Why should anybody oppose public spending cuts, and how?

18 05 2010

Naturally, nobody welcomes having services they benefit from taken away. The bulk of public spending, about 63% of the total, goes on health, education, pensions and social security. Everybody at some time in their lives will benefit from these services. The problem is that the current  level of government spending can only be sustained either by borrowing more money or increasing taxation.

The government, and most economists, believe that borrowing more money would push the country even deeper in debt, which would worry  those who lend us the money so much that interest rates would soar. Eventually, according to this argument, the loans would dry up and we would be faced with default and have to be bailed out, like Greece, leading to even deeper cuts. While we await the specific details of the new government’s plans to tackle this problem it looks inevitable that it will involve a mixture of higher taxes and some cuts in public spending. (For a full treatment of the background to this approach see Sean Collins)

Given the way that financial markets work, looked at in this way it is quite a plausible scenario. So how should we think about what will be in effect an austerity budget that George Osborne , the Chancellor of the Exchequer, will be producing in  a few weeks time? We could all simply take the view that we do not want our public services to be reduced at all.  It would certainly be a good thing if there was a more general opposition to austerity measures,  to any attempt to take this country backwards in terms of the quality of life.

However, in the absence of an intellectual case against the cuts, any such anti-cuts campaign will almost inevitably take the form of special case arguments, as has happened many times in the past. This can take many forms. A popular one is that management should be cut, not ‘shop floor’ workers. Another is that this or that other part of the state, usually defence or the civil service, should take the brunt of the cuts, rather than health, education or welfare. This approach does not oppose public spending cuts per se, but tries to divert them elsewhere. However this pans out, the result is job losses somewhere along the line and a net increase in human misery.

So is it possible, or even desirable,in the light of the undoubted economic problems facing this country, to make a case against public spending cuts per se?  Before we begin to answer this it is important to grasp one vital truth about public spending. All of it is financed out of the proceeds from private business, whether  industry or services,  through corporate or individual taxation. If these parts of the economy are struggling, as they are today, then the proceeds from taxation will stagnate. The current severe deficit problem was created because tax revenues fell in the past few years, not because public spending rose. While increased borrowing can make up for this increased deficit for a while, eventually the borrowing becomes too much and we are back in the Greece scenario.

So the real question about defending public spending is how to regenerate and revitalise the productive parts of the economy to the point where increased revenue from taxation, and therefore more public spending money, becomes plausible. That is why the most effective way of opposing public spending cuts is to argue for policies which encourage faster economic growth. Here is where we begin to part company with the government concensus about austerity. A key element of pursuing faster economic growth is for the state to invest more public money in science and technology education, in the encouragement of research and innovation and  in new infrastructure. This approach would involve some reorganisation and reprioritisation of public spending, away from consumption and towards investment.

Most importantly, the government must generate enthusiasm for a more dynamic economy and society. This would mean challenging the risk averse, pessimistic and therapeutic aspects of British culture. It would mean rejecting the view that economic growth should be green and sustainable, all code words for slow. It would mean restoring the pursuit of excellence as a goal of society and it would aim to bring out the best in people.

And the election winner is…austerity politics!!

13 05 2010

So we now have a government that I am guessing virtually nobody in the UK who went into the polling booths actually voted for, a Con-Lib pact. To me it feels like a kind of coup d’etat, in a very polite English kind of way of course without the martial music.  This uncomfortable feeling is compounded by the announcement that a fixed term parliament of five years has been agreed. Not only did we not vote for this government but we are apparently stuck with it for five years.

Of course, there was so little between the parties in terms of policy that in practice any outcome, whether one party or a combination of the parties, would have made little difference to what is about to happen to us as a nation. As is becoming clear, all of the parties, and certainly this new government, are committed to a future of economic austerity.  Already there is talk of big tax rises, both direct through capital gains tax, and indirect, through VAT. While we are still waiting for detail on public spending , events elsewhere, such as in Ireland and Spain where wage cuts in the public sector are being implemented, are surely a harbinger of what is to come.

