires increasing outlays on constant capital & on expansion of effective demand.

    The total aggregative demand at any one point in time is C (constant capital) + V (variable capital), whereas the value of the total output is C+V+S (surplus value).
    Where does the demand for S, the surplus value produced but not yet realised through exchange, come from?

    Consider the consumption of luxuries on the part of the bourgeoisie.
    “Paradoxical as it may appear at first sight, it is the capitalist class itself that throws the money into circulation which serves for the realisation of the surplus value incorporated in the commodities. But, nota bene, it does not throw it into circulation as advanced money, hence not as capital. It spends it as a means of purchase for its individual consumption. (Capital, vol.2, p.334)

    This indicates to us immediately that one of the necessary conditions for sustained accumulation is that ‘the consumption of the entire capitalist class & its retainers keeps pace with that of the working class’ & that the capitalists must spend a portion of their surplus value as revenues for the purchase of consumption goods (Capital, vol.2, p.332).
    For this to happen requires either ‘a sufficient prodigality of the capitalist class’ (p.410) or a disaggregation of the capitalist class into capitalists who save & ‘consuming classes’ who ‘not only constitute a gigantic outlet for the products thrown on the market, but who do not throw any commodities on the market’ (Theories of Surplus Value, pt.3, pp.50-2).

    Individual capitalists generally have the capacity to survive quite well & live off their wealth while waiting for surplus value to return to them. From this standpoint it does indeed seem as if capitalists throw money into circulation to acquire consumer goods that will, at the end of the production period, be paid for out of the production of surplus value. But there are clear limits to this as a general social process. We have to consider where, exactly, these financial resources come from in the first place if not out of surplus value? Which brings us to the brink of a tautology: the financial resources to realise surplus value come out of the production of surplus value itself.

    “It is in the nature of capitalist production to produce without regard to the limits of the market…Since market & production are two independent factors the expansion of one does not correspond with the expansion of the other” (Theories of Surplus Value, pt.2, pp.522-5)

    A potential way out of this difficulty is to expand commercial relations with non- or pre-capitalist societies & sectors. This was to be Luxemburg’s solution to the problem of effective demand, & it led her to establish a firm connection between the accumulation of capital & the geographical expansion of capitalism through colonial & imperialist policies.

    The 'accumulation problem' cannot be resolved by an expansion of the money supply (QE), this only hides & postpones the crisis (as we are about to see).

  • Comment number 29.

    Many capitalists know the crisis is not over.
    They know they need to keep pumping up demand.
    But few understand why.
    They don't understand the 'accumulation problem'.

  • Comment number 30.

    24.

    Yes - we're nowhere near rock bottom, but I can see the neocons running out of policy options so they could decide to keep pressing the QE button over and over again - to a large extent monetary policy in the US has been to print money to pay for their deficits - but in the end confidence in the $ will ebb and once trade stops being priced in dollars and sovereign wealth funds stop seeing the dollar as the reserve currency, they could be a domino effect and a steep fall in the $ - its already fallen a lot recently and the mood music on commodity pricing and reserve funds is heading that way.

    The reason credit has vanished is that central banks have effectively reduced real interest rates to below zero, but the risk of lending and the dreadful state of banks' balance sheets means that it makes no sense to increase loan exposure to markets already out of their depth from existing borrowing, so banks are milking their good customers even harder - look at the spread above base rates on mortgages at the moment.

    Attempting to simulate the economy by pumping liquidity into this situation will not work - neither will increasing public borrowing and spending, as this just ramps up more debt and debt costs. Indeed it seems to be increasing private debt at an alarming rate, as those that can finance bigger borrowing are being driven into it to maintain their lifestyles, e.g. student debt. The UK cuts programme will probably simply switch the debt from government to personal debt...

    The only way left to stimulate the UK economy is to turn off the import tap whilst keeping domestic demand going, so that manufacturers and retailers are forced to source product from within the UK creating jobs, reducing welfare costs and increasing tax revenues.

    This will export our unemployment elsewhere to the countries that have taken jobs away from the UK in the past and this process will happen one way or another - either through market forces by devaluing our currency so that imports go up in price anyway, or through concious intervention.

    However as the Chinese currency is being held down, the West faces a critical dilemma - trade war or economic meltdown?

    As we have seen in Eire, the impending second banking crisis driven by the collapse in house prices there is likely to happen here too, as the cuts programme about to be announced mirrors what the Irish did last year.

    The idea that the taxpayer in the UK is going to bail out the UK banks again is politically - and probably economically - impossible. Therefore the ConDems will be faced with footing the bill for the deposit protection scheme, but will have to let some banks go under, but because of the interconnected nature of banking, the risk is that the whole system folds.

    There will only be one alternative left - the nationalisation of the entire banking system to prevent total meltdown. In this scenario an enormous amount of debt would be written off and the run on the pound will devalue our foreign debt as well, so ironically the market will, in the end, sort it all out by destroying the value of over issued and over borrowed currencies, but a huge cost to us all. Bye bye pension, house value, jobs, etc.

    We would then be left with a huge public sector, no international confidence in our economy and we would be forced to rebuild our manufacturing industries because that would be the only option left - and as the venture capital industry would not exist and many UK companies would have been severely damaged during the financial meltdown, the Government would have to undertake the job of recreating our industrial base.

    Led by David Cameron & Nick Clegg?

    But by then we will all be well and trully "liberated" from everything we had come to rely on and the brutal reality will have dawned - make common cause, look after your own society and accept that free markets are anarchic and that those that argue for free market forces to determine our futures are offering us a deeply flawed, dogmatic and irresponsible view of the world. We need to protect our interests in the world - the "free" market won't do it for us.

