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I'm in a hurry again, Ketara, so I'll save the lengthy reply for tomorrow, but one thing I don't get about the UK economy, and economics in general is this:

for example, If I owe you £100, and I'm trying to boost the economy or pay off the deficit, then how does myself borrowing £100 from person X, so I can pay you off, reduce debt or boost the economy?

How does getting into more debt help pay off the debt?

Every government, be they Labour or Tory, these past 30 years, has done this. I'm scratching my head and I'm pretty sure I've asked somebody that before, on dakka.

 Do_I_Not_Like_That wrote:
I'm in a hurry again, Ketara, so I'll save the lengthy reply for tomorrow, but one thing I don't get about the UK economy, and economics in general is this:

for example, If I owe you £100, and I'm trying to boost the economy or pay off the deficit, then how does myself borrowing £100 from person X, so I can pay you off, reduce debt or boost the economy?

How does getting into more debt help pay off the debt?

Every government, be they Labour or Tory, these past 30 years, has done this. I'm scratching my head and I'm pretty sure I've asked somebody that before, on dakka.

What you're talking about could be referring to a number of economic levers, so I'll take a guess at which ones you might mean. If I'm wandering off on an unrelated tangent though, do forgive! What I suspect you're referring to is the basic concept of Keynesianism economics, which can be boiled down to a few principles relating to the above.

Essentially, the idea is that when an economy is in a recession, money gets tight. People lose their jobs which means they have less to spend, which means the shops start selling less. The more borderline ones close down, which causes more jobless people and less spending, and so on in a vicious circle. On a wider level, this spiral of unemployment means that banks start becoming less willing to lend money, because they suspect people will be less able to pay it back. This means they sit on their cash, which puts less money into circulation. The Government in turn, because people are making less money and more people are unemployed, receives less money in taxation, and has to fork out more cash on unemployment benefits, resulting on pressure on their budget.

If you have the above for a prolonged period of time, things can get quite grim (/understatement of century). Now if we were running the Government like I was my own wallet, I would look at the debt I already in, my falling income, greater outgoings, and think, 'Yikes! Time to buckle down and spend less money!' In a recession however, the Government doing so simply exacerbates the situation, as you now have even less jobs and employed people!

But, and this is the key, governments do not work like personal wallets. They have a number of financial levers by which they can operate. Because they have a good idea of what revenue will be coming in year by year, and their primary asset (the taxpayer) isn't going anywhere, banks are more willing to lend money to them in a way they wouldn't an individual. And if the banks get too leery anyway, the Government can pass all sorts of interesting laws to pull money from banks (although that causes other difficulties). So generally speaking, assuming a Government is operating in good faith and works hand in hand with the banks, the Government can extract whatever level of credit it requires at good rates.

So our Government (which is already in debt) will now borrow large sums of money from the banks, and invest that money. The usual target is infrastructure (roads, airports, houses, etc), but there can be others, such as education, start up grants for businesses, and so on. By spending that money now, you give someone a job, and with that job, they can start earning and spending again. It's the scenario I gave up above, but in reverse. By spending enough money, you can reverse the downward spiral, and start an upwards one. Quantitative easing (printing more money) also helps here.

Once the economy is doing well again, the Government will be receiving more money in taxation again thanks to the booming economy, their costs will be less because unemployment will have fallen, and they'll no longer have to invest large sums of money because the economy will be expanding. So now, they can use all this lovely new revenue to begin to pay back all of the debt that they borrowed, and reduce back down to a minimal state of government.

In such a way (theoretically), a Government already in debt can borrow money for a period of time, invest it to boost the economy, and then use the dividends of that investment to pay the debt off at a later date. There are plenty of complications, but that's the basics of Keynesian economic theory. Does that make sense?

Unfortunately, most governments skip the 'paying it back' stage, and even if they didn't, Keynesianism has taken quite a beating since the 1950's in several regards.

 BlapBlapBlap wrote:
Corbyn's alright, I guess. He's the least likely to be a lizard, at least.

I'm unfamiliar with that term as it applies to politics. Is it British in origin?

 Jimsolo wrote:

 BlapBlapBlap wrote:
Corbyn's alright, I guess. He's the least likely to be a lizard, at least.

I'm unfamiliar with that term as it applies to politics. Is it British in origin?

Martian possibly.

 Jimsolo wrote:

 BlapBlapBlap wrote:
Corbyn's alright, I guess. He's the least likely to be a lizard, at least.

