tuc crisis presentation - a response to osborne's cuts agenda. believing is seeing
TRANSCRIPT
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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BELIEVING IS SEEINGBELIEVING IS SEEING
the debt crisis as just another story or why are weprey to a single narrative?
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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CURRENT DEBT GDP
RATIO
....about 63%(we owe about two-thirds of what we are
worth like having a mortgage)
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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...and what does the MaastrichtTreaty allow?
(i.e. What did Margaret Thatcher sign upto?)
......a debt limit of .............60%
.....but how does that standhistorically....?
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Britain's Debt /
National IncomeRatio, 1691-1990
Year Percentage YearPercentage
1688/91 6 1901 431759 137 1911 391801 197 1921 1791811 202 1931 2071821 288 1938 1711831 231 1941 154
1841 175 1945 261)1851 150 1950 240) look!1861 123 1960 133)1871 86 1970 821881 73 1980 521891 53 1990 35
Source: Mitchell (1990). 1980 and 1990:
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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....or look at it another way
Our current debt is at an historicallylow level
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....but cheap American money in the
post-war period,you say? Governmenthas cheap money now interest rates arelow and Government owns banks
but that was long-term debt,you say.So is ours today 13-14 years.
....but that post-war period, too, was a
time of great austerity,you say? Butwe were building a welfare state then,free universal education, expanding theuniversity sector right now we are
dismantling the welfare state and
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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....and another way to seedebt...looks pretty random,
doesnt it?
Source: CIA World Factbook(Notice: Canada went through extreme austeritymeasures only recently and has a higher debt than
the UK!)
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Built-in (structural) imbalance of Governments incomings andoutgoings e.g. Public sector costs + servicing the debtagainst tax receipts, proceeds from growth and exports.
So are Public Sector costs too high or GDP/growth/taxreceipts too low? You can work on both sides of the equation.
CG says 80% cuts (one side) and 20% tax receipts (other side).Why? Why not 50/50...20/80...0/100? Its political.
But what does structural mean?! Look at recent history.Theres a dynamic relationship between deficit and borrowing they balance each other out.
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Conservative Government
We borrowed our way out of debt under Thatcher!!
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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GDP = Consumer spending + Business Investment + GovernmentSpending + International Trade income
Its an estimate, based on surveys of < 2% of UK businesses. Soits a guide a rough indicator not a fact?
And GDP is multiplied by the Velocity of money -
(how many times a is spent in 1 year). Increase V and youincrease GDP. But banks have RESTRICTED the flow of money so artificially dampening GDP.
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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This is investment we have boughtshares in banks. Why count it as debt?
In the long term how much will we
recoup from these investments?
more importantly.
If we can invest in banks and makepublic sector pay why cant weinvest in public sector and makebanks pay?
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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UK net debt is 903 bn
Excluding Financialsector intervention, debtis 771 bn
Or 54% of GDP!Source: Office National Statistics (updated June 18,
2010)
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Increasing or reducing the supply of money into the economythrough household and business lending i.e. Manipulatingthe Velocity of money
EXAMPLE: housing equity renewal increased from 4bn in
2001 to peak at almost 18bn in 2004, an annual injection ofbetween 10-14bn into the system during the 2000s. Since2008, as a result of the credit crunch, banks have pulled 8bnper year out of the system and slowed down the circulation ofmoney by making loans expensive (i.e. To raise the price of
money their main commodity)
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So is public sector cost too high?Or GDP too low?
Or growth too low?
Or tax receipts too low?
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What kind of society do we want when the economyis performing to capacity? If we are cutting thestructural elements of debt that means we dontplan to bring them back. What do we want:
Free health care?
Winter fuel allowance?
Good schools?
Historically low taxes on the wealthy?
A well run railway?Child benefit?
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Financial services share of UK GDP rosefrom 5.7% in 1995 to 7.6% in 2007
The manufacturing sector share of UKGDP has fallen by over a third from
20.3% in 1997 to 12.6% in 2007Source: International Financial Services, London Report
2008
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Private sector debt is about 4-5 times larger thanpublic debt and thatis sustainable
Anyway, its not debt that matters but our capacityto pay it(like a mortgage). And our capacity is historically
high, because: Increased wealth and income inequality (see the Gini co-efficient) UKs long-term debt repayments (14 years)
Government access to cheap money (we own two banks!)
Doesnt that make the value of debt
historically low?
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The Gini Coefficient the
most disgraceful curve of allLow = lower wealth disparities; High = greater inequality
Public sector compensates for wealth inequalities so why are we notEXPANDING the public sector???
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Notice that the Gini Coefficient has beenrising (more wealth concentrated on thewealthy) while higher rate taxes have beenreduced (the wealthy taxed less). So the
money to pay for public sector has shrunk.Where can it come from?
..........not from growth...the financialsector has suppressed that! LOOK!
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Growth ratesThe financial sector and banks in recent years also
suppressedgrowth compared to 6-10% growth oftiger economies
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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Public utilities privatised - prisons, more andmore schools, many health services, councilservices etc
Around 20% public current expenditureoutsourced to private sector (124bn) withmore to come as commissioning steps up;
Around 20% public sector employmenttransfer to private sector over recent 2decades
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YES..BUT..
Not between the public and privatesectors
Between the financial andmanufacturing sectors
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8/8/2019 TUC Crisis Presentation - A response to Osborne's cuts agenda. Believing is Seeing.
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The UK is not broke theres no money left! is economicallyilliterate. We have the 6th highest GDP in the world
What about our assets in bank holdings?
Why pay off 100% of our deficit in 5 years, when our debt ishistorically low and we have 14 years to repay our borrowing?
But national debt is never paid off its part of the dynamic of ahealthy economy. YOU may pay off your mortgage but the nextowners bring another one your house ALWAYS has debt
Why not explore options to meet debt payments and reduce thedeficit? i.e. pay more when we have growth, reschedule loans in10 years, increase wealth taxes, public enterprise.
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National debt? NO
Current account deficit? Depends on
your values - its political
Economic governance? YES
Democracy and public debate? YES
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"Thinking's a dizzy business, a
matter of catching as many ofthose foggy glimpses as you canand fitting them together the bestyou can. That's why people hangon so tight to their beliefs and
opinions; because, compared tothe haphazard way in which theyare arrived at, even the goofiestopinion seems wonderfully clear,sane, and self-evident.
Dashiel Hammett
...so...why are we prey tosingle narratives?