Austerity: A Socialist Perspective



Back in 2010, the United Kingdom voted in a coalition government consisting of Conservatives and Liberal Democrats, headed by David Cameron. In doing so,the electorate chose to subject the country to 5 years of austerity and a sustained decrease in public spending. The aim of this was simple – to ‘get the deficit down’, as politicians seem to love saying, and to set the economy on the road to recovery.

Quite frankly, I couldn’t have cared less at the time. I was busy being a thirteen year old and worrying about all the important things that plague the minds of a teenager. I knew nothing about politics or the economy and I didn’t care to learn, as I failed to understand how these forces affected and would continue to affect my life – and everyone else’s, for that matter.

Over the course of the next few years, I gradually became more aware of what was going on around me. Not in a literal, immediate, sense – my spatial awareness is great – but on a national scale. This was largely due to my choice of subjects at A Level – a combination of Philosophy, Economics and History encouraged me to take more of an interest in the world I live in, and  in doing so, I naturally developed opinions about this complex, amazing place.

What I have come to realise though, is that these opinions were entirely determined by what I was exposed to. Teenagers like to think that they know everything and that all of their opinions are their own and so on, but this isn’t true. My family has always been relatively well off; one of my history teachers is a devout Conservative – something they made no effort to hide; and I was studying economics, mindlessly subscribing to every idea and theory that we were taught. So, without even thinking about it, I labelled myself as a Conservative – because everyone I knew was, and I determined that the economy was by far the most important factor in the world. Ever. And for miles around, my defiant cry could be heard.

“You can take our lives, but you’ll never take our free market!” Or something equally as copyright-infringing…

But slowly, imperceptibly, I developed a consciousness, and the capacity for independent thought. Finally coming to understand the truth hidden in a poster, adorning a wall in my Philosophy class room – “It is the mark of an educated mind to be able to entertain a thought without accepting it.” Sadly, it was Aristotle who coined this particular phrase, not my philosophy teachers. Though, they are both great at their job and truly wonderful people.

It is here that we finally meander our way back to the issue of austerity. The point that I have been trying to make is that I understand the Conservative perspective, because it was once my own, and I understand the benefits of austerity, because I once agreed with the policy. But since I have started using this thing I like to refer to as my brain, I have realised that there are more important things to be worrying about.

But lets pretend for a moment that the economy is the only factor we should ever take into account. On this basis, yes, austerity might eventually help – but even so, it currently isn’t. Growth has averaged around 1.5% a year under Cameron’s coalition government, Britain now has a budget deficit of 5% of national income, and UK government debt currently stands at around £1.5 trillion, or 81% of GDP, compared to around £0.76 trillion in 2010. The interest payments on this debt amount to around £43 billion a year – roughly 3% of GDP.

It’s hardly surprising, then, that the Conservatives are obsessed with getting the deficit down. We are, undoubtedly, in quite a lot of debt, and recovery is going to be difficult. In fact, the International Monetary Fund (IMF) recently announced that ‘Britain’s next government would struggle to reduce the budget deficit and that rising household debt was threatening the recovery’. Although contrary to this, the head of the IMF, Christine Lagarde, praised the coalition’s management of the economy the following day, saying it is ‘clearly delivering results’ – so I am inclined to believe nothing that the IMF says. Austerity might be working, and it might not. Maybe no one knows – I certainly don’t. But Cameron definitely thinks it is.

Over the last five years we’ve created a thousand jobs a day, and we commit to continuing that record because we’re going to continue supporting business and industry, continuing to make our country an attractive one to invest in and so we believe we can create those thousand jobs… They’re going to come from successful British businesses, large and small, that are expanding because we’ve got a long-term economic plan that’s working.

In his defence, the first part of this statement is true. Employment rose by 1.8 million between May 2010, when his government came to power, and the end of January 2015. This works out at roughly 1,000 fewer people being unemployed per day. The unemployment rate currently stands at 5.6% and the number of people in work is now a record-breaking 31 million. Perhaps he and Lagarde are right.

But maybe the figures that the PM all too readily quotes don’t quite tell the whole story. First of all, this rise in the number of jobs has not heralded a meaningful rise in real pay. For 6 years between 2008 and 2014, wage growth was constantly outpaced by inflation. This is reflected by the number of people now relying on food banks, which according to the Trussell Trust has almost tripled in 2013-14 to about 1 million people. Admittedly this trend finally appears to be changing, but due to low inflation – a record-breaking zero, rather than a significant increase in wage growth. According to the Bank of England, inflation may even turn negative this spring.

