Saturday, August 21, 2010

Deficit is not Deniable, but neither is the fact that Osborne is a Chainsaw Maniac

George Osborne and other free market fundamentalists (FMFs) are trying to pin the label Deficit Deniers on anyone who does not agree with his chainsaw fiscal policy. Interesting, as most FMFs object shrilly to being called climate change deniers.

As with their approach to climate change FMFs grab one factoid and use it to "prove" their case, ignoring the rest of the complex system that they are dealing with.

Osborne waves the UK deficit, which is a very big number, and uses it to terrify gullible Murdoch journalists and the population at large, who are at present 50/50 over his approach. This will change when his cuts begin to hit. I do not deny that the deficit is a big problem, but the right way is to set it in its whole context, to view they system as a whole. When we do that, the urgency goes out of Osborne's case.

As I said before, I am not an economist, thank God, but I do understand that the economy is a dynamic, interactive system, not just a set of numbers on a balance sheet. Numbers are what we use to get a handle on economics, but they must be taken in relation to all the other relevant numbers, not used in isolation, as Osborne tries to do.

If I were an economist, I would work up a dynamic programme that could be updated to give an idea of the full interrelationships of the global economy. It should be a source of shame to professional economists that this is not available already. The climate scientists have made such programmes available.

In the absence of such a programme, I show here the figures for the UK economy in relationship with other countries, as far as I am able. There is another dimension, the trends in time, which I cannot always show. But what I can show is that there is no substance to Osborne's pant-soiling panic.

  1. Britain is the 7th largest economy in the world. (I know, we used to be 5th. Things change. Part of the change is the inclusion of the new EU on the list).  Even this simple figure has six variants: GDP per capita, GDP as PPP, &c. We are 31st from top in GDP per capita.  Or 22nd - 26th.

  2. UK National Debt in May 2010 stands at £903 billion (62% of GDP)
    This puts in at 22nd from the worst in a list of 129 selected countries.
    UK National debt is mainly owed to UK institutions, not foreign, and is not due as early as other countries' debt. Good. But it is due to rise in the next few years, because of PFI and pensions. Bad. The National Debt without the bank bailout would be £771 billion (54% GDP) This would put us at 38th from worst in the above list. Which is better; still not good but not bad, and definitely not enough to justify Osborne's hysteria.

  3. Now for the Budget Deficit. The Public Borrowing Requirement forecast (PBR) for 2010-11 is £178 billion,  (12.6% GDP)
    This list of countries by Deficit as % of GDP puts us at 8th from the bottom, 2 places better than Afghanistan. 12.6% would put us in 11th from bottom. Without the bank bailout, our deficit would be less, so the idiot bankers had their part in shoving us down to this bad place.

  4. Next, our Current Account Deficit (=Balance of Trade, exports compared to imports) is growing, nearly 5%. Not good. This list puts us 7th from bottom, 175 out of 181. Again, not good.
  5. However, the main threat, as the Osborne never tires of telling us, is that we will lose our AAA rating, meaning that it will be more expensive for us to borrow money, because "The Markets" will fear that we may not give it back. In fact, according to this report (CMA Global Sovereign Debt Risk Report, Dec 2009 .pdf download), we are already only AA, and stand at 39 from bottom of the pile. This still means that the bond market sharks have to kill 38 contries before they get to us.
    Never forget that the mighty credit rating agencies who allocate these ratings are the same idiots who allocated AAA ratings to the Toxic Assets. Infallible. Not.
All in all, the UK's Budget Deficit and Balance of Payments are not good. It is undeniable that we have a problem. The UK economy has many faults and weaknesses, not least that ecology is excluded from the equation. But that is another story.

The National Debt is a problem that has been with us for centuries. The idiot banksters made it worse. The idiot Labour also made it worse, by borrowing rapidly to bring the NHS up to EU averages, and to upgrade the education budget. Good Brownite intentions, but pathway to Cleggeron Hell.

We have this deficit problem, but George "Chainsaw" Osborne is going to make it worse. By getting hysterical about the deficit, and ignoring the other aspects of the economic system, he is going to kill the recovery, and land us in a worse mess, a DD recession.

What's more, his cuts will make inequality worse. Which will wreck Dave's aspirations for a Big Society.

Worst of all, Osborne is ignorant of the ecological imperative for us to decarbonise the economy. He does not understand the concept of Investment, nor does he understand that the Green New Deal represents real investment both in people and in energy security.

Many economists and commentators point out the risk of the DD. Many straws are blowing in the wind pointing to a DD Recession. Yet still, the Osborne brays, and we all await the screams of economic pain that will come when His Osbornic Madness gets busy in the autumn.

Don't believe me? Check out Paul Krugman  in the Guardian today. He likens Osborne to the high priest of a cult, about to make a human sacrifice.

What to do?

There is a Coalition of Resistance to the cuts which we should join. No doubt there will be petitions to sign, and demonstrations to attend. But will they work? No. We need to take effective action. What action?

I have Cunning Plan. Later.

This is what savage cuts are doing to Greece.
And to equality.

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