    It is still possible that there won't be a majority to Gorgeous George's "Eire II" public spending cuts plan - it's possible that the City and the Tory Right will see what is going to happen in terms of the collapse in confidence and the house price meltdown and pull the plug on Osborne at the last minute. All it would take is the risk of a few backbench absentions and the left of the LibDems to be willing to vote against to force Osborne to water down his cuts plan.

    It's also possible that Obama and the EU finally decide to act on Chinese exports and currency manipulation and begin the process of turning off the import taps in the West.

    If the UK then embarked on an imaginative programme of building our industry and import substitution, we could keep our balance on the knife edge long enough to buy ourselves some breathing space, combined with targeted public spending on infrastructure projects to pump prime the construction industry.

    Now who the hell would have thought of this approach?

    Darling, is that you?



  • Comment number 31.

    28. At 09:21am on 23 Sep 2010, duvinrouge

    A simple (over simple?) example of this at work is my current pet hate of supermarket self checkouts.
    What an affront in a time of low employment. If the whole supply chain is based on less and less employment then who will the customers be?

    This morning I walked out of a supermarket without purchasing anything because there were no staffed checkouts. This was the first time I have had to do this. Perhaps we should have a fairtrade scheme for shop staffing!

  • Comment number 32.

    QE does not 'put money back into the pockets' of the general population and cutting back on public sector spending is the worst thing to be done in present circumstances particularly capital spending which mainly goes to the private economy. The government (central and local) needs to create jobs and fund them through a wealth tax.

  • Comment number 33.

    Public sector deficit hawks and doves beware! Steve Keen sees it quite differently:

    "The aggregate level of private debt now towers over the economy, putting into sharp relief the obsession that politicians of all persuasions have had with the public debt. Rather like Nero fiddling as Rome burnt, politicians have focused on the lesser problem while the major one grew out of control. Now they are obsessing about a rise in the public debt, when in a very large measure that is occurring in response to the private sector's deleveraging."

    http://www.debtdeflation.com/blogs/2010/09/20/deleveraging-with-a-twist/

    None of the policy proposals from the major UK parties even dares to recognise this issue, let alone address it.

    Repeat after me: We are a nation of debtaholics who thinks that living standards and wealth can grow in perpetuity.

  • Comment number 34.

    free market? )**_+&^%$£ equals poverty on a grand scale

  • Comment number 35.

    Hi Paul, enjoyed the post as ever. Where is it being suggested that Bernanke is thinking of abandoning inflation targeting. You then use the phrase "lifting" the inflation target. Which one are you talking about? Ben Bernanke in his Jackson Hole speech poured scorn on these suggestions ( at least where it could lead to price instability). Such behaviour could increase financial risk premia and make everything worse, in a world where no-one could make long term plans or saving arrangements.

    As to competitive devaluation, why would consumption-orientated-deleveraging western democracies, undertaking a long term rebalancing where commodities prices are escalating, welcome the inflation from more expensive imports? If the dollar reserve is aggressively debased, what could that do to international trade? Alliances would have to be formed between central banks to orchestrate a targeted outcome. Which stuffy central bankers are going to put their ---s on the line doing that?

    As China is one of the USA's largest creditors, I would be interested to know how China would react if they found their dollar assets debased aggresivlely. Following from that, how would the US deficit be funded other than through large tax increases.

    Just a personal view but I think these latest news feeds are riding on the crest of an unrealistic proposition and analogies with the 30s are being overdone. Yesterday's world is exactly that.

  • Comment number 36.

    "As for OU - totally agree. So why can't we get ourselves out of this?
    Why do we all sit there saying we can't get a good job? Have you ever interviewed? I have - the quality of many candidates is low for knowledge jobs. Once you interview you realise that you are praying for the next person through the door not to be below par."

    The drivers have been made clear, many times, and with lots of supporting evidence. For some reason, this is either just dismissed or doesn't sink in. Whatever words are used to describe this blind-spot, the explanation has been provided, The problem is, I suggest, that most people can not grasp it because it's so at odds with their core assumptions. To grasp it, much else that they hold dear must change too. That's what happens when core values/assumptions/premises are falsified.

    See if Debtjuggler is still posting.


    26. At 08:55am on 23 Sep 2010, Ben wrote:

    "Imagine the implications of nobody trying to help anyone learn. "

    Yes. I can imagine that. The problem is that most people don't understand the nature and limits of 'learning', which is rather odd, as there's a science of this, and it's very closely related to economics as you'll see if you follow the advice given in the last post (I'm counting on the remark that you 'have a brain').

    See education and equality, how has this changed Liberal-Democracies'
    demographics over the past five generations and especially the last one or two (60 years)?.

    PS. The baby boom was a baby blip.


    28. At 09:21am on 23 Sep 2010, duvinrouge

    Are you familiar with the logic of the Null Hypothesis in statistical hypothesis testing? It requires one to understand something basic about observed vs expected observations in samples and populations.

    I have a request: Look up economists over the past century or so holding the Null Hypothesis in mind. When one finds significant departures from expected frequencies, one should be prompted to account for these departures from the expected. Failure to do so is naive/irrational which is anathema to reason.

    Doing this is, for most people, much harder than it might initially seem. Secondly, an argument is quite a rigorous procedure. It is computational.

    34. At 11:34am on 23 Sep 2010, stevie wrote:
    free market? )**_+&^%$£ equals poverty on a grand scale"

    The fatal flaw (or subterfuge if one is a cynic) in Libertarian anarchism as I se it, is that it has a core assumption that inequality is correctable through environmental (market) forces. This is usually translated into education and distribution of wealth according to principles of social justice. The problem, however, is that diversity is not plastic in this short-term sense, as it is biological, and all but immutable (although entire populations can slowly change biologically as Mao kept reminding people). That's why 'free market' is just a euphemism for Natural Selection (Adam Smith was unaware of this force), and sadly, across our Liberal-Democracies (from here to Japan), it has just amounted to economic predation upon the weak. This, I suggest, is why the so-called wealth gap has opened up so much over the past four decades, whilst at the same time, ability gaps have not been closed, despite much effort.