Screen Shot 2015-04-22 at 10.06.54It is also worth noting that this impressive increase in the number of jobs can, to a significant extent, be attributed to a massive increase in the level of self-employment and the ominous rise of zero-hour contracts. As the graph to the left shows, of the 1.1 million who found work between the first quarter of 2008 and the second quarter of 2014, around 732,000 were self-employed. The increase can partly be explained by people choosing to be self-employed, but also by an inability of some to find work as an employee.

The second part of Cameron’s claim however, is just that. Yes, employment is forecast to rise, but this will depend entirely on whether businesses decide to create jobs , and it seems that over the last 5 years, they haven’t. Business investment has been disappointing, and consistently overestimated by the Office for Budget Responsibility. In June 2010, a month after the coalition came to power, the OBR predicted business investment would increase by 10.9% and 9.5% in 2013 and 2014 respectively. Instead, it rose by 5.3% in 2013 and 6.8% in 2014. The fact that businesses aren’t investing as much as anticipated completely undermines Cameron’s claim.

We can’t rely on British businesses to create jobs, and we shouldn’t continue austerity. The ‘long term economic plan’ isn’t working. Admittedly some things have improved, but the range and extent of these improvements are marginal, and they have done little to help the vast majority of people. We need to try a new approach.

I’m not saying the economy isn’t important. There is undoubtedly a correlation between the strength of a country’s economy and the quality of life experienced by its people, and I can’t blame anyone for worrying about it – after all, we are repeatedly told that we should. I’m simply saying that a growing economy shouldn’t be a goal in itself, and that austerity is a terrible idea. Maybe, one day, it will help the economy to get back on its feet – arguably it already has. But it will neglect so many other factors along the way. If you just take a moment to remember the fact that there is more to life than economics, our national debt suddenly seems a lot less scary, and austerity becomes morally unacceptable. But I suppose that is the problem. All too often we forget that the economy, and what our government decides to do with it, has a direct impact on society and the people who constitute it. Austerity might get the deficit down, but it will destroy lives in the process.

Britain is often quoted as being the sixth wealthiest country in the world. Out of 196. Yet over 13 million people in a country of around 64.1 million don’t have enough money to live on. That means that around 1 in 5 people are living below the poverty line – in the UK.

People. Not numbers. Not money. People.

They have their own families, their own lives, their own problems and their own suffering. Austerity is good for the economy, you tell me? Well that’s great. But what does it do for these human beings? Maybe the thought of ‘getting the deficit down’ comforts them whilst they’re starving. I wouldn’t know, I’m lucky enough to have never been in that position, and I’m sure that the same would apply to anyone reading this.

What’s more likely is that austerity will do nothing for them. The Conservatives have proposed cutting £12 billion from Welfare Spending, further depriving the most vulnerable people in our society, in the name of austerity. They advocate this, whilst at the same time making deals with banks and other multinational corporations and making no effort to close tax loopholes. The issue here isn’t the economy. It is our morally corrupt ‘leaders’ and the people who vote for them. We are a society defined by self-interest. That isn’t our fault, we are all products of capitalism. But if we don’t acknowledge how twisted things are, if we don’t do anything about it, that is on us.

Someone recently told me that they were going to vote for the Conservative party because it was in their own economic interests to do that. Honestly, I think that is disgusting, and I think that the Conservatives and anyone else advocating austerity have it all the wrong way round. We shouldn’t reduce taxes and implement austerity to keep the budget in check. The deficit doesn’t really matter, and it is going to take decades to pay of our debt. But for all the years that we are living in austerity and reducing public spending to try to achieve this, people will be living in poverty. Instead, we should increase public spending, and increase taxes. Yes, paying 60% income tax rather than 50% might be a bit annoying, but it won’t degrade your quality of life in any substantial way. But for the 13 million people living in poverty, in our country, that 10% extra could be everything. Besides, the 60% tax bracket, or 50% as it currently stands, is targeted at the richest 1% of people – who, incidentally, have continued to get richer and richer throughout this period of austerity. A growing economy is great, but not if that extra wealth ends up lining the pockets of the rich, rather than going to those who need it most. Who even cares that much about their pockets?

Abandoning austerity would have an immediate impact on the quality of life for those currently suffering under it. Debt would increase in the short run, admittedly, but compared to the social benefits of greater public spending, that is insignificant. In the long run, increased spending on welfare, construction projects and the creation of jobs would lift people out of poverty and benefit the economy anyway. Consumption would increase as more people would have more disposable income, the government’s revenue from income tax would increase as more people would actually have an income, and government spending on welfare would ultimately go down as fewer people would need the financial assistance. It should be more important to maximise the minimum for everyone, and ensure a basic quality of life. To do that we need to learn to value each other without placing a value on each other, and realise that there is more to life than money.

Will Sharman

Domestic Economy

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