Wednesday, June 26, 2013

Four Tory Lies and Myths about the economy

Jeffrey Osborne                                                         Mr Burns

The Coalition Government's case is based on the following statements:

  1. Labour made a mess of the economy
  2. Labour borrowed excessively
  3. Austerity is the only way to cure the deficit
  4. We cannot cure the deficit by taxing the rich
  5. We are as bad as Greece
These statements are all either misleading or outright lies.

Labour made a mess of the economy

Misleading. It was the banks that made a mess of the economy. There was a global financial crisis in 2008/9 brought on by excessive and ill-judged bank lending. The banks went into an unusual spate of lending from the year 2000, as shown by this graph:
Fig 1

Labour were indeed guilty of not restraining the banks. They should have known that unregulated banks cause crashes:

Fig 2

It shows clear correlations between bank failures, financial deregulation and income inequality

So Labour's failure lay in not regulating the banks. However, it is noticable that the Tories were not exactly clamouring for more regulation of banks.

The banks duly crashed, and the UK economy had to bail them out, leading to a huge debt.

Fig 3

There is nearly £100billion difference between the debt Labour had with and without the crash. They were borrowing to increase the budget of the NHS and education after 2007.

So was the banks that made a mess of the economy.

Labour did not borrow excessively. That is an outright lie, as Fig 4 shows.

Fig 4

It shows the Public Sector Current Budget. The blue line is Tory government, the red line is Labour. The government has a surplus if the line is above zero, and is borrowing if the line is below zero. If anything, Labour borrowed less than the previous Tories  - and the Tories had the benefit of North Sea Oil revenues.

So given that we have a big debt problem thanks to the banks, the Tory solution is to cut government spending with a painful programme of austerity cuts. Many economist have said consistently that this is the wrong approach. The best solution is to borrow or, better, create money to invest in infrastructure. Osborne refuses and says his way is best. 

Is it?


The austerity policies of this Coalition Government are disastrous. The disaster is summed up in two graphs:

Fig 5
Fig 5 shows the length of time it took for the UK economy to recover from recession. The present recovery is clearly taking longer than in previous recessions.

Fig 6

Fig 6 compares the recovery of the UK, Germany and the USA from the banking crisis of 2008. Again it shows us lagging comparable countries.

The way out of our financial difficulties is to stimulate the economy through infrastructure investment, primarily in energy conservation, house building and renewable energy technologies.

I will have to leave out point 4  about taxing the rich for today because I have to get ready for the annual pilgrimage to Glastonbury, but just to round it off, here's a graph that gives the lie to the myth that we are as bad as Greece:

That's Greece at the top, with the worst debt to GDP ratio, and that's us down second from the bottom with the least worst ratio.

I am indebted to the nef Mythbuster course for prompting me to put this up. They had other myths, like a review of the strivers/skivers debate, but overall you get the idea. We the British people are kept in the dark and fed on bullsh*t by politicians and most journalists. 

If we're not angry, we should be.

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