13 Terrible Tory Counterarguments
by Benjamin Studebaker
A few days ago, I wrote a post called Britain: For the Love of God, Please Stop David Cameron. I didn’t expect much out of it, because my usual audience is predominately American, and many Americans take little interest in the British elections. So I was pleasantly surprised when it went semi-viral in the UK, quickly becoming the most popular post I have written. Naturally, with a larger audience comes more critical (and sometimes just aggressively hostile) comments, and my usual policy of responding to every critical or interesting comment I receive is increasingly no longer practical. So instead, I’ve decided to write this all-purpose response to the most common bad critiques I’ve seen levied at my post. If you’re one of the wonderful people who read my post and deemed it worth sharing, I hope that this post will help you deal with any Tory supporters you may run across who may try to give you grief about it. So let’s get started.
Here’s a short list of the most common negative responses I’ve seen:
- Unfair Comparison: I shouldn’t compare the UK during 2004-08 to 2010-13, or the UK to the US, because there are so many other variables in play (e.g. 04-08 was a boom, while 10-13 was a recovery, the US is a much larger economy, etc.)
- Labour Overspend: the previous Labour government spent so much money that the coalition had no choice but to do austerity. What else could the government have done?
- Labour Bubble: Labour created unsustainably high economic growth by increasing public sector employment, leading to a debt problem.
- Financialization: the UK was more finance dependent than other countries, so it makes sense that it would do worse.
- IMF Retract: the IMF recently praised the coalition government, so this means that it’s retracted all the research I cited.
- Outdated: the statistical relationship between austerity and growth is based on data from the first few years after the crash–surely that relationship no longer holds.
- Greece: without austerity, Britain would have ended up just like Greece.
- Delay: the benefits of austerity were just delayed, in the last couple years the UK has performed better.
- Fraud: cuts to the welfare state are justified because of massive benefits fraud.
- Authority: no one else agrees with me, I’m some kind of radical.
- Bias: all my sources are left-wing and deeply biased.
- Iraq: Labour started the Iraq War, so it can’t be trusted.
- Nationalist: I shouldn’t talk about the UK because I’m not British.
I’m going to try to very quickly and concisely respond to each one of these. Feel free to skip to the criticisms that you think are most compelling or interesting–each time I address a new one, I list the name of the criticism in bold. If you’re on a computer, you should be able to use your finder (Control-F on a PC) to locate them easily.
Unfair Comparison:
The chart comparing 2004-2008 to 2010-2013 is important because it shows that the primary difference in the growth rate is the amount of demand that is supplied by the government:
This shows that the difference is mostly in government and consumer spending, not in investment or trade. This is important because austerity directly reduces government spending and indirectly reduces consumer spending by laying off public sector workers, reducing other public sector workers’ pay, and reducing benefits.
The US to UK comparison is interesting because both the UK and the US have their own currencies (the pound and the dollar). Neither is on the Euro, and being the Euro adds complications because countries that are on the Euro can’t make their own monetary policies–they have to follow what the European Central Bank (ECB) mandates. That said, I also compared the UK to a variety of European countries as well, and in this case I used the same time span for everyone–the UK did not look good, doing about as badly as Spain during the worst years of austerity.
This should shock and appall us–the UK has its own currency, it’s not on the Euro, it should be able to do much better than the Eurozone, especially the weak economies on the European periphery (e.g. Spain, or Italy). I also supplied further evidence from the IMF that austerity has a strong negative correlation with economic growth, and even shared a graph showing this correlation, taking data from a multitude of countries over the same time period:
Unfair comparison? More like unfair criticism.
Labour Overspend:
Contrary to popular belief, Labour’s spending was not at all out of line with historical precedent–once we adjust to account for the size of the economy, it’s clear that Thatcher spent just as much during the 1980’s.