I'm unfamiliar with that term as it applies to politics. Is it British in origin?

Most likely because of this plonker

Or maybe that's what the lizards want you to think!

 Do_I_Not_Like_That wrote:
The UK might have done pretty well under Blair, Sebster, but its economic foundations were made of sand, and far from ending the boom and bust economic cycles, we're worse off now than in those years, due to their financial ineptitude.

Yeah, see, that's exactly the kind of public perception I'm talking about. As a nominal figure, the deficit in the UK in 2007 was fairly modest, and it's only through some whack-a-doo financial models that boffins end up concluding there was a serious structural deficit at that time. No-one in 2007 thought the UK was flourishing, let alone overheating. The large deficits after 2007 were due, fairly obviously, to the recession.

As to the claim of Labour waste over the term of their government - debt to GDP was lower in 2008 than it was when they took office in 1997, 42% reduced down to 37%.

The issue is that while conservatives hammered Labour on that point and others, including those you've mentioned, most of them are dubious at best. But Labour never tried to defend them, instead trying to move forward on to new territory. While in part this is understandable, as when you start trying to defend one or two specific points of legacy, then you end up having to defend everything including the indefensible (point out financial management wasn't that bad, and you'll soon be called on to defend the invasion of Iraq).

This is not a purely Labour phenomenon. A very similar thing happened in the US, with Reagan lauded and Carter villified, based on little history, but won because many Republicans want to make those arguments, while few Democrats want to challenge them. Nor is it purely a left wing thing to concede history, here in Australia the Labor Whitlam government seems to get credited with great new reforms every other week, wholly at odds with the history. But again it seems something Labor supporters want to talk about, and something Liberals supporters want to avoid, so they win the history.


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 Ketara wrote:
Essentially, the idea is that when an economy is in a recession, money gets tight. People lose their jobs which means they have less to spend, which means the shops start selling less. The more borderline ones close down, which causes more jobless people and less spending, and so on in a vicious circle.

This was a really good overall summary, but I just thought I'd pick you up on a few nitpicks.

If you have the above for a prolonged period of time, things can get quite grim (/understatement of century).

It isn't so much the time, but the severity of the downturn. All the factors in the downward spiral are typically offset by one thing - the interest rate. The imbalance of savings to investment driving the spiral also drives interest rates down, which works to encourage investment and discourage saving, which in most situations should restore economic balance. The problem comes when the imbalance is great enough to drive interest to zero and then need to keep going. Then interest rates can't stabilise and you need something else to balance things, and that's where fiscal policy comes in to play.

But, and this is the key, governments do not work like personal wallets. They have a number of financial levers by which they can operate. Because they have a good idea of what revenue will be coming in year by year, and their primary asset (the taxpayer) isn't going anywhere, banks are more willing to lend money to them in a way they wouldn't an individual.

There's never an issue of governments being good for the cash. For starters, funds are raised through central banks which are an (independant) arm of government). And second up, for countries like the UK where you print your own currency, you can't ever fail to make payments, as you can always print more money. That might raise market fears about future inflation, but no lender will worry about getting their money back.

The importance of government's role simply comes from its unique motivation and size. It's motivation is unique, as all other actors are looking out for their own financial position (leading to tragedy of the commons situations), while government is focused on overall economic health. And government is unique in size, as it alone has the scale of spending to reverse national trends.

Unfortunately, most governments skip the 'paying it back' stage, and even if they didn't, Keynesianism has taken quite a beating since the 1950's in several regards.

Sort of. One interesting thing to note is that while the common myth is that once you allow Keynesian spending it'll never stop, history tells us almost all governments are too quick to apply the brakes. But in general there is a tendency to left debt drift during the good times, that's true.

And the fightback against Keynesian economics was in the 1970s, 'we are all Keynesian now'. But with stagflation, which was somewhat the fault of some broadly Keynesian ideas, you had the rise of neo-classical economics, and even the political legitimisation of nonsense like the Austrians. What's sad is that neo-Keynesian models adapted very quickly to accurately model the spiral out of stagflation, far better than models founded on neo-classical micro foundations. Keynesian econ took the hit and adapted fast, but the narrative was already in place. 2008 should have seen a return to Keynesian dominance, as their models accurately predicted the continued low inflation, debt overhang and damage from austerity, while the classical models basically got everything wrong, and their only adaption has been to pretend they said something different (hyperinflation anyone?)