    This is not making the case for 1920s style communism as in the post revolutionary USSR (which in my view was just transitional anarchism which replaced the status quo with another self-interested group). What came later at the end of the 20s and in the 1930s was much more like what Britain tried to establish after WWII, I suggest, and both were later brought down by anarchists (free-market advocates). To make any form of socialism work (and by that I mean the British not Marxist conception of socialism) one needs to put far more effort/work into sustaining a public sector, and to do that requires sound biological population management.

    Only China has gone any way towards effectively achieving that, and so, I suggest, we should be looking to China for a model. Sooner or later, I suspect, that will happen.

    An idea for a Paul Mason series?

  • Comment number 37.

    Can you imagine how the economy would now be doing if that 200 billion had gone into new high speed rail links, nuclear power stations, wind farms, public transportation upgrade and modernisation, investment in high tech businesses, green industries, etc, etc, across the UK.

    At the same time the Public Sector could have been slashed as the above created real jobs in the Private Sector.

    The UK could now be at the start of a massive growth period but we are currently slipping and failing whilst inflation rises... and the BOE insists on keeping IRs at damaging lows in a vain attempt to justify handing the QE to the banks.

    I have come to conclusion that they did not get it wrong though - all the bankers have benefitted financially from QE. The British people have just not woken up yet to the fact that collectively we have been taken for mugs and robbed.

    It is going to take a housing crash and the switch off of the reality TV drug to wake up the nation.

  • Comment number 38.

    33. At 10:48am on 23 Sep 2010, Hawkeye_Pierce wrote: (quoting Keen)

    "The aggregate level of private debt now towers over the economy, putting into sharp relief the obsession that politicians of all persuasions have had with the public debt."

    Think about his for a moment. The USA and UK have been Libertarian for decades. They have been eroding their public sector because that is what the libertarian agenda has been since at least 1979. Most of the economy is therefore private sector. Most of the debt will therefore be in the private sector. Our elected politicians are all Libertarians.

    They are still therefore obligated to erode what little is left of the public sector. That is all that is going on. They just need to take people along with it. They have people pulling their rugs from under their own feet and thinking that this is a good thing. That's politics.
    Sadly.

  • Comment number 39.

    What little is left of the Public Sector? You're kidding - right?

    In my part of the World - Wales - about 70% of GDP is based on the Public Sector. Scotland is similar and the North of England is not far behind.

    Dependent upon which BBC report you read this week anything from one third to two thirds of workers in these areas work in the Public Sector.

    In places like Swansea and Merthyr it is supposedly two-thirds of the workforce with often the Public Sector employees looking down on Private Sector ones with almost an "Ahhh, so you weren't good enough to get a Public Sector job" mentality.

    All figures show that the numbers of jobs in the UK Public Sector have grown alarmingly in the past 13 years.

  • Comment number 40.

    #38 tabblenabble01 wrote:

    "Think about his for a moment. The USA and UK have been Libertarian for decades. They have been eroding their public sector because that is what the libertarian agenda has been since at least 1979. Most of the economy is therefore private sector. Most of the debt will therefore be in the private sector. Our elected politicians are all Libertarians.

    They are still therefore obligated to erode what little is left of the public sector."

    #39 tawse57 wrote:

    "What little is left of the Public Sector? You're kidding - right?"

    ------------------------------------------

    ....and as if to prove tn01's point (if any more were ever needed!)

    Suffolk County Council to outsource most services
    http://www.bbc.co.uk/news/uk-11398678

    A county council has agreed to slash its £1.1bn budget by 30% by outsourcing almost all its services.
    The decision by Suffolk County Council could be seen as model for other councils to follow.

    AND

    Five departments reach agreement on spending cuts
    http://www.bbc.co.uk/news/uk-politics-11400220

    Five Whitehall departments have reached spending agreements with the Treasury, ahead of next month's spending review.

    As a result ministers Eric Pickles and Caroline Spelman have joined the "star chamber", which rules on departments which cannot agree cuts.
    Most government departments have been told to agree 25% cuts by next month.

  • Comment number 41.

    "39. At 4:37pm on 23 Sep 2010, tawse57 wrote:
    What little is left of the Public Sector? You're kidding - right?

    In my part of the World - Wales - about 70% of GDP is based on the Public Sector. Scotland is similar and the North of England is not far behind."

    P stands for product. What are they producing? Most of the Public Sector consumes, it does not produce. 80% of the economy overall is Service Sector is it not? It make employ people as an alternative to benefits, but most of the Public Sector has been undermined via poor recruitment in order to facilitate privatisation, it's just tat most employees don't see that.

  • Comment number 42.

    Paul,

    Your quote:

    'The problem is that some 12% of GDP has been pumped into the economy but we're not sure how much that has translated into demand. If we are now looking at QE2, you would have to ask whether the stated aim - getting the banks to lend instead of hoarding money - could not have been achieved by some more hands on measure.'

    I think that is an assumption by the BoE? and has not been tracked as is probably impossible to confirm.

    I also think that a good proportion of that 12% has left the UK money supply through the various banks' internal systems and money shufflings and is now overseas?

    A lot of assumptions about this are stated in the media as fact and I think are deliberataly misrepresented to put a political spin on the govt's actions (I'm not having a go at you BTW, I'm just pointing out how hazy the whole QE experiment really is.

  • Comment number 43.

    #41. At 7:58pm on 23 Sep 2010, tabblenabble01: -

    You talked inititally about, your words, what little is left of the Public Sector. Now you have changed tact and are going on about 'P' meaning Product and the Public Sector.