The UK has also run much larger debts in the past–the debt to GDP ratio was higher in the 60’s, and much higher during World War II:
But rather than do austerity, post-war Britain responded to a much larger debt burden by creating the NHS and the modern welfare state. After demobilization, Britain’s increased spending frequently throughout the 50’s, 60’s, and 70’s:
And Britain ran large deficits throughout these decades, sometimes significantly larger than the deficit Labour was running the year before the recession (2007):
Yet Britain’s debt burden fell dramatically between 1950 and 1975. How is this possible? Three factors:
Economic growth–by investing public money in programs that helped grow the economy, Britain was able to grow faster than the debt. While net borrowing only occasionally exceeded 4%, annual UK economic growth frequently exceeded 4% during these decades, neutralizing the borrowing:
Inflation–by running low to moderate inflation throughout these decades (with the exception of the 70’s, during the oil crisis, in which things got out of hand), Britain was also able to reduce the value of the debt in real terms:
Devaluation–because Britain controlled its own currency, it was able to occasionally significantly reduce the value of the pound, shrinking the size of the debt burden rapidly in short periods of time. This also made UK exports more competitive and drove up growth. Harold Wilson famously did this in 1967 (if you look at the debt to GDP graph I posted, the rate of improvement accelerates after 1967). It most recently happened in the early 1990’s, when Britain exited ERM. This brought about a rapid fall in the debt burden:
But the government was able to increase spending at the very same time:
By creating strong economic growth, mild inflation, and occasionally devaluing, governments can reduce even very large debt burdens without resorting to austerity.
The markets understand this power. Governments that control their own currencies and can devalue enjoy much lower borrowing costs than Eurozone countries:
See that little red box way off to the right? That’s Japan. Japan’s debt dwarfs that of all other countries–relative to its economy, it’s larger than Greece’s. But because Japan controls its own currency, the markets don’t worry, and Japan borrows even more cheaply than Britain does. The British could have run significant stimulus for years without so much as approaching the Japanese’ level of indebtedness, and the evidence suggests their borrowing costs still would not have risen substantively.
And let’s also remember that as I said before, austerity makes things worse by decreasing the rate of economic growth, making it harder for the government to shrink the debt relative to the size of the economy. The IMF’s research is very clear on this. Labour’s spending was not out of the ordinary and could certainly have been handled without austerity. If the UK could overcome the debt burden imposed by World War II without austerity, it defies reason that this blip would be too much to handle.
Labour Bubble:
As we saw above, UK spending under Labour was no higher than it was under Thatcher:
While public sector employment did increase under Labour, it merely increased to the same level it was at in the early 90’s under the conservatives. The private sector added many more jobs under Labour than the public sector did (about 3.5 million private as opposed to about 0.7 million public):
Additionally, GDP growth under Labour, while better than it has been under the coalition, was not high by historical standards:
There’s no reason to think that economic growth under Labour was sustained exclusively or even predominately by public sector employment.
Financialization:
It is true that the UK has a bigger financial sector than most countries:
This did mean that Britain got hit harder than some places by the recession. But Britain is not the most financialized major economy in Europe–what about the Netherlands? The Netherlands outperformed the UK during Britain’s heavy austerity period even though it was more financialized than the UK:
Once the coalition slowed down the austerity, Britain easily passed the Netherlands:
The UK was aided in its effort by the Dutch parliament, which decided to pass a major austerity package right when the UK was slowing its own austerity program down. Now it is the Netherlands that wears the austerity dunce cap. The research is clear–more austerity means less growth:
IMF Retract:
It is true that IMF head Christine Lagarde praised the UK economy earlier in the year, claiming that “it’s obvious that what’s happened in the UK has worked”. But this is a very ambiguous statement–does Lagarde mean that the initial austerity worked, or that the coalition’s decision to briefly stop and then restart the austerity at a reduced speed produced good results? Remember, the coalition did the fastest austerity in the first year–after that, it dramatically slowed the policy down:
A few days before Lagarde’s comments, the IMF released a report that undermined the coalition government’s further debt reduction plans, claiming that planned welfare cuts would undermine growth and make it more difficult to close the deficit. The IMF also did not retract any of its other research on austerity–indeed, the recent report is consistent with the claims the IMF made in its previous research.
Lagarde’s own words are also vague. She said that the government had adopted:
smart fiscal policy – what I meant by that … is a set of policies that are actually targeted and tailored to the state of the economy. And what clearly has been demonstrated in the past is that the UK authorities are capable of adjusting to the economic reality in order to provide the right balance of spending cuts, revenue raising and in the order, in the proportion and in the pace that is appropriate to the economy.
Notice the phrases “tailored to the state of the economy” and “in the pace that is appropriate to the economy”–these phrases make it sound like it’s more likely that Lagarde is praising the coalition for reducing the pace of the austerity, given the reports and research the IMF has published. The coalition does deserve credit for that, but the further cuts it has planned will make it even more difficult for the UK to balance the books.
