Last Sunday, Karen and I went to the big Lakeland shop at Windermere. We do occasionally, and I always find myself people-watching whilst Karen browses around, picking up the odd item. For the uninitiated, the shop sells a large range of household goods, of good quality, along with what I would describe as middle-class fripperies. These fripperies include such items as banana-holders (yellow, to look like the actual banana, of course), overpriced Jamie Oliver mugs with monikers like 'Top Dad' and 'Green Fingers', and green mats to go in the bottom of one's freezer boxes to make the veg last (a bit) longer. There is a long list of bourgeois accoutrements which every respectable home must have.
On Sunday, the place was packed. At the one end of the shop, there is a large line of tills, and there was a decent-sized queue waiting to get to the tills. One would never have thought that the country was labouring under the burden of a large fiscal deficit, only just out of recession and facing predictions that worse might yet come. What was absolutely certain was that the people in the Lakeland shop weren't suffering too much. Maybe this is what Cameron meant when he said that 'we're all in this together'. Not so bad after all.
I've always noted that the affluent benefit most in an economic boom and suffer least in a slump. The concomitant is also evident: the least well-off suffer most in a slump and benefit the least in a boom. I also believe that the current government's approach to our fiscal challenges is primarily an ideological one. The ideology is essentially to do with reconfiguring the national economy in favour of the 'private' over the 'public'. Only yesterday, it was announced that public sector pay had fallen in real terms at the very same time that there had been an unprecedented rise in private sector pay. Lansley's proposed health reforms provide another example of this priority.
In an article on 29th March this year, Johann Hari called 'the deficit' 'the biggest lie in British politics'. He says that we have been fed a false account as to how we are in crisis and that the medicine prescribed is inappropriate. He adds, correctly, that what appears to be broad philosophical consensus between the main political parties is simply not challenged, except by a few Nobel Prize-winning economists. The lie centres upon the so-called debt crisis and the supposed need to eradicate the debt rapidly.
Hari goes on to say that, as a proportion of GDP, the British national debt has been higher than it is now for 200 of the last 250 years; that Japan's national debt is three times ours, and yet they are still borrowing at good rates. Cameron says that the bond markets demand that we pay off the deficit rapidly because, if we don't, our national credit rating will be downgraded and then we shall have to pay the debt at much higher rates of interest. Hari argues that the bond markets are making no such threat; indeed, he cites the Nobel-winning economist Paul Krugman, who says that the bond markets actually punish those who cut too quickly and deeply and thereby damage the prospects of economic growth. It's interesting that the last two countries to have their credit rating downgraded are Ireland and Spain, both of whom did precisely what Cameron is arguing for.
The economist who drew the salient lessons from the Great Depression, Hari says, was John Maynard Keynes. These lessons are as follows. In a recession, individuals sensibly cut back their spending and save more. This leads to a fall in private demand and a fall in economic activity. But if, at the same time, governments cut back, too, then overall demand falls, and recession can easily tip into a depression. This suggests that governments must act counter-intuitively: they must borrow, spend, and jump-start the economy, so as to prevent economic collapse and restore growth. Keynes calls this 'the paradox of thrift'.
It seems to have been forgotten by virtually everyone (or perhaps deliberately overlooked) that it was the government's decision to re-arm for the Second World War in the 1930s which was perhaps the biggest single factor in the emergence of Britain from the years of austerity. This re-armament was financed out of a public purse which ordinary people had been led to believe was empty. This programme of public expenditure not only enabled Britain to resist Hitler, but provided the stimulus which put the nation back to work.
It has to be said, sadly, that even the Labour Party (with the exception of a few individuals), has utterly failed to challenge Cameron's basic approach. Its message seems to echo that of the coalition government, arguing only that we should go slower and to a lesser degree.
I believe that Cameron's approach is doctrinaire. He has, after all, called himself the 'Child of Thatcher' in the past. He and Osborne discern, in the present economic climate, an opportunity to bring about a fundamental shift in our national economy towards a free-market, and much more laissez-faire environment. In her book, The Shock Doctrine (2007), Naomi Klein gives a long list of examples of politicians all over the world, in countries such as Argentina, Chile, Poland, South Africa and Russia, consciously and deliberately using adverse economic conditions, often actually confected by Friedmanite economists themselves, to bring about drastic shifts of a kind that enable the rich to exploit the poor. The International Monetary Fund and the World Trade Organisation have been willing accomplices in this exploitation of people's misery in these countries; indeed, in most cases, they have made financial aid to impoverished countries dependent upon the adoption of a political system designed to faciliate the looting of their countries by predatory capitalists.
These shifts have served to widen immeasurably the gulf between rich and poor. In our own country at the present time, it is the pooerst who are bearing the brunt; it is those most dependent on support of various kinds who are feeling the pinch and paying the price of a crisis caused by greedy individuals in the banking sector and elsewhere.
Those shopping in the Lakeland shop last weekend seemed immune to the supposedly straitened circumstances. When the economy emerges into better times, the tills will truly be groaning, whereas our public services and the pensions of ordinary working people will have seen an unparalleled curtailment.