    Sorry, but you are talking gibberish.

    Make a case, a debate or an arguement but don't come out with ludicrous nonsense about there being little left of the Public Sector after it has ballooned beyond reason over 13 years.

    Yes, vast swathes of the Public Sector - all those hundreds of thousands of pen-pushers making rules, regulations and red tape that just hinder the rest of us are pointless. They could all be fired tomorrow and most of us would not even realise they were gone.

    Sadly, most of them have no comprehension that they actually generate nothing for the UK economy and, in fact, by all the red tape they create they are actually a hinderance and a consumer of time and money for those in the Private Sector.

    In this you are saying nothing that most of us who blog here already don't know.

    But if you want to talk about 'P' for Product then there are plenty of Public Sector workers who do tremendous good.

    The Dcotors who look after us, the Dentists who take away our pain, the nice Fire-fighters who rescue cats from trees and put our fires out... the men who come and take our refuse away... even 'good' Nurses, the ones who are not too posh to wipe, do a tremendous good. They, and many others, enable us to live in a Society.

    Society is good isn't it?

  • Comment number 44.

    I am struggling to care about QE2 unless they just give each UK resident £3000 each in cash instead of giving 200 billion to the banks. recession over...party time...right?

    A couple of late posts from some angry yanks on pauls last post are much more interesting.

  • Comment number 45.

    "Sorry, but you are talking gibberish.

    Make a case, a debate or an arguement but don't come out with ludicrous nonsense about there being little left of the Public Sector after it has ballooned beyond reason over 13 years."

    This is no debate, and you clearly have no understanding of what the term argument refers to.

    Let me explain a few things to you. One, just because people write on these pages does not mean they are just airing private opinions. Two, what I am telling you is what has been a strategy to erode the Public Sector for over 30 years. Three, you need to grasp that the UK Public Sector consumes money, that is why it is being cut.
    Unlike in China (and probably still in Russia) the means of production are no longer public ownership.

    Finally, if I am kind enough to explain things to you, make the effort to show some respect rather than telling me what you have trouble with (i.e your remarks about gibberish just refers to your poor grasp of what's being explained).

    Please don't post any more populist nonsense for me to correct as I'm telling you what is really going on..

  • Comment number 46.

    #45. At 10:01pm on 23 Sep 2010, tabblenabble01 wrote:

    Are you just an incredibly arrogant person or are you so used to rudely talking down to people that you have forgotten common courtesy?

    Have a look at the language you have used - what a condescending so and so.

    'Let me explain a few things to you', 'This is no debate, 'you clearly have no understanding of what the term argument refers to', 'what I am telling you is', 'Finally, if I am kind enough to explain things to you', - who on earth uses language like that talking to another individual?

    You come across, in my personal opinion, as either a complete narcissist or just a complete jerk. This is a blog for open discussion and not for someone to try and hijack and abuse other bloggers.

    In future I will not even bother to read any posts with your handle on them.

  • Comment number 47.

    #44 and #45

    Now now children!!!!

  • Comment number 48.

    What tabblenabble01 refers to when saying".. little left of the public sector" I take to mean IN THE USA at the local level - not the UK.

    This is an important point - at State and county levels, public provision has been privatised or cut - or both - and may local authorities are effectively broke - California has taken extreme measures such as selling off all their vehicles to pay the salary bill one month. Paul's there at the moment - maybe he could go to somewhere called Suffolk in the USA and compare it to the one in the UK?

    The logic of the post is quite correct - the USA shows us where the current policy on local government will take us - Suffolk is just the start - the libertarians want to dismantle all state structures, transfer the spending to private contractors, then chip away at the whole idea of state regulation and service provision - to be replaced by private charity on the one hand, and state troopers on the other.

    In the USA, church groups now provide massive amounts of welfare and the issue of absolute poverty is addressed through food stamps.

    Cameron's "Big Society" underpins the approach to this in the UK - get voluntary organisations to take on the provision of services, whilst ripping out the cost base and overhead involved in providing them through public provision. This is dressed up as "liberating communities from government control", but as has happened in the USA, it will end up liberating those in need from support, whilst freeing those with money to shape and control their local communities as they see fit.

    Of course there are downsides to this approach - but a good place to invest in will be wall builders and security contractors because once the affluent have demolished local services they will need protection from the rest of the population behind their perimeter fences.

    Other than defence, the story of the public sector in the USA is one of years of spending cuts, privatisation and reductions in services, but this has not solved the USA's economic problems, which if anything have intensified. Obama is busy pumping money into public works to reflate, but this is all about capital projects, not the day-to-day services that have been cut.

    Neither have Bush's tax cuts for the rich restored the economy - the problem lies at the core of laissez faire capitalism where there is a deep and profound contradiction which no amount of tinkering with public spending and public services will change.

    By electing Obama there was a hope that he could somehow square the circle and make the system work - he can't - the Tea Party's entrism to the GOP shows us where the libertarian Right plans to take the US - they will harden the battlelines between the haves and the have-nots.

    I predict a riot!

  • Comment number 49.

    48. At 09:21am on 24 Sep 2010, richard bunning wrote:
    .....a good place to invest in will be wall builders and security contractors because once the affluent have demolished local services they will need protection from the rest of the population behind their perimeter fences.
    ----------------------------------------------

    It will all end up as this:
    http://uk.imdb.com/title/tt0070948/

  • Comment number 50.

    "who on earth uses language like that talking to another individual?"

    Answer: Someone who really knows what is going on and who is clearly putting someone else in their place when they need to be.

    What you have written is completely at odds with the facts of the matter, and you need to grasp that.

    There is no debate on many of these matters, just an opportunity for those with some knowledge to inform others, as in science course at universities, and as there, we are not all equals. The presumption that we are is an ignorant (albeit often unwittingly so) and seditious sign of our narcissistic times.

