Correcting the Austerity Metaphor


Source: http://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/

When the austerity agenda was introduced after the financial crash of 2008, the British economy was compared to numerous institutions to make the agenda more palatable to the public. Without a doubt, the most widely used model was that of the household. Not only is this an insufficient model, but when considered more deeply, the metaphor becomes an argument against austerity as an economical ideology.

Short-term pain for long-term gain. Tightening the belt. In this together.

It all sounds so wonderful; the household that is the UK, coming together to reduce the country’s deficit. We all spent far too much recently and our debts have stacked up, so now we all need to make sacrifices to get that situation under control. If we reduce spending on unimportant things now, we’ll be in a better financial position and everyone will be better off in some unexplained way at some undefined point in the future.

Unfortunately, as idyllic as that sounds, it couldn’t be farther from the truth.

A household functions best when running at a surplus, giving it the ability to buy luxuries or save up in anticipation of future costs. This is a concept that most people will be familiar with and it is this familiarity that has been tapped into by the discourse of pro-austerity, predominantly neoliberal, politicians and media. By using such a relatable metaphor, they have made austerity seem like the ‘common-sense’ economic approach.

However, a nation’s economy does not function like the finances of a household. It moves in far more complex ways, and its health can in no way be diagnosed by merely looking at the figures of its debt and deficit. The volume of internal and external trade is far more important for an economy than the amount of money in any particular place, such as the Treasury, because a healthy economy must be an active one. Running a surplus, rather than a deficit, actually means actively taking value out of the economy, damaging its society.

There is simply no analogous aspect of the household financial dynamic to this concept. Unless you run a strict free-market system on everything from food and toilet paper through to each individual’s living space, it’s likely your household more closely resembles – shock! – a communist society than a capitalist economy. In principle, and with an irony that has not gone unnoticed, austerity actually makes far more economic sense in a society with total wealth redistribution than it does in today’s Britain.

With all that said, the household model is still worth considering in greater detail. After all, whilst the Rutherford-Bohr model is known to be inaccurate, it is still one of the best ways of understanding atomic theory.

Austerity within the household model means cutting costs everywhere. Everything is bought cheaper, even if it is of lower quality and will break more easily. Children are not allowed to reach for higher qualifications but sent out to work in unskilled jobs. Adults work longer hours to increase their income, even if it could lead to them becoming severely ill and unable to provide any income for extended periods of time. The bank balance might be richer, but their lives are poorer. Worse, there is no preparation for the future and everything is done short-sightedly.

Let us compare this with the economic strategy of investment, presented by those like Jeremy Corbyn and his Shadow Cabinet. With investment, higher quality goods are purchased that will last far longer and provide better service throughout; what may cost 5 times more lasts 10 times as long and functions thrice as efficiently. Children are sent to have complete educations in whatever field they aspire to, as a result not only becoming happier and more well-rounded, but earning a greater salary as well in the longer term. Adults work enough hours to get by but have plenty of time for rest and relaxation. The bank balance may not be as high, but the household is happier, healthier and more productive, and the next generation are well-prepared for the future.

The argument, of course, is that Britain simply can’t afford the latter. Indeed, many of Britain’s households find themselves in the former situation, not out of choice but necessity, for it defies all common sense to choose it over the latter. However, whilst this may be the financial reality for a frankly disgusting number of households in this country, it is not true for the country itself.

If you take a look at the national debt of the UK since 1900, a number of observations can be made, quite quickly in fact, that refute a couple of commonly-held assertions. I will be looking at National Debt as % of GDP, as it gives a far better indicator of the magnitude of a country’s debt than raw debt figures, utilising data collected by economicshelp.org from Reinhart, AER and OBR.

Source: http://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/

What is first apparent is how stable this figure has been since the 1970s, through Tory and Labour governments alike, remaining under 50% until the 2008 financial crash itself. The idea that the last Labour government’s spending habits were excessive and were to blame for the financial crash, rather than the irresponsible actions of the banking sector, has been disproven numerous times before now by people with far greater credentials than I. However, the degree to which this claim has been fabricated is clearly visible here.

If you must place some of the blame on the last Labour government, a far more pertinent argument would be that they failed to regulate the actions of the banks strictly enough. Worryingly, it seems as though successive governments have failed to act to remedy this situation.

The other assertion this data refutes is that having a higher national debt will prevent growth and be significantly detrimental to the UK economy. It is not desirable, of course, but debt levels were consistently significantly higher than 50% from after the First World War until the 1970s. To try and suggest that the British economy was not once successful during this entire period is entirely disingenuous. Whilst contemporary economics may work somewhat differently than during this period, this shows that the hard-line stance of high debt being catastrophic is simply not true.

Why, then, would a government decide choose not only to abide by austerity but to market it to the people? Naively, one might suggest that they truly believe that it is the best thing for the country. Unfortunately, when you look at where the cuts have been made by the most recent governments it becomes difficult to support this view: areas like the NHS, education and benefits are vital for those who are worst off whilst those who are most well off have received benefits like tax cuts.

Some people have described austerity as the “next” trickle-down economics: in truth, it is trickle-down economics, repackaged for a post-banking crisis Britain. The last Labour government practiced a less extreme version of it, but the truth is that even they failed to invest enough in this country. This is how Labour consistently alienated more and more voters throughout the Blair and Brown years, and why so many people are sceptical that Labour in any form, even led by Jeremy Corbyn, will actually be on the side of the people.

Investment is vital for the long-term wellbeing of this country. True, temporarily increasing the national deficit may hurt this country in the short-term, but in comparison to austerity, it is likely to hit everyone in this country more equally, even favouring those who are worse-off over those who are sitting on large amounts of money. If you are looking for short-term pain for long-term gain, a burden shared by the entirety of society for the sake of its own future, then investment, rather than austerity, is the economic approach you should be looking at.

By comparison, austerity is short-term pain for long-term pain, but only for those who are worst off. Austerity has no end-goal; it has no sense of progression onto better things; it is short sighted. It does nothing to remedy the situation that supposedly necessitated it, much like the household that fails to invest in its own future. Until we realise its fraudulent nature and embrace investment as a very real and credible alternative, austerity will be forever.

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© 2018 by "The Prole Star".