Outdated:
Here’s another graph showing the relationship between austerity and economic growth–this graph is more up to date than the one I’ve been using:
As we can see, the relationship still holds.
Greece:
The UK is very different from Greece because the UK has an independent currency (the pound) while Greece is stuck on the Euro. This means that the UK can devalue its currency while Greece cannot. Devaluation is an important monetary tool–it allows states to rapidly shrink the size of their debt relative to the size of the economy. The UK has used devaluation to shrink the size of its debt on a number of occasions (some of which I discussed in more detail in “Labour Overspend”). Greece can’t do this, and this makes it much harder for Greece to shrink the size of its debt without either defaulting or doing austerity. This is reflected in the two countries’ borrowing costs. The UK’s borrowing costs have been steadily falling for decades, and are near a record low now:
By contrast, it is very expensive for Greece to borrow, and during the height of the Eurocrisis (so far), it was totally impractical:
This is because investors know that the UK can devalue its currency and avoid default even if its debt burden becomes very large, but Greece is on the Euro and is much more constrained. Countries that control their own currencies enjoy much lower borrowing costs than countries on the Euro:
Indeed, that little red box in the corner is Japan, a country that runs an immensely large debt but continues to borrow at extremely low rates because it controls its own currency.
There are other differences as well. For one, Greece is ridiculously corrupt. Greek citizens dodge taxes and Greek officials profiteer on a scale that is unheard of in the UK. Additionally, Greece is running a massive current account deficit because its wages are not competitive. Britain is also running a current account deficit, but Britain’s is much smaller:
This means that British exports are more competitive and Britain doesn’t need to send as much money out of the country to pay for imports. This makes the UK economy much stronger than Greece’s even independent of the currency issue.
But most importantly, as long as Britain retains the pound, it retains the ability to devalue its currency, and this means it is not possible for Britain to be forced into default. The UK not only is not Greece, it cannot be Greece as long as it stays off of the Euro.
Delay:
As we’ve discussed, there was a significant slow down in the rate at which the coalition government carried out its austerity policy:
I say that British growth improved because the coalition slowed down the austerity, but how do we know that I’m not wrong and that the initial heavy austerity is not the cause of current British growth? We know because economists and social scientists have looked at many countries around the world and conclusively established that austerity negatively correlates with growth:
We also have research from the IMF stating that this correlation exists and explaining what causes it–the multiplier effect. When the government eliminates a dollar of spending, the person who would have received that dollar must also reduce spending. For instance, if the government cuts a teacher’s salary, that teacher might not buy a new car, which means lower sales for the car dealership, the car manufacturer, and the other industries that serve the manufacturer. If the government cuts many people’s salaries (or worse, fires people), this can add up to a significant amount of money that is not moving through the economy, resulting in losses for many businesses. These businesses may try to remain solvent by cutting wages or laying off their own workers, thereby decreasing those workers’ purchasing power, and so on in a negative feedback loop. These businesses also have less income to pay tax on, so the government collects less revenue, worsening its fiscal position. The IMF talked about that, too.
Fraud:
In 2012-2013, fraud only accounted for 2.1% of the welfare budget. In other years the figure is as low as 0.7%. People who make the fraud argument are deeply misinformed about the basics of this debate. Research shows that on average, British voters think that 27% of the welfare budget is lost to fraud, which is wildly inaccurate.
Authority:
The argument from authority is a logical fallacy–even if no other scholars agreed with me, readers should evaluate my argument on the strength of its merits. That said, my position is by no means radical. Paul Krugman, the Nobel Prize winning economist from Princeton, regularly speaks out against austerity. So does Joseph Stiglitz, another Nobel winner. A survey of 33 prominent economists show that only 15% agreed with the coalition’s austerity measures, with two thirds disagreeing, and most of those two thirds strongly disagreeing. Stimulus is similarly popular with economists–only 5% of US economists surveyed deny that the Obama stimulus package was good for the economy. Add to this the IMF research supporting the point, and it’s pretty clear that if there is a consensus among experts, it favors me, not my opponents.