But politics is about more than being right, and lots of powerful people like what the classical economists are saying, even if it isn't true.


Anyhow, I thought you gave a really good summary. I just couldn't help my inner pedant

Sebster: Blair is in the main hated because of the Iraq war. Economics doesn't really come into it by much, he was losing millions of voters due to his leadership style, falseness and warmongering.

 sebster wrote:

 Do_I_Not_Like_That wrote:
The UK might have done pretty well under Blair, Sebster, but its economic foundations were made of sand, and far from ending the boom and bust economic cycles, we're worse off now than in those years, due to their financial ineptitude.

Yeah, see, that's exactly the kind of public perception I'm talking about. As a nominal figure, the deficit in the UK in 2007 was fairly modest, and it's only through some whack-a-doo financial models that boffins end up concluding there was a serious structural deficit at that time. No-one in 2007 thought the UK was flourishing, let alone overheating. The large deficits after 2007 were due, fairly obviously, to the recession.

As to the claim of Labour waste over the term of their government - debt to GDP was lower in 2008 than it was when they took office in 1997, 42% reduced down to 37%.

The issue is that while conservatives hammered Labour on that point and others, including those you've mentioned, most of them are dubious at best. But Labour never tried to defend them, instead trying to move forward on to new territory. While in part this is understandable, as when you start trying to defend one or two specific points of legacy, then you end up having to defend everything including the indefensible (point out financial management wasn't that bad, and you'll soon be called on to defend the invasion of Iraq).

This is not a purely Labour phenomenon. A very similar thing happened in the US, with Reagan lauded and Carter villified, based on little history, but won because many Republicans want to make those arguments, while few Democrats want to challenge them. Nor is it purely a left wing thing to concede history, here in Australia the Labor Whitlam government seems to get credited with great new reforms every other week, wholly at odds with the history. But again it seems something Labor supporters want to talk about, and something Liberals supporters want to avoid, so they win the history.

...
...

I think UK Labour made a big mistake in allowing the Conservatives to dictate the false history of the country's economic state in the 2000s. Labour's key weakness has always been the general perception that the Tories are better at managing the economy. This simply isn't true if you look at the facts. Labour should have drilled down hard on that and established a reputation for economic competence.

 Kilkrazy wrote:
I think UK Labour made a big mistake in allowing the Conservatives to dictate the false history of the country's economic state in the 2000s. Labour's key weakness has always been the general perception that the Tories are better at managing the economy. This simply isn't true if you look at the facts. Labour should have drilled down hard on that and established a reputation for economic competence.

Labour? Economically competent?

 Da Boss wrote:
Sebster: Blair is in the main hated because of the Iraq war. Economics doesn't really come into it by much, he was losing millions of voters due to his leadership style, falseness and warmongering.

Yeah, that's pretty much my point. Not wanting to defend Blair, Labour has then neglected to defend any part of the New Labour legacy. And that's actually left them in a really difficult spot. It's given the tories a free reign on bagging New Labour's economic policies, which in turn has made it much easier to justify their own very silly policies.

 Shadow Captain Edithae wrote:

 Kilkrazy wrote:
I think UK Labour made a big mistake in allowing the Conservatives to dictate the false history of the country's economic state in the 2000s. Labour's key weakness has always been the general perception that the Tories are better at managing the economy. This simply isn't true if you look at the facts. Labour should have drilled down hard on that and established a reputation for economic competence.

Labour? Economically competent?

That's my point in a nutshell. You dismiss the idea instantly as a joke, but, if you would go and look into the economic data you would see they did a good job in the 2000s. Whereas if you look at the data from the Tory period that preceded New Labour there was plenty of woe and disaster brought on by their supposedly expert handling of things.

Cheers for the reply, Ketara, I'm going to up my reading and knuckle down on economics.

Question is, though, if the government wants to get people spending more in recession, why don't they cut tax?

 Kilkrazy wrote:


That's my point in a nutshell. You dismiss the idea instantly as a joke, but, if you would go and look into the economic data you would see they did a good job in the 2000s. Whereas if you look at the data from the Tory period that preceded New Labour there was plenty of woe and disaster brought on by their supposedly expert handling of things.

