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Cuts will not end the UK crisis
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by liamssoft | September 6, 2011 at 01:35 am
151 views | 7 Recommendations | 2 comments
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Tumbling stock markets, riots in the streets and rising unemployment are not signs of economic confidence, despite George Osborne's assurances. The British economy remains in a depression, defined by the authoritative National Institute of Social and Economic Research as any period in which output remains below its previous peak. The UK depression has already lasted three years, and NIESR argues that is likely to last five years or more – longer than that of 1930s.
Yet economic debate is dominated by counterproductive attempts to reduce the deficit through cuts in public spending, which are now the single most important cause of the depression. Before the cuts of last October's comprehensive spending review, the economy had grown by 2.5%. Because of the slowdown the government will miss its targets to reduce the deficit by some distance, an entirely self-defeating policy.
The notion that stagnation is the necessary consequence of deficits and debt inherited from a profligate Labour government is nonsense akin to the Tea Party-led hysteria in the US, yet this view dominates the debate in Britain. The budgetary squeeze introduced by the Tory-led coalition has brought about lower aggregate demand, which lowers business confidence in the growth outlook. Critically, private sector investment has almost collapsed, and it is this slump that now accounts for 80% of the total output lost since the recession began. In the first quarter of 2011 GDP was £56.3bn below its peak level in the first quarter of 2008, and the fall in private sector investment (gross fixed capital formation) is £44.9bn.
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liamssoft
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Most RecentMost Recommended Comments (2)
at 03:13 on September 6th, 2011
Right, reengineering the economy is not a simplistic task. Optimizing national resources requires a team effort led by one that understands the complexity and how to align resources and assets for optimal results.
at 06:47 on September 6th, 2011
We're facing a simular problem here in Canada. Rather than actually continue to try and solf the problems, the PM here has given orders that his flunkies tell the nation the Economy has fully recovered, and twist the stats to prove it. They have four years before they need to start worrying about an election, and five to call it, so the Canadian politicians are even more spineless than usual these days.
The jobless rate is going up, so they do not count people who have been out of work for more than a year, and then claim the unemployment rate is going down, and then cut services and staffing at the government offices that are there to help those in need; pensioners, the unemployed, and anyone else who relies on the Federal Government for assistance are left in the cold, while the members of Parliament have hace a four month paid vacation, having done nothing between their re-election and breaking for the summer but to force the postal workers back onto the job.
Cutting spending does NOTHING, unless you also have revenue coming in. When a nation's workforce is shrinking, the ammount of revenue staying stagnant, and people becoming desparate, the economy needs job creation. All the spending cuts in the world will not make a difference. In the UK, as in Canada, they should start by cutting the MPs salaries, they are paid too much to do too little as it is.