Pick up any broadsheet newspaper today, and you’ll definitely find an article (if not a feature) on the current deficit ‘crisis’. The resolution, according to the new Conservative – Liberal Democrat coalition, is cuts to public services. If you’re a little inexperienced in economics, yet a little bit of a history buff, this reasoned argument doesn’t quite make any sense when unemployment figures are so high and the numbers of people below the poverty line continue to increase. Further research indicates that the deficit’s proportion to Britain’s GDP is the lowest of the G7 countries.
Anyone who’s ever studied the Great Depression, even at GCSE level, is aware of basic Keynesian economics – that in order to escape an economic downturn you have to encourage exchange and monetary circulation. Named ‘fiscal stimulus’ by economists, this generally involves creating a general change of mentality, where the public begins to believe that the economy is stable, and their jobs (and savings) are secure. As such, in a globalised economy, it is perfectly arguable that the government has little control over the economy, but there are measures to ensure that this does not remain the case. A step towards self-sustainability has always been available, yet we continue to ignore this long-term development in favour of high-risk short-term growth in stopping financial services from moving their offices elsewhere.
The Case for Vestas
I can’t say I was a fan of supporting the Vestas workers on the Isle of Wight as I saw little benefit in making wind turbines in the UK that were only going to be exported to the US. However, more recently I have been beginning to see the benefits of the government nationalising the company. Apart from saving hundreds of jobs, had the government taken over the factory and given the reigns towards a workers’ collective (that would eventually pay the government back), the UK would have retained an exportable good.
This would have meant that there would be external currency fuelling the economy and thus less demands on government to fund a way of tackling the deficit. In addition, the government would have to do little to actually run the company whilst providing the workers with the benefit of continued employment and a fair wage from their gains.
Investment not Cuts
Public spending is not a bad thing as much as the Tories would like to argue otherwise; it provides education, health, transport, jobs, welfare, advice, defence… the list is endless. These services are essential for retaining well-being in order to provide potential for economic stability. If these services are cut, this may ease out current deficit but in the long-term, as Joseph Stiglitz has argued previously, we will end up paying the price with a slow descent into a poorer educated workforce and an inability to continue with our own economic development.
Obviously, there is a case for tackling our deficit, but we should look towards investing in a medium-term solution rather than paving our way into yet another recession. The argument held by Larry Elliot in an article published in the Guardian today, has been the development of export-driven economic policy:
Export-led growth is certainly what the UK needs: whether it will happen is highly questionable. Consider the facts. More than half British visible exports go to the rest of Europe, the bulk of them to the euro area. Yet this is a part of the global economy that struggles to grow. Over a full economic cycle from 2001 to 2009 Italy did not expand at all; Germany managed less than 0.5% a year; France a little over 1%. Spain, Greece and Portugal have all announced austerity packages and, like Britain, are seeking export-led growth. But this will remain a pipedream all the while Germany is imposing deflation on the rest of Europe and while Angela Merkel seems intent on becoming the new Herbert Hoover.
The Case for an Economic Re-evaluation
This global economic downturn should have given us the opportunity to question what society we are trying to develop. There are inherent problems through which our economic beliefs have shaped our political approach to the economy. Instead of trying to seek out those problems and identify how we can change them, we have opted to take the regular apathetic ‘shit happens’ attitude. Is this because we are scared to see the results as it would violently crumble our ideology of Free Market economics? Or is it because corporations and the government are fearful of the implications it would have on their profits and belief in infinite growth?
We need to recognise that the economic growth we continue to demand in order to achieve high rates of employment is not sustainable. For that, all we need to think about is where we actually gain our material wealth from; on a planet of finite resources, infinite growth is an idealist’s dream. For long-term economic sustainability we need to start creating a poltical economy which renews wealth from the efforts of its citizens rather than one that demands wealth externally.
Yes, this would mean that our manufacturing industry should be based on local demand and supply as well as local resourcing, ultimately not supporting an export-driven economy as I argued earlier, but the economy has never been so simple. My opinion is that we need to grow our export-based economy as a way of ultimately developing our own local economy. Thus, in a decade or two, the UK have a self-sustainable economy though initially grown-through and supported by external revenue.
Initially Published on AcaciaThorns: http://www.acaciathorns.net