    You are wrong. Learn to recognise this and learn from it when it's pointed out, learn to take admonishment, and learn not to make adolescent assertions which are obviously un-testable. "In future I will not even bother to read any posts with your handle on them." - indeed
    ;-)

  • Comment number 51.

    "48. At 09:21am on 24 Sep 2010, richard bunning wrote:
    What tabblenabble01 refers to when saying".. little left of the public sector" I take to mean IN THE USA at the local level - not the UK."

    It's been the same in the UK though. Reagan was doing the same thing in the USA as Thatcher was here. Many of us remember the transition all too well (BT, BA, BG, and a stream of other public sector companies paid for and owned by the people/state), and some of us have seen what happened to the Civil Service in the UK as it was hollowed out through recruitment and promotion of those who were 'unfit for purpose'.

    This is just a description of history over the past 30 years and that is not debatable. As it's also just a description of policy those who 'disagree' are either subversives, ignorant (or very young). Many of those in the hollowed out public sector (think of Probation in the last decade or so) had very little idea about what was being done.

    We now have to endure a generation of people who think (many have been taught to think this way) that what they don't understand or believe, is not going on. Now that's classic metaphysical solipsism or self-centredness. That's narcissism. They don't know the difference between what methodological solipsism was as suggested by Fodor in 1980, or the Veil of Ignorance suggested by Rawls a decade earlier (both draw on Husserl here I suggest).

    Rebuking the ignorant for arrogance and ignorance is not offensive, in fact, it's a benevolent social service, but it comes as no surprise to me that to many it's unwelcome these days, as that's precisely the cognitive modus operandi which the anarchistic cuts strategy exploits - which is my overall point if one looks closely enough - see also Debtjuggler's posts.

    I think the rest of your post is on the right track although I suspect there won't be riots, as the population has been softened up over the last 30 years. Technically, the Libertarian/anarchistic cuts are ego-syntonic. The people engineering all this were not stupid, that was just the foot-soldiers. :-(

  • Comment number 52.

    49. At 09:51am on 24 Sep 2010, Kit Green wrote:

    Have you read 'The Bell Curve' (1994) or 'The Rise of the Meritocracy'
    (1958). It's worth noting who wrote these and what the response of liberal USA was to the former in the 90s and later:

    http://www.guardian.co.uk/politics/2001/jun/29/comment

    Still, today most people won't listen. Somehow they think they know better, and so won't be told anything. Odd that:(it's been said before many times, even here I am told).

    http://www.ets.org/perfect_storm

  • Comment number 53.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 54.

    Tabble

    You seem to be an intelligent fellow. However, you need to read about Socrates' ideas on how a wise man must act. You need to learn that 'I don't know' is the highest state of intelligence - for there is always new information to be discovered, new experiences to be learnt. At the same time, all assumptions and 'common-sense' notions must be questioned if Truth is to reveal itself.

  • Comment number 55.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 56.

    54. At 5:18pm on 24 Sep 2010, dceilar wrote:

    "You need to learn that 'I don't know' is the highest state of intelligence - for there is always new information to be discovered, new experiences to be learnt."

    Not in this context. These are basic policy issues. You may not be aware of these, but that doesn't mean others aren't. Be grateful that you're being let into a dirty secret so you can consider this as an explanation.

  • Comment number 57.

    #54

    Nice one. Probably lost on tabblenabble though despite his obvious intelligence, his cup is rather full (to put a far eastern spin on your Greek position).

    I think he would get on very well with richard dawkins though, but there again I rather share barrie singletons view on that particular individual.

    ''Somebody has been going round systematically switching us off.

    If we were all switched on, the Pope would win the Nobel Prize for Standup Comedy. Poor Dawkins (who would come second) must be busting a blood vessel. ''

    Genius.


    Stephanie Flanders and Paul Mason (I assume) in the NN studio tonight talking about capitalism... looking forward to that I must admit, I suspect Stephanie will be a good foil for PM and ask the right questions as oppose the the more politically orientated newsnight presenters.

    Could be a winning combination to properly explore and bring to the fore the nature of the changing global economic model.

  • Comment number 58.

    Nice one. Probably lost on tabblenabble though despite his obvious intelligence, his cup is rather full (to put a far eastern spin on your Greek position)."

    Why are you so eager to stay with the herd which has been conditioned to accept that all are equally stupid? Do you think it socially desirable to appear thoughtless? Has it never occurred to you that this is exactly how predation has operated, i.e by misleading everyone to believe that everything is debatable? It isn't in the sciences, medicine etc you know - at least, not in the way that many in blogged-out-Britain seem to think. Have you noticed how science and rationality have been under attack at the same time that the productive economy has been going down the tubes? QE2 won't fix that will it and currency wars will just devalue the pound if the rest of the world decides that the population here is now a bunch of dimwits. They will you know.

  • Comment number 59.

    #57 Jericoa

    I am rather surprised by your outburst. You say you are an engineer. I am an engineer as well (I am 45 y/o btw)...yet I feel your response seems somewhat emotional (how old are you?...as this is relevant with regard to education these days).

    Barrie Singleton does write some eleoquent/sublime prose about life....but he is not very bright/intelligent!

    Whoever tn01 is....is irrelevant. As whoever they are...they are very bright/intelligent. Just take in what they write...it is all almost (certainly) based on pure logic/reason and extreme high intelligence. Why can't you see this?

    I would urge you to watch the Dawkin's programmes 'The Enemy of Reason' again. Unfortunately, Channel 4 seems fit not to allow them to be aired on C4OD, but watch them again if you can.

    Just think what the great scientists/mathematicians (Newton, Darwin, Galton etc) had to confront in their time....i.e. many bigots who could not understand their logic/reason...yet they prevailed non-the-less.