Bias:
Many conservatives appear not to trust Oxfam as a source because Oxfam cares too much about the poor. I even saw one commentator claim that relative poverty is not important at all. This is not true–I recently wrote a post detailing all kinds of evidence that relative poverty and relative inequality contribute to a variety of serious social problems. But in any event, even if you exclude the Oxfam results, it’s clear that ordinary people have been negatively affected by austerity–my data on real wages in Britain comes from the government:
The rest of the data in my original post came from a variety of undeniably reputable sources. We’re talking about Eurostat, the IMF, the Office for National Statistics, the Economic Policy Institute, and so on. If you’re going to call these sources into question, you’d better have clear evidence of wrongdoing–and if you have that evidence, you should contact a journalist, because that would be big news. These are the sources professional researchers trust.
Iraq:
The Tories supported the Iraq War too. Do we really believe that a Tory government wouldn’t have joined the Bush administration in Iraq? Do we really think that without British support, America would have stayed out of Iraq? I think the answer to both questions is clearly “no”. In any case, Iraq is a foreign policy issue, and it has nothing to do with the efficacy (or lack thereof) of the coalition government’s austerity policies.
Nationalism:
I love and care deeply about the United Kingdom and its people. I didn’t write this to hate on Britain or the British people. I wrote this to help. On other issues, I sometimes criticize American policy and point to British policy as a superior alternative–off the top of my head, I’ve done this with both health care and gun policy. I’ve chosen to study in the UK for undergrad (and will return for my PhD this fall) because Britain has a really great university system that has some significant and important advantages over the one in my own country.
Too often, our political disputes get too domestic. We stop paying attention to the examples of other countries. Our debate becomes disconnected from the global debate. In the United States, I see this all the time. In the Europe, the research is settled on global warming, on gun control, on government health care, and so on, but many Americans refuse to learn lessons from European countries. When I mentioned the positive policies Britain and other countries have to offer, my fellow Americans sometimes dismiss the positive outcomes other societies have seen and continue to insist that American culture is so distinct and so exceptional that what works in Europe could never work in the states.
Britain is now acting like the United States sometimes does. It’s ignoring the international research on austerity, becoming too consumed with its own narrow domestic debate. The international research is clear, but too many British people are living in denial, presuming that Britain is the exception to the rule. When my country denies the efficacy of single payer or gun control, I hope that foreign writers step up and point out our error. When I see Britain making the same kind of mistake with austerity, I step up and point it out not to insult or deride Britain, but to help it be a better place for all of its people.
I’m glad that foreigners care about American politics. I’m glad they’re not apathetic, and that they want my country to be a better place. So I reciprocate that, I care as much as I can about as many places as I can–especially Britain, a country I love studying in.
[…] in associating more recent economic growth with austerity measures (statistics perhaps suggest otherwise) placed the idea in the populace’s minds. Labour’s weakness in shifting this rhetoric […]
[…] in associating more recent economic growth with austerity measures (statistics perhaps suggest otherwise) placed the idea in the populace’s minds. Labour’s weakness in shifting this rhetoric […]
[…] week, I wrote a post about how the Tories messed up Britain’s economy, and then I wrote a follow up post, handling some of the most common counterarguments I saw around the internet. To my surprise, the […]
How about having a lack of faith on Ed as a leader? Cameron has run rings around him in prime minister’s questions. How about also making uncosted promises to reduce tuition fees? What are your thoughts?
Ed did a very poor job of challenging the Tory economic narrative and has now paid the price. That said, it’s not an easy narrative to challenge–it’s very simple, very black and white, and is now considered common knowledge in most circles.
It’s a textbook example of Gramscian common sense formation.
He’s inspired me and many other young people to get involved and more interested in politics.
Your only problem is, that the British electorate do not agree with you and you analysis
Apparently at least 63% of them did agree with Benjamin (1st past the post system)… & many didn’t vote (no one to represent them, apathy, etc.)
http://theconversation.com/the-case-for-proportional-representation-in-the-uk-just-became-clearer-41544
However, the total number of right wing votes was higher than the total number of left wing votes…
I wouldn’t claim that 63% agreed with me. The Tories and UKIP together are about 50%. Labour + SNP + Greens are about 39%.
It’s very sad, because the victims of this result will be the very British people who are disagreeing with me.
The plea was “Britain: For the Love of God, Stop David Cameron”. Most people in Britain did not vote for David Cameron.
My post was in response to the gentleman who said that “the British electorate” did not agree with this plea because they went ahead & voted for Cameron & his drastic policies. The majority didn’t.
The plea was “Britain: For the Love of God, Stop David Cameron”. Most people in Britain did not vote for David Cameron.
