Sunday, October 20, 2013

Asset stripping bankrupt Britain


Let's start with a simple assertion: The United Kingdom has been bankrupted. This is not my assertion, it is the assertion of the Prime Minister of the United Kingdom, David Cameron, which he made in the House of Commons on the 16th October 2013. Here's what he said:
"The last Labour Government ... crashed the economy; they bust the banks; they doubled the national debt; and they bankrupted this country."
I really shouldn't have to explain why this is such a ludicrous statement for the Prime Minister to have made, and why the underlying assertion, that the UK is bankrupt, is so inaccurate. But there are a lot of cognitively illiterate people that accept such stupid and transparently inaccurate narratives, and repeat them in lieu of actually developing anything resembling coherent political or economic thoughts of their own, so I will.

It is a dire reflection on the state of political and economic literacy in this country that the Prime Minister can get away with spouting such transparent nonsense, without so much as a murmur of criticism from the mainstream press. The assertion about Labour busting the banks is bad enough (I'll come back to that later) but the real glaring demonstration of erronious judgement is the hystercal use of the work "bankrupted" to describe the UK economy.

The real state of the economy


In the final full year of the Labour administration, after 13 years in government, the official GDP to debt ratio was 44%. To put this in perspective, this was only slightly above half the average rate throughout the entire 20th Century, which was 81% of GDP.

The 20th Century debt peak came in the aftermath of the Second World War, when the national debt stood at an incredible 238% of GDP. Did the politicians of the day spend their time fearmongering about this debt? Of course they didn't. Did the Prime Minister of the day Clement Attlee describe the UK economy as being "Bankrupted"? Of course he didn't. Attlee and his government put all of their energies into rebuilding our shattered nation, and launching the most ambitious programme of state investment in UK history (social housing, the NHS, welfare, legal aid, nationalised utilities companies and industries, transport infrastructure, education ...). Contrast that with Cameron and his Tories, who never stop banging on about the national debt (even though after three years of their brazen economic mismanagement, it has still yet to officially reach one third of the scale of the post-war debt that Attlee and then Churchill had to deal with) and they've set about ruthlessly attacking and demolishing what remains of Attlee's legacy. If the UK wasn't declared bankrupt in the 1940s, it is absolutely ludicrous to claim that it has been "bankrupted" at any time in the recent past.

Aside from the fact that Attlee successfully dealt with a much larger national debt through state investment and nationalisations, and Cameron is using a much smaller debt to justify the massive scale of cuts and and privatisations, there is another glaring difference. Attlee's state investment projects resulted in a rapidly growing economy, and huge annual surpluses, meaning that the debt fell from 238% of GDP in his first full year in office (1946) to 194% in his final full year in office (1950), and he left his successor, Winston Churchill a healthy economy, with strong budget surpluses and a rapidly declining national debt. Cameron's government has done precisely the opposite, it has slashed public investment, resulting in a stagnating economy, run enormous budget deficits, and will leave the subsequent government a rapidly growing national debt.

David Cameron inherited a much less debt laden economy than Attlee, with the official debt to GDP ratio of just 44%, and has overseen a massive increase in the national debt. The Office For Budget Responsibility Recklessness (George Osborne's hopelessly discredited economics watchdog) now admits that the national debt will have risen to 85% of GDP by 2015-16.

The undeniable fact is that Clement Attlee reduced the national debt by 44% through a massive programme of state investment and nationalisations, and by the time David Cameron's Tories have left office, they will have increased the national debt by something like 41% with their programme of massive cuts and privatisations.

Economic illiteracy


One of the reasons that David Cameron and the Tories have got away with this massive increase in the national debt is the appalling state of economic illiteracy in the United Kingdom. When people hear the Tories banging on about how they have reduced the "deficit", they falsely assume that this means that they have reduced the "debt"*. What makes this confusion so much worse is the fact that David Cameron is prepared to outright lie to the public with claims that his government have been reducing the national debt, when the fact is that they have dramatically increased it every single year since they came to power.


