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Almost It is not just the economic downturn that has got us deep in debt, it is a consumerist politics in which our elected representatives feel compelled to tell us we can have our cake, eat it and walk out without paying.
Writes Matthew Taylor, former policy adviser to the Blair government, in today’s Times. I think that is not quite right. Not “feel compelled” – “are compelled”. Elected representatives do not stay elected very long unless they maintain the fiction for those who voted for them that someone else is less deserving, someone else is paying.
Taylor says ‘leadership’ is the answer. I wonder why we should believe that, when politicians are actually exercising leadership all the time, in the manner their interests direct. Leadership conferred by outbidding other leaders for the favour of the public is precisely where consumerist politics comes from.
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I see the LibDems are pitching for the leftist vote by promising to load a new tax on folk with homes valued at £1 million or more. Not much “leadership” there: this is just the blithe assumption that the tax can be levied without causing any offsetting effects.
Possibly a positive development, since they have no prospect of power and may split the leftist vote.
They’re also pitching for the rightist vote by cutting the number of MPs and reducing spending in a number of areas. It seems the theme of the week is who can pretend to be the most conservative.
As the fellow said, democracy can only survive until the people realise they can vote themselves largesse from the public purse.
There used to be an old saying, something to the effect that “Leadership” requires followers.
Often “Leadership” is a misnomer for the ability to either get out front of a motivated group with their own specific objectives; or, without regard to specific objectives (or reasons for them), appeal to enough disaffected people to create the appearance of a movement.
“Leadership,” should always be understood in the context of circumstance; it is not a fixed relationship nor quality of character..
Excellent point RRS, although it is a quality of character (or maybe rather personality) to the extent of the ‘getting outfront of a motivated group’ case. And, it can be as fixed a relationship (or not) as any other.
As to democracy, what Ben Franklin said.
Normally when politicians actually cut government spending (not a normal policy of course) they are REELECTED.
Even some of the people they dismiss vote for them .- perhaps out of shock, perhaps because human reason (the soul) actually exists.
Whatever people are taught in school and university and is repeated in the media – people (deep down) know that government spending is not really “good for the economy” (that the reverse is true) and people who work for the government or depend on benefits know (again deep down) that they are a financial burden (not a boon) to the community.
So when someone like Harris (ex Prime Minister of Ontario) come along, even some of the people whose income he cuts may vote for him.
“A politician is actually doing what he said he would do – and he is right, there are too many people like me, the land will go bankrupt unless the burden is reduced”.
Normally it is their own party who betrays such people in the end – as it was with Harris.
I’m not sure if the platitudinous quote that heads this post is really relevant, since it is surely net worth that is the operative determinant in a ratex world. Yes, yes, our liabilities have increased in absolute terms, but once you subtract our liabilities from our assets, has the situation deteriorated considerably under Nu Lab’s so called neoliberal policies?
vimothy,
Care to translate your comment from the original gibberish?
Er, ok: what does “deep in debt” actually mean? Consider that a balance sheet has two sides: liabilities, and also assets. A person with £1mn in liabilities might be in an awful lot of debt. Certainly, £1mn looks like a lot of money from where I’m sitting. But it’s hard to say without knowledge of the value of that person’s assets. That is, what is the net worth of this person? If his assets total £2mn, then his net worth is £1mn — a tidy sum.
Thus while politicians and journalists are quick to inform us that we have taken on too much debt because we are greedy idiots (per Mr Taylor), it’s not obvious to me that we actually have taken on to much debt. Indeed, without seeing the other side of the balance sheet it is my contention that it is impossible to say. I haven’t seen UK data, but I know that in the US, whilst debt has increased in absolute terms (approx 100% of GDP), the assets that debt supports have increased in value (to 475% of GDP), so that net worth is actually up on its post war average (from 350% to 375% of GDP) — even taking into account the housing correction (a recent post at Ilan Mihov’s blog made this point very well and has links to relevant data).
Now, I know that this doesn’t really speak to the distribution of those assets, but this is a separate question that presumably libertarians are less interested in. Still it would be nice if everyone wasn’t so quick to join in the self-flagellation — libertarians, especially.
Simple, yes? Possibly even no need for snark, but it’s your blog, I know…
A little less obscure. At least I can now see you are quibbling about Taylor’s assertion that “we” are deep in debt, which I think is not really relevant even if you make the language less unfathomable.
I’m quoting him to take up his public-choice point. But “we” does make sense in the context of the quote, because he is referring to we, the country, the taxpayers. The national debt has increased massively, and I do not understand why you think it is backed by assets. The thing about national debts is that they are financed on the basis of the sovereign power to force the populace to service them.
Vimothy, what do assets have to do with this? If I owe 1mil, while owning a house that’s worth* about the same, am I in good shape?
*How does one evaluate assets these days anyway?
Alisa: no, because your net worth is zero. But here again the value of the assets you own is critical in assessing whether the level of debt you have taken on is excessive.
Guy: ah, I thought that Taylor was referring to consumer & household debt. Certainly government debt is high, and I know that the political economy of democracy has certain implications for the taxation and spending regime that governments _must_ (here we agree) follow if they are to retain power. Indeed, this is its strength, to my mind. But I read the current level of debt as driven by 1, the bailout of the financial sector, and (most importantly) 2, the consequent economic contraction (cf. Reinhart & Rogoff, who note precisely this historical trend in financial crises). So I’m not convinced that this really is a public choice issue.
And then there is the debt itself. There are plenty of states whose public debt far exceeds our own (Japan, Italy, e.g.). Some of our debt supports financial assets and may be recovered. And even if you include future pensions and PFI (not that you necessarily should), the level of debt is way below historical post-war highs. We started out in pretty good shape, comparatively speaking, and ran into problems thrown up by the financial crisis and by poor monetary policy in Q3 and Q4 2008. It’s bad, but not terrible, and it’s not about bread and circuses. The key is IMO to support nominal GDP growth with credible commitments from the BoE to target a year-on-year 5% increase in NGDP (with 2% annual inflation), reducing the real interest rate and supporting aggregate demand through positive private sector expectations. Ta-da. Problem solved. Next!