I'm not sure I buy Labour's supposed economic competence. From what I recall, yes the British deficit went into surplus after election in 1997, but that was after the Conservatives had already balanced the books, we were entering into an economic boom period, and Labour hiked taxes to boot. They then jacked up the spending beyond our means long before the global financial crisis hit, and we were running a deficit again, despite all that extra income.

http://newsimg.bbc.co.uk/media/images/47693000/gif/_47693234_uk_budget_deficits466.gif


When you throw in Brown's sale of the gold reserves (https://en.wikipedia.org/wiki/Sale_of_UK_gold_reserves,_1999%E2%80%932002), rocketing government expenditure levels from 2002-03 (http://www.economicshelp.org/wp-content/uploads/blog-uploads/2012/05/government-spending-real-1967-2012.png) and the classic 'We have eliminated boom and bust!' (http://www.channel4.com/news/articles/politics/domestic_politics/factcheck+no+more+boom+and+bust/2564157.html) and I'm not exactly convinced of New Labour's economic competence. Anyone can generously spend money already flowing into the coffers, if you gave me the economic setup they had when they came into power, I suspect I could do at least as good a job. It's what you do when the going gets rough, and the longterm economic plans you lay that count, and from what I saw, they failed on both accounts there.

Pistols at Dawn wrote:

 Shadow Captain Edithae wrote:
I'm never even going to consider voting for Labour until they purge all the Old Guard of former New Labour ministers. There are still far too many of them in senior positions in the party for my liking. Harriet Harman for one. Andy Burnham. Yvette Cooper etc (is she a candidate?). So roll on a Corbyn Shadow Cabinet! It'll be good to see the back of new labour once and for all.

Well I admire your dedication to The Cause chap, but a Corbyn cabinet isn't exactly going to be crammed full of political viagra. Read somwhere (might have been the speccie) that Corbyn had about 20 MP nominations from people who actually supported him, so he doesn't have a bottomless pool of talent to drawn from. And some of the others have said they will refuse to serve in a Corbyn shadow cab. Going to be interesting to see how he's going to square that circle.

Who knows - maybe there's a whole generation of promising young bucks waiting for their moment to shine? But he's going to have a hell of a task leading his party - even if he utterly smashes it in the first round of the vote most of his MPs don't want him as leader.

My opinion is those MPs can shut the feth up and do their jobs. If Corbyn gets elected leader then it means that those who support the Labour party want him as leader. So those MPs can either go along with that democratic decision or throw a tantrum and expose themselves as undemocratic imbeciles who can't stand that the people who they are meant to represent don't agree with their own personal viewpoint.

Go Corbyn!

Didn't Brown sell off a big chunk of our gold reserves at a time of record low gold prices and at the height of an economic boom so he boost public spending even more, instead of reserving it for when the economy was poor and gold prices were high? (I.e. the 2008 crash).

Didn't we see public spending spending, taxes and the national debt skyrocket under Labour during an economic boom, leaving us poorly prepared for the financial crash? Austerity might not have been so long and painful if Labour hadn't "spent all the money" (in the words of one junior Labour minister).

Didn't Brown boast of ending boom and bust, and saving the world's banking system?


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 Kilkrazy wrote:

That's my point in a nutshell. You dismiss the idea instantly as a joke, but, if you would go and look into the economic data you would see they did a good job in the 2000s. Whereas if you look at the data from the Tory period that preceded New Labour there was plenty of woe and disaster brought on by their supposedly expert handling of things.

It is a joke. The economic data does not support your viewpoint.

I'm not saying that the Conservatives are never incompetent, but there is a worrying trend of conservative governments inheriting a poor economy from Labour and having to fix it, then Labour is Re-elected and rides on the success and good e comic conditions they inherit from the Conservatives.

We elect Labour when things are good, and we want high spending, and we elect the Conservatives when things are bad and need fixing.

http://anotherangryvoice.blogspot.co.uk/2015/02/george-osborne-debt-monger.html

On a similar vein:

From 2014, but has been true for decades and not just from the Blair-Brown era.

http://anotherangryvoice.blogspot.co.uk/2014/10/what-is-point-of-labour.html

......Labour fear the growth of a viable left-wing alternative party just as much as the Tories fear UKIP.The Labour leadership seem to think that attacking genuine left-wing parties and offering the electorate nothing more than "not quite as bad as the Tories" will be enough convince the public to vote them back into power in 2015. Even though they've experienced an opinion poll boost on the rare occasions they have offered anything even remotely radical, they're still intent on pushing a Thatcherism-lite agenda in the vain hope that the Tabloid press will take it easy on them. They haven't reailed that the Murdoch press and the Daily Mail will attack Labour whatever they offer, and that by attempting to suck up to the right-wing press, they're simply driving more and more left-wing people away from the Labour Party in exasperation.