In 2010 David Cameron's Tories inherited a national debt of £760 billion, that debt has already grown to £1,189 billion, and it is projected to grow further to £1,398 billion by the time their term in government is finished in 2015**. Only a barefaced liar could try to take advantage of public economic illiteracy with claims that this represents a "paying down" of the national debt.
 

Economic illiterates are not only found amongst the stupified tabloid reading public, several members of Cameron's own government have confused the meaning of "debt" and "deficit" including their economic spokesperson Claire Perry, who claimed that they are "the same thing"!

Credit Worthiness

Now that we are absolutely clear that the national debt has continued to grow at an astonishing rate under David Cameron's leadership, let's consider this: If The United Kingdom has been "bankrupted" as he has claimed in parliament, how on earth has it continued to borrow hundreds of billions? How can the national debt be growing at the fastest rate since the Second World War if this country is bankrupt? Who on earth lends money to a "bankrupted" institution?

The next obvious question should be this: If Labour "bankrupted" the UK, then how did the UK retain its AAA Credit Rating with the Credit Ratings oligopoly throughout the 13 years of Labour rule? We know that the Credit Ratings Agencies have a history of awarding spectacularly inaccurate AAA ratings to toxic sub-prime junk like Collateralised Debt Obligations, however, allowing a "bankrupted" state to retain its AAA rating is stretching the boundaries of plausibility a bit too far is it not?

While we're on the subject of Credit Ratings, it must be noted that the UK economy was downgraded by the Credit Ratings Agencies under David Cameron and George Osborne's watch. If we are going to allow hyperbolic claims that the UK economy has been "bankrupted", then surely it is more befitting to use the term "bankrupted" to describe the Tory austerity policies that have resulted in the UK losing its AAA credit rating for the first time since the 1970s?

Another point is that David Cameron and the Tories have been repeatedly warned by economics experts that the use of fearmongering language like "bankrupted" in order to describe the UK economy is very bad for market confidence. I mean, what international business would chose to establish business interests in a nation that is publicly described as "bankrupted" by its own Prime Minister?

The figurative language defence


Given that the UK has not been declared bankrupt by a court of law, the only possible defence for David Cameron's use of the word "bankrupted" to describe the state of the UK economy is if he has totally disregarded the actual definition of the word ("a person or organisation adjudged insolvent by a court, his or her property being transferred to a trustee and administered for the benefit of his creditors") and that he simply uses the word "bankrupted" as a figure of speech in order to score cheap political points.

The problem with this "figure of speech" defence is that it is an admission that David Cameron blatantly corrupts the English language, and disregards the formal meanings of words in order to spread simplistic and inaccurate "blame Labour" narratives. It is a demonstration that the Prime Minister of the United Kingdom is prepared to dumb down the level of political debate to such a ludicrous level that words of the English language no longer retain their proper definitions. This kind of childish and inaccurate use of language is desperately unstatesmanlike, and would surely have some of the more intellectually literate past leaders of the Tory party such as Winston Churchill and Benjamin Disraeli spinning in their graves.

Media non-reaction


One of the most appalling things about this bastardisation of the English language in order to score cheap political points is that, as usual, there was barely a murmur of criticism from the mainstream media oligopoly. We all know that David Cameron is an intellectual lightweight. We know he has a track record of warping the English language and telling outright lies. The problem is that the mainstream media endlessly allow him to get away with it. Either the paid journalists of the corporate press are so dumb that they can't spot this blatant misuse of language (which means that they are unfit to be doing their jobs) or they are perfectly aware that Cameron uses dumbed down terminology and outright lies to befuddle the public, but they continually let it slide (in which case they are complicit in the Tory agenda).

Contempt


Another appalling thing about this corruption of the language is that David Cameron is openly displaying his contempt for you (the general public). To make such counter-factual assertions in the expectation that he will get away with it relies on the assumption that he is the leader of a nation of lazy-minded cognitive illiterates who either don't understand the actual meaning of the term "bankrupted", or are so apathetic that they don't give a damn if their political leaders completely disregard the actual meaning of words in order to create desperately misleading political narratives.

Patriotism?