    Take in what is being said/taught....it's not rocket science!

    You are an engineer after all...arn't you?

  • Comment number 60.

    Seams that the moderator didn't appreciate the note of appreciation from the rich, so here it is again, this time with a link to the original, which gives express permission to disseminate !

    Of course their may be other reasons to be sensitive to such notes of gratitude - but I can't think of any. Anyway why not stop all your carping and enjoy some praise once in a while:

    " A note of appreciation from the rich Let's be honest: you'll never win the lottery. On the other hand, the chances are pretty good that you'll slave away at some miserable job the rest of your life. That's because you were in all likelihood born into the wrong social class. Let's face it — you're a member of the working caste. Sorry! As a result, you don't have the education, upbringing, connections, manners, appearance, and good taste to ever become one of us. In fact, you'd probably need a book the size of the yellow pages to list all the unfair advantages we have over you. That's why we're so relieved to know that you still continue to believe all those silly fairy tales about "justice" and "equal opportunity" in America.

    Of course, in a hierarchical social system like ours, there's never been much room at the top to begin with. Besides, it's already occupied by us — and we like it up here so much that we intend to keep it that way. But at least there's usually someone lower in the social hierarchy you can feel superior to and kick in the teeth once in a while. Even a lowly dishwasher can easily find some poor slob further down in the pecking order to sneer and spit at. So be thankful for migrant workers, prostitutes, and homeless street people. Always remember that if everyone like you were economically secure and socially privileged like us, there would be no one left to fill all those boring, dangerous, low-paid jobs in our economy. And no one to fight our wars for us, or blindly follow orders in our totalitarian corporate institutions. And certainly no one to meekly go to their grave without having lived a full and creative life. So please, keep up the good work! You also probably don't have the same greedy, compulsive drive to possess wealth, power, and prestige that we have. And even though you may sincerely want to change the way you live, you're also afraid of the very change you desire, thus keeping you and others like you in a nervous state of limbo. So you go through life mechanically playing your assigned social role, terrified what others would think should you ever dare to "break out of the mold." Naturally, we try to play you off against each other whenever it suits our purposes: high-waged workers against low-waged, unionized against non-unionized, Black against White, male against female, American workers against Japanese against Mexican against....

    We continually push your wages down by invoking "foreign competition," "the law of supply and demand," "national security," or "the bloated federal deficit." We throw you on the unemployed scrap heap if you step out of line or jeopardize our profits. And to give you an occasional break from the monotony of our daily economic blackmail, we allow you to participate in our stage-managed electoral shell games, better known to you ordinary folks as "elections." Happily, you haven't a clue as to what's really happening — instead, you blame "Aliens," "Tree-hugging Environmentalists,"............" Welfare scroungers," and countless others for your troubled situation. We're also very pleased that many of you still embrace the "work ethic," even though most jobs in our economy degrade the environment, undermine your physical and emotional health, and basically suck your one and only life right out of you. We obviously don't know much about work, but we're sure glad you do! Of course, life could be different. Society could be intelligently organized to meet the real needs of the general population. You and others like you could collectively fight to free yourselves from our domination. But you don't know that. In fact, you can't even imagine that another way of life is possible. And that's probably the greatest, most significant achievement of our system — robbing you of your imagination, your creativity, your ability to think and act for yourself. So we'd truly like to thank you from the bottom of our heartless hearts. Your loyal sacrifice makes possible our corrupt luxury; your work makes our system work. Thanks so much for "knowing your place" — without even knowing it! "

    http://www.namebase.org/richnote.html

  • Comment number 61.

    Dear #58 and #59

    I have a sense of humour, and there was, a certain amount of intended mischief in my post, so please dont take it too personally/ literally.

    on a more serious note I think you should accept that in life and in the pursuit of 'truth' as in the fundamental building blocks of everything as represented by quatum mechanics it is actually possible to be in two places at once and be aligned to the way things actually are in the natural world.

    I both simultaneously agree and disagree with both yours and Barrie Singletons adopted positions and see no contractiction in being that way.

    I don't pretend to have your intellect, to have it is both a burden and a gift, which I suspect you know at some level. It is harder for someone whom has used and had success no doubt from the possession of such a finely tuned and trained instrument to experience life only in terms of that instrument, when in fact, there is a little more out there than is dreamt of in your philosophy.

    Yes I am an Engineer, I am an engineer who has a reputation for inovation also, so I do have to balance reason while being open to creativity.

    I hope my explanation assists you to understand my position, no offence was directly intended but i will admit to being a little mischievous sometimes, which i hope adds a little colour to the world. A world built purely on reason would not be as beautiful a thing.

    Look forward to reading your future posts, debating with you and..occasionally being mischievous.

    Jericoa.

  • Comment number 62.

    Hey children - this is usually a civilised blog - let's not insult each other and question bona-fides unless someone makes outrageous claims? :-)

    I am a militant secularist, but life needs to worth living. No-one asked me whether I wanted to be born, and I am not content to play the trample-your neghbour game of fight consume reproduce and die. What's the point?

    It is very interesting that as well as the capitalism debate on Newsnight yesterday, there was also an interview with Kenn Dodd.

    Man cannot live by rationalism alone, we need to laugh, cry and love. Unfortunately, organised religion tends to exploit our desire for meaning and often perverts it into something very unpleasant.

    BTW many great scientists had some crazy and irrational beliefs. Eg Kepler's laws were a by-product of his mystical and astrological searchings. (This and much more is described in Arthur Koestler's "The Sleepwalkers")

    As for Newton - well look at this:

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 63.

    Going back to the economics:

    The word "socialism" has long been so ambiguous as to be effectively useless in conversation. To some people it is an insult and a pejorative term. To others it describes something desirable; but we cannot agree upon what it is.