So in answer to the question of what the Labour Party is for?The Labour Party has become nothing more than an empty power structure, so far divorced from its founding principles that it exists only to seek and maintain political power. The party leadership isn't driven by any objective other than the pursuit of power for its own sake. The Labour party strategists imagine that the only path to achieve this political power is through eschewing any kind of radical, progressive or left-wing policies, in favour of promoting a Thatcherism-lite agenda designed to appease the right-wing press, and by conning the public into voting for them with a few lame bits of pseudo-socialist window dressing.

However Corbyn and his allies really aren't old Labour. They are the same pseudo socialists who trample upon the parties post war legacy in order to get elected.

 Shadow Captain Edithae wrote:


I'm not saying that the Conservatives are never incompetent, but there is a worrying trend of conservative governments inheriting a poor economy from Labour and having to fix it, then Labour is Re-elected and rides on the success and good e comic conditions they inherit from the Conservatives.

Well I don't think we need worry about that this time.
http://www.bbc.co.uk/news/business/market_data/overview/
At least they won't be able to blame the other guy.

 reds8n wrote:
http://anotherangryvoice.blogspot.co.uk/2015/02/george-osborne-debt-monger.html

That's an interesting article, but either the author doesn't quite comprehend the facts he's throwing around, or he's misleading people in the way he's accusing others of doing. To take the first substantive paragraph:-

On the two occasions that Labour oversaw increases in the national debt as a percentage of GDP there were the mitigating circumstances of huge global financial crises. The Ramsay MacDonald government of 1929-31 coincided with global fallout from the Wall Street Crash (they left a 12% increase in the debt to GDP ratio), and the last few years of the Blair-Brown government of 1997-2010 coincided with the 2008 financial sector insolvency crisis (they left an 11% increase). The other Labour governments all reduced the scale of the national debt, Clement Attlee's government of 1945-51 reduced the national debt by 40% of GDP despite having to rebuild the UK economy from the ruins of the Second World War; Harold Wilson's 1964-70 government reduced the national debt by 27% of GDP; and even the Wilson-Callaghan government of 1974-79 managed to reduce the debt by 4% of GDP.

Firstly, the postwar period saw the debt to GDP slashed not because the Labour Government was spending less (far from it). It was because unemployment was exceptionally low right up until the 1970's, combined with a period of extreme economic growth. The result was rising real incomes, which equalled much higher Government revenues, knocking the debt to GDP figure right down.

Secondly, the more recent Labour Government may not have had to borrow much money up until the last five years, but as said above, this was because like in the period just mentioned, tax receipts were up and the economy was booming. This enabled them to jack up the spending without having to borrow as large sums as they might otherwise have had to do. To put it into figures, public spending in 2002 was 389.1 billion pounds, in 2006 it was 523.5 billion, and in 2010, it was 673.1 billion. For sake of comparison, when Blair took over in 97/98, public expenditure was 308.4 billion pounds.

So in other words, the factor that seems to be being generously left out by the author here is that greater borrowing was not required by these Labour Governments, because growing tax receipts and the economy were able to accommodate their breakneck spending rate to an extent. I mean, the last Labour Government literally doubled the running costs of the country over the period they were in charge. And that's fine to an extent, because if there's so much of a budgetary surplus there, no-one minds you spending it. But literally doubling the amount spent by Government is somewhat mind-boggling, and as we'll soon see, the money simply wasn't there in that quantity.

When we come to look at George Osborne's own record as Chancellor of the Exchequer it is an established fact that in his first 3 years as Chancellor, Osborne managed to add more to the national debt than the Labour Party did in the 13 preceding years.

By George Osborne's own estimates, the national debt will have grown by 26.9% of GDP between 2010 and 2015. If you want to check this for yourself, have a look at page 19 of the November 2010 OBR Economic and Fiscal Outlook which records the debt to GDP ratio as 53.5% of GDP for 2009-10, and page 20 of the December 2014 OBR Economic and Fiscal Outlook which records the debt to GDP ratio for 2014-15 as being 80.4%.

In the last 200 years of economic history there have only been three prolonged periods of debt accumulation worse than George Osborne's tenure as Chancellor of the Exchequer: The First World War (+110% of GDP), the Second World War (+100% of GDP) and the tenure of Tory Chancellor Nicholas Vansittart 1812-1823 (+64% of GDP).
Having increased public sector debt by 26.9% in five years, George Osborne has undeniably created more new debt than any single Labour government in history ever has. In fact it's a bigger proportional increase in the national debt than all of the Labour governments in history combined.

