Today’s Cuts Are Just Very Old Economics

Pull the wagons in a circle, ration the food, water and ammunition and fight on until we hear the bugle of the private sector cavalry.  We will have fewer troops, far less police and a whole wad of turkeys who voted themselves onto the dole.  I saw the writing on the wall (blogs passim) but this doesn’t matter.  No one who did was able to shift the election debate away from the sterile crap in which even Clegg (Liberal first past the not using rent boys post) looked good.  I can’t remember who the Chancellor is, but he’s clearly a numpty without his autocue.  Wasborn W Silverspoon or something?  He opposition seem to have put forward Postman Pat in his whiskey drinking dotage.  Vinny Cable was good a convincing us he had a heart, but has now clearly had the triple bypass.

Economics itself is now very wary of the private sector cavalry.  The rumour is Audie Murphy and John Wayne melted down the bugle and sold it as scrap to China.  The new ideas include aircraft carriers without aircraft.  In Gary, Indiana, cops paid by Obama face mobs of 14 year olds with AK-47s, and are pulling out soon, perhaps to let nature take its course.

The half million public sector jobs about to go, will hardly matter once 2 million private sector ones are created – or will matter beyond belief if the other side of this prediction is right and maybe we’ll see a net loss of 3 million jobs.

We could, of course, do everything 25% cheaper just by cutting wages across the board by 30% – even use a spreadsheet to ensure the bottom is cut less.  We could put everyone in jobs to reduce hours, in order to encourage new private sector solutions and time to get on with them by people with time released by the employment of others.  Could it be that people really have no real entrepreneurial skills and thus just want to hang on in safe sinecures?  What does this suggest on their real worth?

We have been paying chief constables, Town Hall worthies and even head teachers millionaire money.  Judges, lawyers, accountants … on and on and on.  Where is any evidence of any return from this?  Even police superintendents and college professors on £60K plus with mega-pension contributions are on more than the return from an invested million and cost us a million over 15 years.  Any sign any of these is worth much more than standard pay?  I’d say the evidence over the years is that high differentials don’t work, other than in preventing the work we need to get done and in creating a ‘benefit class’ far worse morally than the ‘evil poor’.

I believe these cuts equate to the situation in the 1920s when wages were cut by 50% and people forced to accept this and longer working hours.  Cops who were always doing such a good job (except for people who needed them) and now just worth a pink slip.  Our court system, which simply can’t cope, can lose 10,000 ‘slackers’ and so on.  Social housing is about to be fucked – yet we may have more economic problems because of our housing inflation and the false wealth ‘created’ by sitting in homes (which screws other parts of the economy and discourages investment in industry).

We are all in it together chap and chapesses – unless you are an over-promoted dork or rich of course.  What’s going on is a big gamble – but do you know what the gamble really is?

I think I know, but I can’t be sure.  My guess is that ‘money’ doesn’t care about the UK as we think of it, and knows there will be bargains for it to pick up if these policies fuck us worse than a couple of million will feel dumped out of jobs to benefits (if you can get any).  We may not be being bombed, but ‘money’ will be buying our equivalents of cement factories for the reconstruction.

All the modernisation stuff that’s been around in my career has failed.  We have more or less no mines, no heavy industry, import more food than we need to, make more or less no ships and may as well have left our oil and gas in the ground.  A mate in the US sent me a PhD syllabus we might teach on – it equates to an old HNC – thank god it’s distance learning and we’ll never have to look a student in the eye.

What we need is a new deal, from a new unmarked deck.

As to any claims the poor are being protected in these  cuts, anyone saying this should have their name taken to be lined up against the wall.  Inflation for most poor people must be running amok.  Food prices are up a lot and you can bank on other staple items rising way ahead of stated general rates of inflation.  The so called quantitative easing is both a tax and a pay decrease.  Social housing is going up in price, largely to make a better market of buy to rent and property companies.

What I’d like to see is a fresh look at these ‘rich people we can’t do without’, from people in suits swanning about not really being cops, super headteachers, people in universities teaching with no outside experience and on through politicians and bankers.  I suspect the financial collapse has been caused by them over-paying themselves, and that they have become a block to the kind of social innovation we need.  Many parts of this crisis were known and being investigated 20 years ago, the pension one being the most obvious.  Good companies were known to be going to the wall or being broken up by junk bond thieves, but nothing was done.

What’s happening at the moment is that the people who made the mistakes, took false credit in the bubble times and have stashed the money stolen, are making changes that don’t affect them or reveal what really went on.  At least six countries are making bigger cuts than the UK and the amount of our cuts is really only between 3 and 4% annually over the time period.  The notion that NuLabour were profligate probably fails on the amount spent, but surely succeeds in analysis of effectiveness.

The standard thinking on public spending had been that it should not exceed 40% of GDP, though we can tinker with this to use government money to tide us through recessions.  Some combination here of the NuLabour clown joker play and the collapse of the banking Ponzi put up UK spending to around 48% and deficit from around £35 billion to £100 billion plus.  There is cause to do something about this, though other international experience that is similar suggests cuts don’t really work.  The problem lies in some changes in economic realities that we don’t model well.  Some basic business models like retailing may be failing and basic work can be done much more efficiently.  We probably have little idea on what will work from economics.  The game will play out to its own rules.  Most economists are happy someone else will have to make the decisions and get blamed for them, which suggests they believe a depression looms and economists are jerks.

None of our politicians are offering anything other than variations on a standard theme and the malaise of our country is not being addressed, with the system that produces it remaining untouched.  I feel really sorry for any hard-working public servants who get the chop.  They will be the wrong ones.

MrG hits the right note in policing terms at  http://bankbabble.wordpress.com/2010/10/19/the-storm-before-the-calm/

In industrial re-organisation, my experience included time with a vicious asset-stripper.  We were always asked to ‘find the LOMBARDS’ – those taking Lots Of Money But Are Right Dicks’.  There was always faith we could find the people really running the business or who could do it better for far less.  The LOMBARDS were nearly all highly paid and highly pensioned.  The business always worth more once we had excluded them.

I’ve given Osbourne a few minutes and I’m bored.  The cuts are not as deep as threatened and although he mentioned the need for proper restructuring, he was short on how to achieve this, the key issue.  He said the better off will bear a lot of the cuts, but I don’t believe this either.  I believe he should have brought in a salary cap of £60K from next April across the public sector on top of the cuts, to help bring in younger leadership.  He is only tinkering.

We are expected to believe that Osbourne is serious on tax avoidance when he does it himself via a family trust and is speaking from a party funded by a Belize and Turks and Caicos operator?

Welfare is being slashed by £20 billion.  Many of us wanted to see changes, especially on abuse and payments to reasonably well-off people, but who is going to suffer?  How much money will be sucked straight off the ‘high-street’?

Why nothing on plans to get new areas of the economy moving?  Why no plan, say, to reduce police pay, but keep numbers?

1 thought on “Today’s Cuts Are Just Very Old Economics

  1. Pingback: “Slash and burn” OR ‘Trim and Smoulder’? « THE BANKSIDE BABBLE

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