    The debate on Newsnight last nicght, (with Stepanie F, Ha-Joon Chang and Anatoly Kaletsky) demonstrated that "capitalist" is becoming similarly meaningless. Both guests reaffirmed their belief in capitalism, but Ha-Joon Chang would change today's system beyond recognition, and Kaletsky was talking about "Capitalism 4.0", although he was extremely vague about what it was going to be. Both guests reminded me of someone saying "Of course I believe in God, but...."

    In fact, both "socialist" and "capitalist" have become emotionally loaded ideological terms which impede debate rather than advancing it.

  • Comment number 64.

    why has my previous comment been on hold for 2 days? Was it really that controversial?

  • Comment number 65.

    @61 Re my broken url:

    Type "Isaac Newton Occult" into the search bar of Wikipedia.

    Incidentally, today's featured article is about Diocletian. He is a favourite emperor of mine, because he was the only one who retired voluntarily. Then when invited to reassume the purple he declined, saying he prferred to concentrate on his hobby, which was growing cabbages!

  • Comment number 66.

    #62

    I was not aware of the extent of Newton's research interest and participation into what would commonly be dismissed as 'hocus pocus' nowadays.

    I think that does re-inforce the point I am trying to make to the pure rationalists on here that reason in itself is not the some total of reality and therefore should not be used exclusively to examine reality to the active exclusion of that which lies outside of rationality.

    Rationalists are to an extent in denial ever since quantum mechanics came along, which in my mind is the natural limit of rationality. Rationality itself via scientific method proved that rationality can not be the sum total of everything.

    That denial has become a kind of 'cult of rationality' if I were to say that there is scientific proof (which there is) that the phases of the moon influences human behaviour which could form a basis for astrology, ridicule and claims of 'hocus pocus' would soon follow from the rationalists camp in the same way copenicus was laughed out of the vatican when he told them the earth went around the sun.

    The truth is, is it really so far fetched to think that strong changes in gravitational fields would not impact upon the quantum level workings of the brain? That is well...logical, but it is not a logic you would find many rationalists signing up to because they also (typically) are the ones who believe that 'free will' also exists and the thought that they may not be entirely in control of their own behavior (and therefore destiny) is too uncomfortable a concept to explore and challenges everything about who we are and the way we run society.

    Cup of tea anyone?

  • Comment number 67.

    #63 Sasha Clarkson

    You are right that people use these the word 'socialism' in different ways.

    But can we not agree the simple definition of 'public ownership of the means of production' as oppposed to the private ownership of the means of production?

    Obviously, just what 'public ownership' looks like is a matter for much debate.

    Can we further agree that a 'mixed economy', where most of the means of production are privately owned but the state interferes to redistribute, is not 'socialism' but a form of capitalism known as 'social democracy'?

    Too may people confuse 'socialism' with 'social democracy'.
    They think socialism is hand-outs to minorities & the lazy.

    Unless the means of production are controlled by the people & wage labour is abolished, there is no socialism.

    Spain 1936 had an encounter with socialism.
    Russia, for a brief period just after the revolution, arguably did as well.
    Cuba probably qualifies to a degree.
    But the problem with Russia & Cuba was the 'Party' taking control (perhaps unavoidably in a capitalist dominated world).

    This is why I believe socialism requires direct democracy & must be pretty much worldwide.

  • Comment number 68.

    Cometh the hour, cometh the Miliband - ED not DAVE!

    Is this the end of "New" Labour? But it's not a return to old Labour either - Blair and Mandleson described him winning as a "disaster" for New Laboour - let's hope they are right - but only for the NEW bit!

    Labour needs to break with the Washington Concensus. It needs to end the sycophancy towards the City, to end the libertarian free market supine approach to trade and to take head on the role of the state in the economy, our trade inbalance and the state of our manufacturing industry.

    END socialism for multi-millionaire bankers - END the damage to british industry being inflicted by the Chinese Communist Party's rigged trade system - build a sustainable economy, society and environment.

    The new politics should be to build a sustainable, fair society.

    Ed knows how important the environmental issues are - he also knows how you cannot run a society where the rich get richer and the poor poorer.

    When the "Eire II" public spending cuts bite and IMHO we will see a 40% fall in house prices, 5m unemployed and GDP fall by up to 10% and the risk of another huge banking crisis, then the ConDems will be as popular as leprosy.

    Assuming the LibDems see the writing on the wall and jump ship, Labour needs to have a programme for government that faces the realities of our problems and be prepared to sell them to the electorate.

    Arguing over the level of spending cuts isn't going to change anything - the CAUSE of our economic problems isn't public sector spending - if it was, Germany would be a basket case as they spend a higher % than we do.

    The problem is laissez faire economics and globalisation - it must end.

    Learn to love the idea of protecting our economy and jobs - learn to reject exploitation of low paid workers in developing countries.

  • Comment number 69.

    67. At 5:03pm on 25 Sep 2010, duvinrouge wrote:

    "But can we not agree the simple definition of 'public ownership of the means of production' as oppposed to the private ownership of the means of production?"

    Yes.

    "Can we further agree that a 'mixed economy', where most of the means of production are privately owned but the state interferes to redistribute, is not 'socialism' but a form of capitalism known as 'social democracy'?"

    Yes.

    "Too may people confuse 'socialism' with 'social democracy'.
    They think socialism is hand-outs to minorities & the lazy."

    Yes.

    "Spain 1936 had an encounter with socialism."

    Questionable. The battle there was Trotskyism/anarchism vs statism (Stalinism as National Socialism).

    "Russia, for a brief period just after the revolution, arguably did as well."

    No, Russia after 1917 and until Stalin brought an end to it after 1928 was a Bolshevik/anarchistic/Trotskyite disaster very much like what we were headed towards under Thatcher, New Labour and now the Con-Dems.