The second paragraph, meanwhile, just fact walls you without attempting any kind of contextualisation of those facts. Let me take a stab at it.

Firstly, he's correct on account of the the level of National Debt having not been this bad in a long time. Here's the graph that shows the figures.



As you can see, there was a spike around John Major's Government in the early nineties, followed by a dip up until 2002. Then Labour, due to their rising spending costs (as mentioned above) simply weren't getting enough cash from the tax receipts to account for their increased expenditure. If you cross-reference again with their spending here:-


you end up with this chart here which shows the government expenditure correlated with the tax receipts.


To summarise, around 2002, New Labour found that with a slightly decreasing tax receipts, there wasn't enough cash to keep covering their ever-expanding budget, and began borrowing to cover up the shortfall. When the financial crisis hit, and they started worrying about the next election, borrowing skyrocketed further still. In 2007, national debt stood at 527 billion pounds. By the time of the election, that total had hit, 956 billion. In other words, Mr Brown, in his short tenure, managed to almost borrow as much money as the UK state already owed.

So when Mr Osborne walked into the Treasury, he found Government expenditure more than double what it was in the previous Tory Government (whereas when Tony Blair walked in, the Government was running a surplus) and UK national debt at just under trillion pounds (as opposed to about 350 billion when Labour took over).

Now with the contextualisation added, I'd like to address the paragraph in the link before. He slates Osborne on account of how Osborne has added as much to the national debt in three years as the Labour party in the entire period beforehand. I'm going to explain why that is, but first, I want to draw your attention back to this graph posted earlier.



If you look closely (or even not so closely), you will see that the total sum of money borrowed compared to GDP has fallen constantly since the Conservatives took over, whilst revenue has more or less flatlined. Now the reason why Osborne has borrowed so much money is because Brown expanded the level of borrowing so far, that to simply cut it all in one go was impossible. The country was already in recession, the Liberal Democrats were insisting the cuts be made more slowly, and cutting to that depth instantly would most likely have damaged any form of recovery.

If the graph above follows it's natural trend, at some point in the next five years (as it supposedly the intent), the lines will intersect. That will mean we are making more money than the Government is spending, and Osborne's borrowing spree will have ended. But the fact is, Osborne was more or less economically forced to borrow those sums of money in order to match the interest now payable on the vast sums Brown borrowed, and to slowly run down Government expenditure without breaking the back of the economy (which if you follow Keynes as explained above, would most likely have happened).

You begin to see why I have little faith in New Labour when it comes to economics! It's one thing to shout at Osborne for making cuts, but to shout at him at the same time for borrowing too much money is counter-intuitive. After all, if he was just borrowing large sums of money, surely he wouldn't need to make cuts, right? The truth is, he had no choice but to keep borrowing money due to the absolute financial mess left by the previous government.

I'm not a fan of the Tories, but New Labour really was quite bad when it came to money. They spent and spent, and then borrowed to spend more long before the recession hit. So frankly, blaming the recession for their financial failings (as the link above did) is quite disingenuous!


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 sebster wrote:

 Do_I_Not_Like_That wrote:
The UK might have done pretty well under Blair, Sebster, but its economic foundations were made of sand, and far from ending the boom and bust economic cycles, we're worse off now than in those years, due to their financial ineptitude.

Yeah, see, that's exactly the kind of public perception I'm talking about. As a nominal figure, the deficit in the UK in 2007 was fairly modest, and it's only through some whack-a-doo financial models that boffins end up concluding there was a serious structural deficit at that time. No-one in 2007 thought the UK was flourishing, let alone overheating. The large deficits after 2007 were due, fairly obviously, to the recession.

As to the claim of Labour waste over the term of their government - debt to GDP was lower in 2008 than it was when they took office in 1997, 42% reduced down to 37%.

As I just demonstrated above, Labour spending was wildly out of control. The fact that they had a deficit was in and of itself a bad financial indicator, considering they had inherited balanced books, a booming economy, and soaring tax receipts. They had no need to spend such vast sums, and yet, they did.

That's why a lot of people don't trust them with the economy.

There's never an issue of governments being good for the cash.

Greece?

Jokes aside, I was trying to keep it simple and in laymans terms. Bringing in things like inflation and effects of quantitative easing seemed like a quick way to complicate things.