My post was in response to the gentleman who said that “the British electorate” did not agree with this plea because they went ahead & voted for Cameron & his drastic policies. The majority didn’t.
Oh yes we do agree with his comments, many of us do!
I was under the impression that Japan’s borrowing costs were so low because around 70% of Japanese government bonds are purchased by the Bank of Japan, with the bulk of the rest being purchased by Japanese trust funds (i.e Japanese savers). Hence the borrowing level is not a true reflection of the markets confidence in Japanese ability to repay their debt just a reflection of the large domestic demand. Japan is a ticking timebomb, let’s see what yields it has to pay when its vast reserve of elderly savers dies and there is no one left to fund its deficit.
You mention a country that can devalue their currency is viewed more favourably by investors in debt which is reflected in their lower borrowing costs. Again I think you are incorrect here since the ability to devalue your currency in a global marketplace surely leads to inflation, increasing the costs of your imports and eventually reducing your ability to repay that debt. Zimbabwe is capable of devaluing its currency yet look at its bond yields…
I agree that austerity is not the answer to all woes, targeted investment in infrastructure projects which generate a positive return on investment can be an excellent way to ‘spend’ your way to growth. Unfortunately giving money in the form of benefits is not such an efficient use of capital.
In most countries, borrowing is primarily domestic. Domestic lenders also cannot be compelled to buy government bonds–if they do so, it is because they have more confidence in them than in stocks. Additionally, if the central bank can buy most of the bonds w/o soaring inflation (effectively printing money and handing it to the government), the implication is that the spending is required to prop up growth.
A devaluation definitely entails a brief spike in inflation. In the early 90s, when the UK devalued, there was a brief jump, but it doesn’t last:
http://www.tradingeconomics.com/charts/united-kingdom-inflation-cpi.png?s=ukrpcjyr&d1=19890101&d2=19951231
Increasing the costs of imports helps domestic firms compete on the domestic market. The devaluation also boosts exports. UK exports increased from 22% of GDP in 1992 to 27% by 1996. Source for that:
http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?page=3
After the devaluation, growth in exports helps the UK almost continually grow at at least 2% a year:
http://www.tradingeconomics.com/charts/united-kingdom-gdp-growth-annual.png?s=ukgrybzy&d1=19900101&d2=20071231
Zimbabwe is a very different case–instead of spending to put idle social resources to use, Zimbabwe tried to use more resources than its society could provide. It created demand that vastly exceeded supply, producing a currency spiral. The key thing to note is that the cause of the hyperinflation is not the mere fact that Zimbabwe ran up debts, it is the fact that Zimbabwe tried to demand resources from its people that they could not supply.
I can’t believe this guy has spent so much time writing this article and I’ve wasted so much time reading it. Why has he compared 4 years of boom to 3 years of gloom, why not 5 years verses 5 years to 2015. Why did he stop his report in 2013? Is he trying to be negative? Well it seems so, at least he’s keeping all the uneducated socialists happy.
The comparison of UK performance in 04-08 and performance in 10-13 is meant to indicate the differences in where spending came from (the primary difference is in government spending). Depending on which part of the term I was talking about, I used comparison data in different years. So when the coalition was doing severe austerity (2010-2012), I compared its performance to other countries during that period, and when it backed off of austerity (2012-present), I compared it to other countries in that window as well. I have several charts that include data after 2013.
Not quite sure how you can say the government has backed off austerity. Your source shows that government spending is decreasing at an average of 1% per year.
http://www.tradingeconomics.com/united-kingdom/government-spending-to-gdp
Even if you were to say that the increase in austerity is slowing down it is still there and now the economy is improving at a faster rate than any other in Europe.
http://europeansnapshot.com/2014/11/
Why would any British person in their right mind voting purely on the principles of economics (you seem convinced this is the only basis upon which people should vote) attempt to elect a government that might change this?