Is talking down the UK economy with words like "bankrupted" really how right-wing patriotism manifests itself these days? Making up lies about the state of the UK economy in order to mislead a public that they clearly regard with absolute contempt seems like pretty odd behavior for people that never tire of wrapping themselves in the Union Flag and proclaiming their patriotism.


Administration

If for the sake of argument we accept David Cameron's assertion that the UK has been "bankrupted", then that does at least offer an explanation of what has been going on for the last three years of Tory rule. The normal procedure for bankrupted institutions is that administrators are appointed to sell off the assets in order to return a few pennies in the pound to the creditors. The Tories certainly have been conducting a fire sale of British infrastructure. Half of the secondary schools in England have been given away for free (many to Tory party donors), the Royal Mail has been sold off on the cheap, the NHS and the justice system are being carved open for the benefit of private sector profiteers.

It seems that the Tories actually do believe their own lies that the UK is "bankrupted", and they're acting like a corrupt bunch of administrators, carving up the remains, not for the benefit of the creditors, but to sell them off on the cheap (or simply give them away) to their pals.


Busted banks


Before I conclude I'd just like to return to one of David Cameron's other claims; that Labour "bust the banks". 

Firstly: David Cameron seems to have forgotten that the Conservatives fully supported the Labour party financial sector deregulations that led to the financial sector meltdown, only criticising them because the deregulations didn't go far enough. 

Secondly: This "Labour bust the banks" narrative clearly contradicts the right-wing appeals to responsibility: If the poor are responsible for their own poverty and worklessness as the Tories love to claim, shouldn't the banks accept full responsibility for crashing themselves? 

Thirdly: The argument that the government are ultimately responsible for the activities of private institutions is a clear argument against the neoliberal ideology of privatisation and deregulation that David Cameron and the Tories adhere to so dogmatically. If the government is to be held accountable for problems in the financial sector, and the taxpayer is expected to bail out failed financial institutions, then the logical conclusion is the nationalisation of the financial sector. If the government gets the blame and the taxpayer foots the bill when it goes wrong, then surely the government should administer the financial sector and ensure that the taxpayer gets the profits when it goes right? If the state and the taxpayer end up with the blame and the financial burden of reckless financial sector gambling, yet the banks are allowed to continue operating as deregulated private enterprises, this creates moral hazard because the banks can continue to behave as riskily as they like, safe in the knowledge that that the government and taxpayer will bear responsibility and the financial cost of their mistakes.

Conclusion


David Cameron is guilty of using ludicrously hyperbolic language. The United Kingdom was not "bankrupted" in 1948 when debt was 238% of GDP, so to claim that the economy was "bankrupted" by Labour, when the national debt hadn't even reached one fifth of the size of the post-war debt is utterly disingenuous.

Cameron's childish "blame Labour" narratives are shockingly misleading, riddled with logical inconsistencies  and reliant upon a sickeningly smug and superior assumption that the UK public are now such a bunch of dumbed-down, unthinking halfwits that they will unquestioningly accept such abject nonsense as the truth.

The only possible defence for the use of such language to describe the economy is if Cameron is happy to utterly divorce words like "bankrupted" from their actual meanings, which is a childlike and desperately unstatesmanlike tactic.


If we are going to accept the fact that the Prime Minister of the nation uses such simplistic dumbed-down and dishonest narratives like this to explain the state of the economy, then we can pay at that game too. If Labour "bankrupted" the economy, then the Tories are quite clearly behaving like a crooked accountancy firm, carving up what remains of the bankrupted enterprise in order to hand it out at bargain basement prices, or even for free, to their mates. 

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* - A deficit and a debt are two entirely different things. A debt is the total amount owed, and a deficit is the amount by which the debt is increasing. To reduce a debt, you must pay off more than you borrow, to reduce a deficit you only have to reduce the amount that you borrow. A good analogy is that a debt is like the speed at which a car is traveling, and a deficit is like the acceleration of the car. In order to reduce the debt, you must actually reduce the speed of the car (decelerate) but to reduce the deficit, all you need do is reduce the rate of acceleration (you continue speeding up, but not with your foot to the floor).
** [Source]




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