The almost unchallenged assumption throughout mainstream politics  is that austerity economics is the only way forward.  Much of the already pitifully small investment planned by Labour for upgrading the infrastructure of the UK has been scrapped or threatened with delays. The third runway at Heathrow will definitely not go ahead, the Crossrail project could be canned and the high-speed rail link  from London to Birmingham and beyond is in doubt.

What plans does this new government have to stimulate economic growth, which is the only alternative to austerity? There has been nothing in any of the pronouncements so far which has addressed this in any concrete sense. The focus is entirely on cutting the public spending deficit, mainly  to appease the financial markets, the same markets which were invoked as a reason why this coalition had to be put in place as quickly as it was.

Indeed the mood music is that the Liberal influence will make this government even more prone to sustainability and a green agenda than the last, another way of describing low growth expectations. Both Tories and Liberals are against state involvement in the fostering and development of new industries, something Labour’s Peter Mandelson was a late convert too.

The impression of a coup d’etat by a small, elite group of mainly upper middle class men will be reinforced once the cutting starts. One consolation is that this small group, cut off from any real social base or proper legitimacy,  may not even have the capacity to carry through a major attack on living standards.  But by the same token neither will it have the vision or decisiveness to take the steps necessary to modernise the UK economy. We are likely to be left with the worst of all worlds, an inward looking, pessimistic and unambitious elite which tries to micromanage the UK economy at time when boldness above all is required.

NB One of the main challenges for anybody who looks at the prospects ahead and recoils, is to develop an alternative approach to the economy. This means more than anything looking at why and how economic growth must be put at the centre of economic policy. Daniel Ben-Ami has put together a very helpful list of people who are trying to work in this direction. If you wish to become part of this, do get in touch with anybody on that list.

Sailing into space

6 05 2010

No, not a comment about today’s election. Although I think we all have a sense that we are about to enter uncharted territory once the votes have been counted. This is a much more uplifting story from Japan about their latest spacecraft, to be launched within the next few weeks.  What could be more elegant than a spacecraft with sails, driven by the sun’s particles, flying at 500,000 miles per hour across the solar system. And note, this idea was first dreamed up by Arthur C Clarke in a science fiction story. At this crucial time in human history we need more people with big dreams, and more people prepared to turn them into reality. I am reproducing the whole story from the Times below.

Leo Lewis in Tokyo

The Japanese space agency, flushed with the success of its origami space orbiter and zero-gravity sushi experiments, is poised for another spectacular leap into the cosmos: the launch of the first “space yacht”.

In three weeks’ time, in a trial run that is expected to captivate space researchers and science-fiction writers alike, a Mitsubishi H-IIA rocket will be sent into orbit from the island of Tanegashima and release its small satellite into the void.

Soon afterwards, having spent a few weeks first settling into a slow rotation, Ikaros will reveal its secret, unfurling the microscopically fine 20m sail that some believe to be the future of interplanetary travel.

Over the following six months — and if the theory of “solar yacht” propulsion holds up — Ikaros will begin its silent journey towards Venus, driven by only the tiny but relentless force of solar particles buffeting the sail.

If it works, it will be a triumph. Other space agencies have succeeded in unfurling experimental sails in space, but have yet to produce the expected propulsion. With every passing second Ikaros should gather a tiny amount of speed.

The craft derives its name from Icarus, the character from Greek mythology whose ill-planned flight took him too close to the Sun and ended in disaster.

Keen to avoid this association, the Japan Aerospace Exploration Agency (Jaxa) is keen to point out that Ikaros stands for Interplanetary Kite-craft Accelerated by Radiation of the Sun. A larger version of the vessel could eventually travel at tens of thousands of miles per hour without any fuel.

The sail is designed to exploit the behaviour of photons, the particles that leave the Sun carrying energy in the form of heat, light and — critically for the space yacht — momentum.

It is the weak but unremitting beams of photons that give comets tails as their solar cores propel the dust behind them.

The Ikaros sail is coated with tiny mirrors that the photons bounce off, pushing the satellite through the resistance-free environment of space.

The Japanese experiment will test how quickly and effectively the photons can drive the satellite along, and how well the device can be controlled.