My source shows a 1% reduction from 2010-2011, a 2% reduction from 2011-2012, no change from 2012-2013, and a 1% reduction from 2013-2014. This is a combined 3% from 2010-2012 and a combined 1% from 2012-2014, a massive difference given the IMF multiplier (around 1.5). Given the extensive research indicating a strong relationship between spending cuts and economic contraction, it is very reasonable to argue that this dramatic decrease in the rate of cuts would considerably improve growth rates by at least 2 annual points over those two years than what would otherwise have been attained, possibly more. And indeed, the difference between 10-12 and 12-14 is a couple of points of GDP growth:
http://www.tradingeconomics.com/charts/united-kingdom-gdp-growth-annual.png?s=ukgrybzy&d1=20100101&d2=20121231
http://www.tradingeconomics.com/charts/united-kingdom-gdp-growth-annual.png?s=ukgrybzy&d1=20120101&d2=20151231
Austerity is passed in mid-2010, and growth falls from over 2% per year to about 0.5% a year by 2012. Over the next two years of less austerity, growth climbs back from 0.5% to around 2.5%. This is exactly what the research predicts–a couple points difference in spending results in at least a couple points difference in growth.
I can’t reply on your comment below. I think you may be distorting the figures by coupling the two time periods into two-year periods. We have a 2 point decrease in growth followed by a 2 point increase in growth following decreases in government spending by 1%, 2%, 0%, 1%. Allowing for reasonable time lag I don’t think we can ascertain any particular impact on growth from austerity for a couple of years.
What I do know though is that if we go by your reasoning, having previously been on a similar path, France’s economy, after ditching austerity, should now be doing better than Germany’s, but it’s not.
We shall see.
My last point still rings true though. Why would a British voter, layman or not, want to get of rid of the government that has witnessed the fastest growth in Europe in the last 18 months, especially now it is unshackled from the economically unviable Lib Dems?
I like this “sophiarchism” – otherwise known as the contents of Plato’s Republic.
The research on multipliers is uniform that there is no time lag. There is some disagreement over how large multipliers are, but not on the time lag.
In France, we see a similar fall in the rates during the austerity:
http://www.tradingeconomics.com/charts/france-gdp-growth-annual.png?s=frgegdpy&d1=20100101&d2=20121231
As austerity backed off in France, France avoided a double dip, but has not produced very strong figures:
http://www.tradingeconomics.com/charts/france-gdp-growth-annual.png?s=frgegdpy
Germany saw growth fall while it did austerity as well:
http://www.tradingeconomics.com/charts/germany-gdp-growth-annual.png?s=grgdppgy&d1=20100101&d2=20121231
It backed off the same time France did, and has outperformed France, probably due to its stronger exports:
http://www.tradingeconomics.com/charts/germany-gdp-growth-annual.png?s=grgdppgy&d1=20120101&d2=20151231
Exports as % of GDP are 45% in Germany, only 28% in France:
http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS
In all three of these cases, growth rates have fallen during austerity and stabilized or risen as austerity is reduced or reversed.
UK wages have been falling throughout the coalition government–a British voter should have thrown the coalition out to get a party that will do more spending than the Tories and get wages growing.
Sophiarchism has a few important differences from Callipolis, notably checks and balances, protections of liberal freedoms, and an explicit commitment to a method of inquiry rather than a fixed political viewpoint.
If you have read this whole article and this is all you have to say why comment at all? You clearly are restricted by your own ignorance and haven’t taken in a word. Excellent article.
Are you using the government’s fraud figures? There are many people who’ve been unfairly accused of fraud.
I know of one, malicious anonymous complaint. Proved in court that she was living alone. The department says it doesn’t matter they still need almost £30k repaying – imagine if that was tax dodgers. I know many stories of disabled people being cut off who aren’t in a position to work. There are 70 deaths a week due to benefits being cut from people with disabilities. I’ve read in the groups of people being told to look for desk jobs then, people being sanctioned because of not applying for jobs that they could do with their disability or because they were too ill to leave the house.
Personally I’m fortunate I have good people in my life looking after me so I don’t need to work or rely on benefits.
If you’re right, this would suggest that even the government’s very low fraud figures could be inflated. It’s hard to say, given that we’re discussing isolated cases. We’d need more comprehensive research to be sure, ideally conducted by researchers unconnected to the state or to any particular political cause.
It’s not hidden. There are plenty of stories coming out all the time. The fraud rate they’re quoting does include all the people they’ve taken off benefits, there’s no distinction.
https://www.google.co.uk/search?q=deaths+from+benefits+sanctions
Join some disability groups on Facebook. On my fibromyalgia group people are posting all the time for help with interviews. The consistency of who gets it is ridiculous.
There’s also a loophole where you can be turned down for benefits but the job centre can decide you’re not well enough to take a job. You get no money at all then.
