Well Ed, Keynes might not have been on side..
Ed Balls’ recent announcement that Labour would prepare its Shadow Budget within Coalition spending limits came less than two weeks after the IMF urged George Osborne to slow the pace of cuts.
So why did the Shadow Chancellor meekly abandon his position just as it received tacit endorsement from an organisation that was hitherto austerity’s biggest cheerleader?
Keynesians were flummoxed. However, for all Balls’ indignation over austerity, Labour’s previous prescription was really just austerity-lite: they were still going to cut, just a bit more slowly.
Balls has recognised his limited room for manoeuvre. With the UK having lost its prized AAA credit rating in February, a slowdown in the pace of cuts – never mind a net spending boost – may ultimately increase the cost of borrowing and balloon the deficit further still.
The name of Keynes has been invoked by the Left to damn the austerity drive across Europe, while the Right ripostes that imprudence during the boom left the finances too fragile to countenance more stimulus spending.
Often overlooked is the fact that Keynes preached fiscal constraint in the boom times to leave a budgetary surplus to draw on when the economy contracts: “The boom, not the slump, is the right time for austerity,” he wrote 76 years ago.
Achieving a tri-partisan compact to pursue such policies seems a forlorn hope if you subscribe to the axiom that voters tend to vote for parties that spend heavily during boom times but lurch rightwards when the economy nosedives.
The rise of fascism is often cited as exhibit A: European trends have often supported this theory. With the debt contagion threatening to engulf the Eurozone, a wave of Rightist victories left only Belgium, Denmark, Austria and Slovenia of 27 member states with left-leaning governments by 2011.
The election of François Hollande in France and electoral breakthrough of Leftists in Greece has reversed the polarity somewhat, but we’re a long way from 2007 when 10 left-of-centre administrations held power in the Eurozone.
The undeniable hardening of opinion against benefit ‘scroungers’ amid the biggest squeeze on living standards since the 1930s further validates the theory that voters grow less receptive to social justice narratives when their own economic situation deteriorates.
But people don’t simply become hard-hearted.
Swing voters – because most voters are solidly right- or left-leaning regardless – often vote for parties whose spending patterns mirror their own when income rises or falls.
But it’s counterproductive, cry the Keynesians, for the state to emulate a private household’s eminently sensible approach. Cut spending on eating out by £100 a month and a household saves precisely £100 a month. Income is entirely unaffected.
Between government spending and income, however, there’s a feedback loop, the so-called ‘paradox of thrift’: slash public spending and you put people out of work, thus increasing the benefits bill and reducing income tax receipts. Rising unemployment reduces consumer demand and fewer public-sector contracts are available to private businesses – again stunting growth and reducing the tax take.
Perhaps, then, swing voter should defy their intuition and vote in governments that implement countercyclical spending policies – so parties of the right to ‘fix the roof when the sun is shining’ and then of the left to cushion the crash.
Canada, which turned a budget deficit of 9 percent of GDP into a surplus in just three years following a humiliating ratings downgrade in 1992, represents a good case study for countercyclical spending. Scarred by the early 90s recession, there was a bipartisan consensus to avoid deficits, so the Canadians were better equipped for stimulus spending when the 2008 crash hit. Canada has created more than 600,000 jobs since the slump.
Perhaps European governments should practice what they preach to Northern Rock and RBS, who are forced to keep greater reserves of capital to act as a safety buffer during unforeseen events. “When you have an extra kidney, you don’t have to predict the source of harm – whether it’s going to be a snake or cancer or whatever,” said Nassim Nicholas Taleb, author of the Black Swan, on Radio Four last year.
“Likewise if you have a lot of savings, you don’t have to predict the cause of the next crisis. But if you have debt, you need to be very accurate in your forecast of the future.
“To emulate nature, we could just say we don’t want government debt […] we want a surplus in the good years. It is completely immoral to stick your descendents […] with the cost of your mistakes. Even if debt is economically efficient, you’re not bearing the risk.”