In theory, larger sails should deliver greater propulsion given enough time. Scientists in the United States believe that a sail a mile across could gradually achieve a pace to carry a craft across the solar system in five years.

If the sail were “shot” with the more targeted light of a laser, a solar yacht could theoretically achieve speeds of 500,000 mph.

In his final novel, The Last Theorem, the late Arthur C. Clarke imagined solar yacht races with astronauts competing to reach the Moon and back by photon power.

The sail, which cost about £10 million to create, is about the thickness of a Cellophane sandwich wrapper (32.5 micrometers) and covered with a second experimental material — so-called “thin film” solar panels, which also have potential applications on Earth.

The panels coat the sail so that Ikaros has a source of electrical power. It can then use it to ionise gas and fire it from small jets — a method of propulsion already used in conventional satellites. Japan is not the only country pursuing space sail technology. Russia is close to producing a version of the space yacht and much of the material science behind the sails has been developed in the United States.

Even if the prospect of sending sail-powered craft through the galaxy remains distant, the technology could make an immediate difference to conventional satellites. Without the need for fuel and cumbersome propulsion mechanisms, sails would allow satellites to be built smaller and lighter, requiring less energy to launch them into space.

The maiden Ikaros mission will last six months but the Japanese agency has further ambitions for the technology if it proves successful. It is hoping to send a device with larger sails towards Jupiter early in the next decade.

Flying high

Arthur C. Clarke, the English science-fiction writer, is best known for The Sentinel, which was made into the film 2001: A Space Odyssey. Clarke had a knack for producing visions of the future. He foresaw the creation of communication satellites, proposing they should orbit the equator.

Why vote? Part 2

4 05 2010

So,why vote on Thursday? It certainly cannot be because of any belief that any of the parties, or any combination of them in coalitions or minority governments, has a plan to reinvigorate either the economy specifically or UK society in general. This blog is grounded in materialism and does not believe that society can be progressed outside of continued dynamic economic growth. Discussion of how to generate more economic growth has been almost entirely absent from the pre-election debates, either on television or off it. All of the parties are mired in the low expectations of sustainable development and general pessimism about the prospects of our economy becoming dynamic again.

I therefore find myself caught in a no man’s land as far as the big economic issues are concerned. Unlike the Conservatives I do think that the state has a big role to play in helping to modernise the infrastructure of society like the transport system and  the power supply, in creating an education and training regime which is suitable for a modern society and in creating favourable conditions for the development and encouragement of new industries. The market cannot, and really never has, provided these basics of modern life.

Unlike Labour I do not believe that the state should be interfering in or managing the minutiae of our daily lives. The whole apparatus of the therapeutic state should be dismantled and we should be allowed to manage our own relationships with each other, within our families and outside of them, with minimal state interference. If those aspects of public spending were taken away it would make for a far better society.

The Liberals are a kind of anti-party at present which I cannot take at all seriously. There is nothing in their economic policy anyway which makes them stand out from the other parties.

Whatever happens at this election it should be clear that we are in a transitional state, away from traditional party politics but towards what is not yet clear. There have been some valiant efforts to inject more political debate into the election campaign, from the Institute of Ideas, Spiked, Big Potatoes and To the Point amongst others, most of whose take on modern politics I agree with. Experimentation along these lines must continue in order to help the birth of whatever new political movement will replace the old.

On the basis of all of the above, principled abstention from this election would be an entirely respectable position to take. However, there is in my view one reason to vote and one reason only. Whatever the result of the election, this country faces a very difficult future. Within a very short period after the election the next government will be forced to take radical steps to keep the economy moving. None of the parties has created a mandate for tackling the problems we face. In this situation the least worst scenario is to have a majority government which at least can be held to account for whatever it decides to do. Minority governments and coalitions will try to evade responsibility and load it onto the shoulders of others.

We need to be able to hold our government firmly to account for what happens over the next few years. New Labour is exhausted and the Liberals not serious. Neither has any chance of forming a majority government. For that reason, and that alone , the best result of this desperate election will be a victory for a majority Conservative government. I am not a Tory by instinct or tradition, but that is what we should vote for on Thursday.