I wonder how fraud is calculated? There are many cases of what it technically fraud, e.g. not reporting a change in circumstances for a few days longer than should be. Whether that is added as an absolute number to the total, or counts for less than someone who, say, fakes a disability, I do not know.
There are two types of overpayment. That would be classed as overpayment, the case I described they’d accused her of deliberately not informing of her partner living with her for 2.5 years.
It’s the deliberate act of obtaining money you know you weren’t entitled to.
70 deaths a week due to benefits being cut from people with disabilities?
Please provide supporting evidence.
(You won’t be able to, of course, as it’s left-wing hyperbole.)
That was a pathetic attempt to demean a well written post.
Why do you think the government are squirming and wriggling to avoid releasing the figures?
70 a week is probably a CONservative estimate.
I note your comment on Japan. It’s already been proved that Japan is not an example to follow with regards QE. The fact Japan can print money until the cows come home is not because they have their own currency! Money printing and debt is a question of credit. Japan can keep the train moving because around 95% of their debt is domestic owned. This is why foreigners dont care about the borrowing rates. They don’t own any of the bonds.
And this is the main reason why rates are so low in Europe. It’s not a reflection of the markets confidence in the the UK. The BoE owns around 42% of gilts keeping rates artificially low. This is what QE is! I guarantee if the central banks stopped buying govt bonds rates would rocket. The market could not take the paper.
It goes without saying that growth rates are higher without austerity. But this is like saying if you have unlimited credit limit on your credit card you can buy stuff. Of course. Getting the deficit down is key here and given the level of it and the risk of future rate raises (they will come) particularly in the US tacking the deficit before the debt is key. Given its level the uk cannot grow itself out if this hole.
There is nothing wrong with the data you use. It’s basically your interpretation. And btw. Nearly all economists like Paul Krugman are all Keynesians. You need to read a bit wider.
The Japanese central bank buys a tremendously large percentage of Japanese debt–it effectively prints money and hands it to the government–and yet Japan does not run a high inflation rate. This is because Japan’s economy desperately needs the spending. It only serves to prove my point that as long as spending is needed by the economy, governments can finance debt w/o producing inflation or high borrowing costs. This does not keep rates “artificially low”–if the central bank can buy the debt with no resultant inflation, the economy desperately needs state spending to prop it up, so borrowing costs reflect the economic situation.
I’m well-aware that the economists I cite are Keynesians–I am a Keynesian and I believe that Keynesians do the best work.
Hmm…that would explain the exclusive focus on neoclassical economics in British universities:
http://www.post-crasheconomics.com/economics-education-and-unlearning/
I can only begin to imagine how much frustration I would bring upon myself if I tried to argue ALL of these wonderful, wonderful points about how we shouldn’t have a Tory government.
So I’ll just stick to one.
We’ve got a Tory government. Suck it.
Good read.
I think the chart “real GDP % change from 2008 peak” is misleading because you indexed it from the peak. As you said, UK was hit harder by the crisis and so dropped further. If you took the same data and indexed it from when the Torys came to power, I suspect the UK would be looking very good, particularly compared to Europe.
The index from the peak is useful if you want to see how close countries are to where they were pre-crisis. That said, you’re right that different countries crashed to different degrees, but I hope that is accounted for by showing the extent to which the different countries bottomed out. The key thing I observe is the change in the slope of the UK trajectory starting midway through 2010 (when austerity came in). The gap between the UK and Germany or the US is much smaller in 2010 than it is in 2012.
This is probably covered but as a non-economist Im finding it hard to understand!! So thanks for the post and it would be great if you could help me get this straight:
1) If spending is the solution, why did we hit recession when labour were in power (2008)? Were they not spending enough? Or is government spending irrelevant, outside forces are more influential?
2) Is there an upper limit to spending? If a £1 spent by the government is a £1 in someone’s pocket, then why not spend trillions on hospitals, schools, etc? Then we’d all have a tonne of cash. Yay!
3) If there is an upper limit, is this all not just an argument about what the limit is? Conservatives say x billion, labour x billion + y, you say x + y + z. Global finances are too complicated to come up with a number? Or is the point that we can aim for an optimal or at least “better” number?
4) Do you think us Brits had a real choice here? This (and follow up post) seems to be aimed at Conservatives and supporters but labour were also offering us austerity “lite”. Only the SNP seemed to be offering an anti austerity package (and they one almost all seats they stood in!).