Sort of. One interesting thing to note is that while the common myth is that once you allow Keynesian spending it'll never stop, history tells us almost all governments are too quick to apply the brakes. But in general there is a tendency to left debt drift during the good times, that's true.

And the fightback against Keynesian economics was in the 1970s, 'we are all Keynesian now'. But with stagflation, which was somewhat the fault of some broadly Keynesian ideas, you had the rise of neo-classical economics, and even the political legitimisation of nonsense like the Austrians. What's sad is that neo-Keynesian models adapted very quickly to accurately model the spiral out of stagflation, far better than models founded on neo-classical micro foundations. Keynesian econ took the hit and adapted fast, but the narrative was already in place. 2008 should have seen a return to Keynesian dominance, as their models accurately predicted the continued low inflation, debt overhang and damage from austerity, while the classical models basically got everything wrong, and their only adaption has been to pretend they said something different (hyperinflation anyone?)

I'll be frank, the legitimacy of the Austrians and Milton Friedman in relation to Keynes is outside of my understanding of economics (or interest, to a large extent). Detailed macroeconomics and suchlike require a more mathematical head than I have, and lie beyond my studies in British industry (I'm looking at historical merger wave phenomena right now!)

 Ketara wrote:
The fact that they had a deficit was in and of itself a bad financial indicator, considering they had inherited balanced books, a booming economy, and soaring tax receipts. They had no need to spend such vast sums, and yet, they did.

But it wasn't a booming economy. No-one before 2008 was describing the UK economy as booming. Inflation was steady, unemployment was okay, and there were no calls for interest hikes to bring this boom back under control. It was bubbling along okay.

It's only because economic models, to describe the process really simply, pretty much describe optimum output as an average of previous years, that the severe downturn post GFC makes the pre-GFC weirdly get redefined as a booming economy.

But it wasn't, and so the expectation that Labour should have known it had an economy that would be reclassified as booming in hindsight, and so should have been saving is a real stretch.

I was trying to keep it simple and in laymans terms. Bringing in things like inflation and effects of quantitative easing seemed like a quick way to complicate things.

Yeah, and as I said your overall summary was excellent. It's just that I can't fight that inner pedant

I'll be frank, the legitimacy of the Austrians and Milton Friedman in relation to Keynes is outside of my understanding of economics (or interest, to a large extent). Detailed macroeconomics and suchlike require a more mathematical head than I have, and lie beyond my studies in British industry (I'm looking at historical merger wave phenomena right now!)

If you don't like detailed maths then you'll love the Austrians. You don't need complex maths or even ideas that actually work!

Sebster,

You write some good posts, but I fear you are overlooking the politicking of the Blair/Brown years.

Two points that I'd like to make;

1) Labour had a record of pishing away money on ill-conceived projects. The most notorious being a comprehesive IT scheme for the NHS that was a complete ballsup with a £12 billion price tag. Brown especially was fond of funding various wheezes that would give him a day or two of favourable headlines - Winter Fuel allowances for OAPs being one, fiddling around with the tax bands (making poorer people worse off in a classic case of 'We haven't thought this through') was another.

2) Ed Milliband defined himself by bascially saying "New Labour - that was a disaster wasn't it?", and then doing precisely bugger all to defend the good things that Blair and Brown had done, as well as making some blunders of his own. If the leadership won't defence their economic record why should the electorate have any confidence in them?


Which leads us directly to Corbyn and his supporters, who really, really hate the previous leadership of their own party. And have some fantastically silly economic ideas. 'Peoples Quantitave Easing' being particularly demented.

 sebster wrote:

 Ketara wrote:
The fact that they had a deficit was in and of itself a bad financial indicator, considering they had inherited balanced books, a booming economy, and soaring tax receipts. They had no need to spend such vast sums, and yet, they did.

But it wasn't a booming economy. No-one before 2008 was describing the UK economy as booming. Inflation was steady, unemployment was okay, and there were no calls for interest hikes to bring this boom back under control. It was bubbling along okay.

It's only because economic models, to describe the process really simply, pretty much describe optimum output as an average of previous years, that the severe downturn post GFC makes the pre-GFC weirdly get redefined as a booming economy.

But it wasn't, and so the expectation that Labour should have known it had an economy that would be reclassified as booming in hindsight, and so should have been saving is a real stretch.