Increased spending during downturns and retrenchment amid booms would surely result in a more serene economic cycle; lower peaks, sure, but shallower troughs too.
It seems an impossible utopia. Across Europe policymakers have coalesced behind a consensus that deficit reduction should trump growth spending. Meanwhile, the Tories berate Labour for its profligacy during the boom times, forgetting conveniently how David Cameron had promised before the crash to “share the proceeds of growth” between tax cuts and spending rises – which surely would have resulted in a similarly huge deficit.
It seems that neither the Tories nor Labour have the stomach to challenge voters’ understandable instincts over state spending, whether its indulgence of largesse in the good times or approval of self-defeating austerity in the bad.
One can hardly blame them: had the Tory Party advocated punitive cuts between 1997 and 2007 their trio of General Election defeats would surely have been far heavier.
In that sense, when it comes to boom and bust, it’s neither the fault of Labour nor the Conservatives – we, as voters, sort of get the economy we deserve.
That said, the correlation between voting patterns and the state of the economy doesn’t consistently fit this model if you examine UK electoral history.
Labour governments were elected during the 1930-34 and 1973-76 recessions, although the early 80s downturn ushered in Margaret Thatcher and the Tories also presided over the next contraction, between 1990-1993. The 2010 General Election, the first since the 2008 financial crash, again returned a Conservative Prime Minister, albeit the Tories failed to win a majority despite the incumbent Labour administration having presided over the worst slump since the 1930s.
Winston Churchill is often quoted – falsely, it transpires – as saying:
“If you’re not a liberal when you’re 25, you have no heart. If you’re not a conservative by the time you’re 35, you have no brain.”
You might also tell swing voters that if they don’t lean right during a boom and left during a bust then they’re fuelling a boom and bust cycle (a less catchy saying, I know).
Austerity Discredited, Not Defeated. Time to Fight for Jobs and Growth.
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Globe and Mail
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Men’s News Daily
Portugal’s crisis shows that our problems haven’t gone away
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Richard Sharp has been chosen as a regulator of the financial system in the UK. He has been a big contributor in the past to the Conservative party in power. Now he has been appointed to help protect the public from another financial crisis.
And, by the way, Mr Sharp worked for Goldman Sachs for 22 years. Should the public be worried? Should the fact that Goldman has direct access to influencing financial reform put a pall on the success of reform?
The information below is quoted from a pdf document (page 5) called Doing God’s Work: How Goldman Sachs Rigs the Game (March 2011) by Spinwatch. The report traces the many connections that Goldman Sachs has within the UK and in the EU through revolving door politics and lobbying against reform of the financial system in Europe. Page 6 has a chart of the web of relationships of Goldman with various politicians in the UK:
Jumping through the revolving door
Ex-Goldman people have also walked into key public positions in the UK: former chief economist at Goldman, the late David Walton, was handed a seat on the Bank of England‘s interest-rate setting Monetary Policy Committee (MPC), and Paul Deighton, a former chief operating officer at Goldman, now runs the London Olympic Games organising committee. In March 2011, Ben Broadbent, an economist from Goldman Sachs joined the MPC.
Funding the party
Over the last decade, senior Goldman Sachs and ex-Goldman Sachs bankers have donated £8.8 million to Britain’s political parties.
* Richard Sharp £404,000 donated to the Conservatives since 2002. Ex-Chairman of Goldman Sachs’ Principal Investment Area in Europe spent 22 years at the firm (he left in December 2006). Sharp is also a supporter and funder of Tony Mayor, Boris Johson’s Fund for London, both personally and through his Sharp Foundation. (from page 5 of report by Spinwatch)
A group of Conservative MPs listening to David Cameron
“What we do in the Coalition government is frankly ludicrous. We’re in chaos and one only has to see the headlines to see this fact. Is it satire or reality? It’s very hard these days to see the difference,” Edward Mulrooney, the head of the government’s PR team cited in the report.