5) Please make a note to follow this up in five years! What are the key measures that will make you think your analysis was right? Answering this now will help reduce the risk of bias / cherry picking results at the time. It would be great to see if you were right for the right reasons, and if you were wrong (it’s a possibility!), some analysis of what we can all learn from it.
1) Outside forces overwhelmed the Labour government in 08, there was nothing the Labour government could have realistically done to avoid a global economic crisis sparked by the US housing bubble (though stronger financial regulations might have made it hit a bit softer).
2) The upper limit is inflation. If the government spends more than is needed to get and keep the economy moving, demand will outstrip supply and prices will rise, resulting in a sharp spike in inflation. When the government begins to see rising inflation, it must back off spending increases (and possibly respond with cuts or tax increases).
3) The conservatives that I have encountered predominately deny the efficacy of spending altogether or argue that debt reduction will produce greater benefits than spending will. We know that we have not reached the upper limit because there has been no sharp rise in the inflation rate (though at various times in the last few years, some conservatives have claimed that rising inflation was imminent, it has not transpired).
4) Labour was not offering a panacea, but lighter austerity would diminish the negative effects, even though it would not eliminate them altogether. There was also the possibility that Labour would change policy faster than the conservatives would if it became clear that the economy needed more support.
5) If the relationship between austerity and stimulus continues to hold in depressed economies and if there are no major downward revisions to the multiplier under depressed circumstances, I will be proven right. If economies remain depressed but this relationship breaks down and subsequent research negates my claims, I will be proven wrong. If economies continue to recover and austerity is very mild or begins to be reversed, there may not be much further evidence either way in 5 years, and the current evidence will have to stand on its own.
[…] the Tory party was not the best option for the economy. Read this and more. For goodness sake, educate yourselves, people! Millions of people will suffer for the poor […]
here is my friend;s criticism. I couldn’t find an argument to address it in your list of rebuttals.
I love a good bit of fiction… He links austerity to short term growth only and not long term growth which would actually show a different picture. Cutting public sector spending and stimulating private sector growth should always increase growth in the medium to long term. Most major forecasts show the UK overtaking France and Germany as europes biggest economy by 2030. The delay in growth is more down to the very high private debt this country has, which largely drove the boom of the early 2000s. People have largely been paying this down and not spending the last 5 years but now it’s improving. This article like many says the impact of any change feeds through 100% immediately. Ludicrous I’m afraid but sounds good.
Also all these articles who talk about our debt issues and say it’s not an issue as its not that bad compared to historic performance ignore a key difference. Private debt was almost non existent before the 80s. In fact most of the public debt was held by UK citizens so internalised in this country so not a major issue. Now we have massive private debt as well and a high proportion of both is held abroad. Completely different and more dangerous situation.
If anything this article should give you comfort that austerity hasn’t actually been as deep as the press on all sides talks about…… Left wing press to slate the Tories, right wing press to praise them. Interestingly many commentators expect the extra £12m of ‘cuts’ will happen directly as a result of growth reducing in work benefits…. The Tories wouldn’t admit that as doesn’t make them look as ‘tough
The US ran private sector debts that were just as large (as % of GDP) and continues to run larger private sector debts but outperformed the UK and Europe:
http://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS
Long-term UK performance versus Germany & France has more to do with population–the UK’s population is growing faster than France’s and much faster than Germany’s.
“Most major forecasts show the UK overtaking France and Germany as europes biggest economy by 2030.” Who is that, Major Malfunction?…. Hahahaha….
Private unsecured debt doesn’t even count, as it is not real money in the classical sense of the term, just ones and zeroes generated off the back of a signature – which coincidentally is already factored in to the instantaneous inflation figures.
Does your friend work on a zero hour contract?
I doubt it. No sense signing on the top of your lungs from a the top of the shitpile…
Well written and researched, I am afraid that as you stated the people who will suffer are the people who critize your work. I am very saddened that the politics of division and fear now has a strong grip and I don’t think that will change in the near future. Propoganda and psychological mind tricks are now used as election tools as with charisma being the main qualifications for a politician. I have become increasingly alarmed at the lack of morality towards each other in the UK.
Great article, I particularly enjoyed reading the desperately blinkered rebuttals from the usual suspects 🙂
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A very informative and well researched piece that concurs with other studies that have been published. Strange that I’ve not found similarly well researched articles to support all the points being bandied about that led you to produce this, for which you’ve provided a good analysis of.