    "Cuba probably qualifies to a degree"

    Yes, but China would be a better example. They too regarded post Stalinist USSR as a revisionist mistake.
    .
    "But the problem with Russia & Cuba was the 'Party' taking control (perhaps unavoidably in a capitalist dominated world)."

    No. You have to have a socialist state run by a party. People are not equally able. You need a vanguard to help run the train. The myth of Trotskyism/anarchism is that all people are born equal and the environment can equalise. It can not. Just think of SEN kids as the starter..

    "This is why I believe socialism requires direct democracy & must be pretty much worldwide"

    No, that is Trotskyism/anarchism, and is exactly what the free-market people want. That is why Stalin ejected them in the 30s..You either don't understand the nature of socialism or you are en entryist. The Fabians understood socialism. They understood Darwinism. So did Michael Young

  • Comment number 70.

    @67 duvinrouge.
    Your definition of social democracy would be widely accepted.:-)

    But even if I were prepare to agree with your definition of socialism, others would not. It's like being a Christian. I would have thought that being a Christian necessitated being your kind of socialist, but others manage to reconcile it with ownership of guns and vast riches. :-(

    Sadly, you will not stop people redefining words to suit themselves. From Lewis Carroll's "Through The Looking Glass" :
    "... 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean, neither more nor less'. 'The question is,' said Alice, 'whether you can make words mean so many different things.' 'The question is,' said Humpty Dumpty, 'which is to be the master, that's all.' ..."

    This quote became famous - or notorious - in the well known WWII legal case of Liversedge v Anderson.

    http://en.wikipedia.org/wiki/Liversidge_v_Anderson

  • Comment number 71.

    "Spain 1936 had an encounter with socialism."

    Questionable. The battle there was Trotskyism/anarchism vs statism (Stalinism as National Socialism).

    I have to disagree - (you catch me as I am reading Beevor's Battle for Spain). The Republican government as you rightly say was riven by splits on the left including a strong anarchist movement.
    The fundamental issue was that this disintegration forced the political centre to migrate to the extremes. In reading this history it occurred to me that this could be mirrored in the UK. The Nationalists were able to exploit this as they united around reaction and a support for the "old Spain". I was surprised to read how backward and almost feudal Spain was in the 20's and 30's and a refusal of the landowners and right to recognise the need for change. The Nationalist coup was almost a failure and the splits on the left (and intervention by big oil e.g. Texaco in favour of Franco and the acquiescence of Baldwin's government which starved the Republican government of support in an admittedly febrile Europe). Stalin can only be credited with minimum support and providing the justification for the right's claims of the "red menace" and international Communism).
    Ed Miliband in debt to the unions may just kill off the Labour Party in this country, leaving a vacuum on the left.

  • Comment number 72.

    "71. At 3:52pm on 26 Sep 2010, tonyparksrun wrote:

    "I have to disagree "

    No you don't ;-). For instance, you could try agreeing and just seeing whether the conceptual scheme that I'm presenting (and it's largely been made elsewhere) generally fits the outcomes (behaviour) better than most history books do. I'm offering a perspective on what happened in the last century which isn't frequently entertained in Liberal-Democracies as this draws largely on basic precepts of Behaviour Analysis (more Quine than Dreben...see remarks on Rawls elsewhere, and especially the nature of 'race/gender norming', legislation in the USA since the 70s, 'the veil of ignorance' and dramatically changing demographics both here and the USA - all of which has been practically subverted the status quo).

    "Ed Miliband in debt to the unions may just kill off the Labour Party in this country, leaving a vacuum on the left."

    I'm suggesting that is his function (whether he fully understands that or not. It doesn't even matter if Ralph Miliband understood his own function, as it's just behaviour which matters, not intention or academics' rationalisations). Ed Miliband's function, I am suggesting, along with New Labour generally ove rthe past 13 years, has been to bury Old Labour as statist party, and to facilitate grass-roots democracy (Trotskyism/anarchism/Neo-conservativism) instead. The New Left always has been Trotskyite not Stalinist. The state must wither away. Franco, like Hitler was essentially a Stalinist (a Fabian - see the Webbs' on Russia) and Wall Street USA regards Fabianism as anathema to free market Libertarianism, aka consumerism.

  • Comment number 73.

    Whilst there are a few typos in the above post the basic idea should be clear. However, just to shed some light on a more subtle issue raised in the post, look into Griggs v.Duke Power Company (1971) in the USA and the EEOC. Then look up what the US Labor Department's Employment Service recommended in 1981 and how that led to "race norming" for personnel selection by 40 states by 1990 (using the GATB). The US Justice Department actually challenged this as unconstitutional racial discrimination against whites in 1986, and "race norming" was banned by the Civil Rights Act of 1991. Now, what was going on here do you think? Is any group especially advantaged rather than disadvantaged by this? Warning: That really is quite a subtle question, as it is a within group question, and it has a bearing on the recent New Labour leadership election too. .

  • Comment number 74.

    #63 Sasha

    In fact, both "socialist" and "capitalist" have become emotionally loaded ideological terms which impede debate rather than advancing it.

    I would argue Sasha that they are two sides of the same coin. And a bad penny at that!

  • Comment number 75.

    #72 "it's just behaviour which matters"
    There, we do agree.
    Was Old Labour ever a statist party (except Nye Bevan and allies)?
    Certainly once clause 4 was ditched, even the appearance of being so went away. In the long history of the Labour party, were Keir Hardie and Ramsay McDonald ever out and out statists? That is to assign to a poitical movement the attributes of two of its most prominent personalities, rather than analyse the undercurrents of the movement as a whole. They were certainly distinct from the Clydesiders and Sydney and Beatrice too. And what was their behaviour when it mattered? History tells us that.

 

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