The Prime Minister himself has vowed to change the way people view the Conservatives and said this in a high pitched falsetto voice: “Swivel eyed loons? No, I want people to take us seriously. Did I just say that? Stop sneering at me you little oik, I want you to take me seriously, waah hah hah hah eeeep eep eep!”
Nick Clegg, leader of the Lib Dems provided even more lunacy yesterday when he told everyone he was fully committed to Britain staying in the EU. To loud guffaws from the backbenches, he was stretchered off to the parliament’s welfare office crying like a little girl.
“You must take us seriously. We are serious in our policies. Honestly..” Mr Cameron said with his eyes moving around erratically.
Following the success of the UK Independence Party in many local elections where they gained huge numbers of seats, often without candidates setting out what they intend to do about the wide spectrum of issues confronting the electorate, or even turning up, the party insists it has listened to the public and intends to find some really good policies, and pretty damned soon.
U-KIP insists that in the finest traditions of British commerce ever since the glorious 1950′s, that of course will mean ignoring the best that the British policy industry can offer and catching the first plane to China to source them at a fraction of the cost.
‘Keeping policy making in the UK has been verging on impossible for some time now – we had become lazy and simply couldn’t come up with anything new,’ said newly appointed U-KIP party spokesman Xin Jian. ‘But our friends in Guangdong have shown superb policy work ethic and now hold greater academic credibility than our onshore source of crude populism. Working conditions there, fairly good by Chinese standards, rest assure. Success!’ added Nigel Farage.
British voters have mixed feelings on the subject. Floating voter Reginald Evergreen, 54, from Lincolnshire said that it made perfect sense as everything else in his house was made in China, so why shouldn’t his electoral future be bought from a country which is ‘streets ahead’ when it comes to immigration? His wife Raquel, 23, said that she votes UKIP and so is not in a position to make an informed judgement on the matter at this particular point in time.
So far, the Chinese policy-making unit has come up with a number of suggestions that have found favour with UKIP chiefs, including ingrained suspicion of anything foreign, strict and arbitary residence rules, knocking down town centres and replacing them with concrete, capital punishment for petty theft and having the country ruled entirely by bitter old men who think the world has gone to pot ever since Gracie Fields retired.
‘We have found it harder to sell them the idea of a one-child policy,’ admitted Xin Jian. ‘Though in the case of the average U-KIP member, that would seem to be an academic point.
Thatcher opponents have driven the song ‘Ding Dong, the Witch is Dead’ to the top of Britain’s pop charts. Was the ‘retaliatory’ promotion of a 1979 punk song fanned by fans – or a good capitalist moment?
Two songs are battling to the top of the British music charts in memory of Margret Thatcher. One is, her supporters say, in bad taste, but the one adopted by fans of the late Conservative prime minister isn’t quite what it seems, either.
Opponents of Thatcher have campaigned successfully to have “Ding Dong, the Witch is Dead”, a song from the 1939 film “The Wizard of Oz” composed by Harold Arlen and Yip Harburg, to reach the top spot Britain’s official charts.
The response from Conservative Party supporters was swift, with newspapers including The Daily Mail and Daily Telegraph demanding that the BBC refuse to play the song. The BBC has said it will play a five-second clip of the song along with a news item explaining why during its official chart rundown on Radio One, Sunday.
RECOMMENDED: Keep calm and answer on: Take our United Kingdom quiz.
Equally irritated, though less outraged, Tories had another plan: counter Ding Dong with a song of their own. They chose the little-known 1979 punk number “I’m in Love with Margaret Thatcher” by the Notsensibles.
The British press loved it — and why not? It’s a good story, in a silly sort of way: a bit of political argy-bargy in a fun and digestible package.
The media didn’t exactly work hard to uncover the truth of the story, such as it is. A phone call to the band’s former frontman, Michael Hargreaves, was all it took to discover that the campaign predated the Tories’ adoption of it.
