Is the UK elite too soft to cut public spending?

8 09 2009

AP3JW14CAIC0UF9CAP1ZS3HCA08CDRACA06ZKDNCAO1S3HRCA2QEX80CAH39K4JCASTQ9QWCA6W1DG3CAT17RVCCA3R31ZVCAYORE6JCAP4TZJJCATQOWU7CADGR38OCA9AFAVJCA2EEGUBCAV998NYCAM0TUPO‘There is no one in the civil service with real hands on experience of fiscal hard times. They know they have to learn very fast.’

This comment from an academic who has been teaching civil servants about the UK’s economic past sums up some of the problems facing the UK political elite in dealing with its current economic black hole. In fact the civil servants who administer the state on a day to day basis are lacking in many of the qualities which enabled the UK to survive and prosper in the past, not just the experience of dealing with recession. One symptom of this has been the increasingly porous character of state institutions with leaks and whistle blowing becoming more and more prevalent.

More importantly, over recent years as expressed through the policies of New Labour, the state has become used to dealing with market research led, short term policies rather than longer term strategic ones. This is all fine when the issues concerned are trivial domestic political issues, such as drinking in the streets. The problem is that when a serious and profound problem does arise, the ability to respond effectively does not exist.

Now that such a deep problem, the recession, has appeared the state is confronted with an enormous problem with which it is ill equpped to deal. The price of bailing out the UK financial sector has been to create an enormous budget deficit. There are two main ways that this could be managed. One would be to mobilise the resources of  the state into stimulating new productive investment in order to grow the economy as fast as possible. But growth has become a dirty word in the UK unless caveated by the need for ‘green ‘ growth.  The UK economy, along with most of the developed economies, needs fundamental restructuring. New growth can only come out of the destruction of the old and out-dated. The kind of dynamic political leadership needed to push through such a programme simply does not exist.

The second way of managing the debt is more short term, and therefore more attractive to the UK elite, and that is to cut public spending in an effort to balance the books. Even this approach makes politicians of both main parties feel extremely uncomfortable. Both parties are casting around for the language in which to disguise the cuts both are planning to make.

As Frank Furedi has argued in relation to the Lockerbie affair, the UK elite has become so incoherent that it has become incapable of managing even the day to day affairs of government effectively. The UK elite has become soft and ineffective at its heart. One expression of this has been the fact that despite the huge amounts of money put into education and health over the past ten years these public services are still hugely inefficient and unsatisfactory.

The good news for public sector workers from all this is that no government, Labour or Tory, is likely to have the strength to push through the kind of public spending cuts which many now fear are necessary. There have only ever been two prior occasions when public spending has been substantially reduced, after the massive increases caused by World War 1 and World War 11. It is quite possible that only external pressure, from the IMF for example, would make this happen today. The bad news is that the inability of our political elite to do this shows it is equally incapable of taking the tough decisions needed to keep the UK on a growth curve in the longer term.

What’s wrong with a Green New Deal (Part 2)

20 04 2009

As you can see from the responses to my previous entry on this subject, the Green New Deal (GND) is a very controversial subject.  The amorphous character of the debate around it makes it very hard to pin down, yet governments and political parties are determined to sell it to us as a key component of the anti-recession packages.

As Ben Pile points out in his excellent article in the Register, there are countless reasons to question the investments being made in the creation of green jobs.  To take one example, the creation of 25,000 jobs in the Waste Management and Recovery & Recycling sectors will come at a cost of £1.2m per job since as is very often the case with the green sector it absorbs rather than creates wealth.  For this reason, I think it is highly doubtful that such investments will create meaningful jobs or use resources rationally.  So then is this really the best way of spending money if the main aim is to boost the economy?  I think not.

This is why a focus on economic growth as an objective of economic activity is far better than a focus on environmental outturns.  Again, as Ben Pile points out, even the limited success of recycling activity in the UK is due to demand from the dynamic Chinese economy for raw materials.

When demand is high and economies are growing, common sense tells us that the use of resources, whether raw materials or labour, will be more efficient and therefore more productive.  The market may not be the most imaginably efficient way of doing things necessarily, but it is more efficient than an economic agenda which is led by ideology; what the GND is becoming.

What’s wrong with a Green New Deal? (Part 1)

17 04 2009

The Conservatives have unveiled their plans for a Green New Deal for the UK (although they do not call it that).  It is fast becoming an item of common sense, from Obama downwards, that the twin problems of recession and global warming can be tackled by investing in green technology, thereby killing two birds with one stone.

This may on the surface seem an eminently sensible suggestion. There is a problem in that the climate change agenda is so politicised it is almost impossible to work out from the outside what the real facts are. But let us assume for the moment that climate change needs to be addressed.

The first problem with the Green New Deal (GND) is that it is a very amorphous concept. However, as the Tory proposals demonstrate, the GND almost always begin with a requirement to cut energy consumption. If one intention of the GND is to stimulate the economy out of recession, then cutting energy consumption is an odd way of doing this. As the authors of Energise have pointed out, a more rational approach to the issue of carbon emissions is to accelerate the development of better and cleaner energy sources rather than cutting consumption which can only have the effect of lowering living standards.

Indeed, China, the fastest growing economy in the world, has 16% of its electricity produced by renewables, compared with 4.5% in the UK. This is because China’s rapid growth has stimulated research, development into and implemetation of new sources of energy. In the West by contrast the whole issue of renewable enegy has become linked to an anti-growth agenda. The subtext of the current discussion on the GND in the West is that it is part of the new austerity.

Whether you accept all or some of the climate change agenda, the solution lies in innovation and growth, not consumption cutting and austerity.