Hargreaves himself started the campaign with a Facebook page on Wednesday that soon garnered 8,000 likes. Surprisingly, though, by Friday it had been adopted by Conservative Party supporters as a counter to “Ding Dong.” Facebook, Twitter and Tory blogs lit-up with requests that people buy the song in order to keep the anti-Thatcher song from reaching the top spot in the hit parade.
Would Maggie be proud?
In some press interviews, Hargreaves has implied, rather unconvincingly, that he is a supporter of Mrs. Thatcher. But if the song is a hit, the royalty checks may represent some private enterprise Margaret Thatcher would approve of.
Hargreaves, an ex-punk rocker who now works with adults with learning disabilities, is an unlikely figure for adoption by Conservative Party members, though he did say “Ding Dong” was disrespectful. (Read a in-depth profile of Margaret Thatcher here.)
“My grandfather was [both] a Christian and a communist. I’m a fat, 50-year-old punk. You make your mind up about my political sensibilities,” he says.
Hargreaves, who is due to perform with his old band on BBC television news in Manchester on Monday, says he doesn’t really mind how high the song charts in the end, but that the experience has been fun. “We dunked a pebble in the lake and there seems to be a few ripples.”
Eighty-five seconds of the song were previously featured in the 2011 biopic movie “The Iron Lady,” starring Meryl Streep as Margaret Thatcher.
“I find it hilarious that Tories have adopted it,” he says. “The song is a sort-of tribute and sort-of not.”
Could Boris Johnson actually end up as Britain’s prime minister?
And in that key word lies the rub — and Cameron’s worst nightmare. The rise in prices on the Boris Index is a sign that many Tories are resigned to losing the next general election. The right, which has never wholly trusted Cameron’s attempt to “detoxify” the party’s image, is disgruntled; the center worried that a panicky “lurch to the right” spells electoral calamity. It remains rather easier to imagine Boris as leader of Her Majesty’s loyal opposition than as prime minister. Indeed, even Tapsell only ventured that “perhaps” Boris could be a credible prime minister.
Boris is fun. But political prime-time is not the same as light entertainment.
So a large part of the pro-Boris bandwagon is predicated upon Cameron being ejected from office after a humiliating election defeat in 2015. Boris, back in parliament by then (even though his second mayoral term does not end until 2016) would then be swept into the leader’s office by depressed Tory members who want nothing more than to be cheered-up.
It takes no great powers of political analysis to perceive that this would be a high-risk adventure. For instance, the idea of Boris ever — even accidentally — having responsibility for Britain’s nuclear missiles is not a soothing one. But nor is it an idea that can be dismissed as evident nonsense.
For the time being, Boris is urging some measure of loyalty. “After 2016 who knows what will happen” he says. “But I’m very, very happy with the job of mayor of London.” Discontented Tories — i.e., his putative rivals — should “cool their porridge” and “save their breath.” They need to “put their shoulders to the wheel, all hands to the mast, and all shoot from the same trench — to mix my metaphors.”
And yet none of this quite convinces. Boris’s relationship with Cameron has long been uneasy. Cameron was two years Boris’s junior at Eton (and Oxford) and, befitting the time-honored conventions of the British boarding school, the older boy has never quite lost the sense of superiority first ingrained by seniority when the pair were teenagers.
It certainly seems that way. In an interview with a French radio station this month, Boris suggested, in his typical style, that he and David Cameron were “like Wallace and Gromit” though, as the Guardian observed, “he didn’t say which was the absent-minded inventor and which his far brainier dog.”
Be that as it may, many Tories still consider Boris the Clown Prince Across the Water. This despite a record of achievement that is, by objective standards, negligible. Boris has performed adequately as mayor of the capital city, but even his staunchest admirers are hard-pressed to produce any lengthy list of achievements he has to his name. London’s mayor has relatively few powers. Like being governor of Texas, it sounds a weightier position than it really is. There is a fear that, just as the United States was lumbered with George W. Bush, so Britain could be stuck with Boris. Like Bush — whom Boris once described as a “cross-eyed Texan warmonger” — Johnson’s appeal is as much a matter of style as substance. He talks “Real Tory.” From his euroscepticism to his enthusiasm for lower taxes, Boris tickles the Tory party’s erogenous zones. And he does so in a fashion that seems to entertain the public.
Perhaps it is a feature of these rancorous and gloomy times that Boris is no longer as preposterous a notion as he once seemed. He is not a “serious” politician but, as election results in Italy and Israel have shown recently, non-serious, populist, politicians are able to capitalize upon public discontent.
Before he became mayor of London, Boris briefly served as shadow arts minister in 2004. Upon his appointment he told one interviewer, that “Look the point is … er, what is the point? It is a tough job but somebody has got to do it.”
We may yet hear a variation on that refrain once again. Being leader of the Conservative Party is a tough job that someone has to do. So why not Boris?
The mind, as Boris might admit himself, boggles.
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SUBJECTS: POLITICS, ECONOMICS, BRITAIN, EUROPE
It’s a fairly well-established fact, in political psychology, that leftwingers report lower levels of happiness than rightwingers. (This fact, you may have noticed, is self-reinforcing: learning of it makes leftwingers even gloomier.) What’s much less clear is why. Conservatives like to argue that it’s because the things they value – traditional families, faith, free markets – make people happiest. Liberals prefer to think conservatives are blinkered, clinging to an ideology that lets them avoid confronting life’s grim truths; it’s even been proposed that conservatism might be a mental illness. And there’s an added complication: the social psychologists who study such questions, as the American academic Jonathan Haidt has complained, tend to lean left. But does that mean they are biased – or that, when you closely study the real world, you usually end up liberal? (“Reality has a well-known liberal bias” – Stephen Colbert.) It’s all very murky – though if you’re a liberal, like me, that’s less of a problem, as studies suggest we might have more capacity for tolerating uncertainty. So there’s that.
Truly illuminating new research in this field, alas, is almost as rare as a watertight argument in a Richard Littlejohn column. But a forthcoming paper from the University of Pennsylvania may be an exception – even though its authors, Jonathan Berman and Deborah Small, weren’t studying politics at all. Their subject was selfishness. In a fascinating set of experiments, they showed that when you give people a financial windfall, they’re happier if you insist that they spend it on themselves. If you give them the option of donating it to charity instead, but they choose the selfish option, they’re less happy – presumably because of the undertow of guilt. After all, as Berman and Small write, “Every dollar spent on oneself could otherwise be donated to someone in need.” They gave their subjects a small cash sum as payment for a gruelling hour of psychology tests. Some were given a choice between keeping it and giving it to Unicef; others were told to spend it on themselves. (A control group was given a choice of two selfish options, to make sure it wasn’t the mere fact of choice that caused misery.) Those on whom self-interest was imposed were happiest: they were “freed to enjoy self-interest without selfishness”.
Might this explain what conservatives are smiling about? As Eric Horowitz points out on his excellent blog, Peer Reviewed By My Neurons, where I first discovered the study, rightwing ideologies do arguably impose selfishness on their adherents. If you believe that society benefits most when everyone pursues their own interests, then good, caring people are obliged to act self-interestedly. Guilt doesn’t come into it. Liberals, meanwhile, may be as selfish as anyone – but their selfishness feels more chosen.
Sadly, it’s not feasible just to switch your deepest beliefs to ones that make you more cheerful. But there are other, smaller, nonpolitical lessons here for us all. One obvious tactic is to pre‑commit to your self-interested activities, instead of undertaking them spontaneously. Make hard‑to‑break plans with friends; pay for holidays months in advance; buy cinema tickets for next weekend now. The less freedom you have to back out, the more fun you’ll have when the time comes, because doing something more selfless instead won’t feel like an option. This is one sense in which even liberals probably shouldn’t be pro-choice.