Perhaps I'm not being clear. I'm not saying that the economy in 2007 just before the GFC was booming, that would be a clearly fradulent claim by the figures above. But up until 2003? It was doing really rather quite well. In 1997, when Blair took over, growth was at 2.6%. In 2003, it peaked at 4.3%. From there, it went downhill back to and levelled off around (roughly) around the 2.7% mark until the recession hit in 2007. But Labour spending? It kept increasing post 2002, out of all proportion to income. I've posted the charts above so you can see their ballooning expenditure in the 2002-2007 period, and their subsequent borrowing rate.

I'm not saying the Labour Government 'should have been 'saving'. There's nothing wrong with spending money that's in the kitty, and whilst not putting a little aside in anticipation of a global downturn because you believe you have 'eliminated boom and bust' is a bit silly, there's nothing inherently problematic with that.

What I am saying though, point blank, is that they went far beyond that. They were spending considerably beyond the means of the tax receipts they were gathering over a protracted period when they had no cause, reason, or need to do so long before the recession hit. And that they were having to to borrow ever larger sums to sustain this unnecessary spending. The data I have provided in my last post, in reasonable depth, confirms that viewpoint. In such I way I have substantiated the viewpoint of the last Labour Government as not being very good with money. If you have data that contradicts me, please do provide it, but this isn't a case of me just casually stating an opinion here, I've actually pulled out the figures to back it up.

Pistols at Dawn wrote:
Sebster,

You write some good posts, but I fear you are overlooking the politicking of the Blair/Brown years.

Two points that I'd like to make;

1) Labour had a record of pishing away money on ill-conceived projects. The most notorious being a comprehesive IT scheme for the NHS that was a complete ballsup with a £12 billion price tag. Brown especially was fond of funding various wheezes that would give him a day or two of favourable headlines - Winter Fuel allowances for OAPs being one, fiddling around with the tax bands (making poorer people worse off in a classic case of 'We haven't thought this through') was another.

2) Ed Milliband defined himself by bascially saying "New Labour - that was a disaster wasn't it?", and then doing precisely bugger all to defend the good things that Blair and Brown had done, as well as making some blunders of his own. If the leadership won't defence their economic record why should the electorate have any confidence in them?


Which leads us directly to Corbyn and his supporters, who really, really hate the previous leadership of their own party. And have some fantastically silly economic ideas. 'Peoples Quantitave Easing' being particularly demented.

The Tories record is equally as bad. Universal Credit is now predicted to cost £12.8billion and is also massively behind schedule, bit of an increase from the initial £2.2billion.

 A Town Called Malus wrote:


The Tories record is equally as bad. Universal Credit is now predicted to cost £12.8billion and is also massively behind schedule, bit of an increase from the initial £2.2billion.

We actually had Universal Credit, more or less, back in the eighties. New Labour abolished it, and split benefit payments into about eight different departments. So you get your housing benefit from one source, your working tax credits from another, and so forth. As someone who has parents who claim today, and who had to claim rather heavily under the previous system, they judged the previous system infinitely easier and less complex. You got one payment from one source, and that was it. Deductions and additions were made as appropriate, if you had a problem (which always happens), you spoke to that one source instead of spending months chasing different departments. So they're in favour of it going back. Because it was one payment, you had a local person to talk to, whereas now, you end up on five different phones, to five different call centres, none of which talk to each other, and cause you endless nightmares.

With regards to government big project fethups though, that happens for all of them. Bureaucracy can be a real nightmare, and giant IT projects are always problematic at the best of times.

Labour seems to be split between impotent wannabie-tories and back-to-the-1980's militant unionism. It's a shame that there's no real centre-ground there.

It was interesting watching Corbyn squirm on Panarama over his alleged links to Hezbolla and Hamas; he didn't deny it or say that it's all lies from the Daily Mail, he just said something along the lines of 'they were people who happend to be at the rallies.'

 SDFarsight wrote:
Labour seems to be split between impotent wannabie-tories and back-to-the-1980's militant unionism. It's a shame that there's no real centre-ground there.

It was interesting watching Corbyn squirm on Panarama over his alleged links to Hezbolla and Hamas; he didn't deny it or say that it's all lies from the Daily Mail, he just said something along the lines of 'they were people who happend to be at the rallies.'

Thing is, Hezbollah and Hamas are both political parties and paramilitary forces, often with large presences in their countries respective governments.

As such they will, for now at least, inevitably be part of the peace protest. Also, in the UK the political sections are not listed as terrorist organizations, only the military wing. You are not going to secure a peace in the area around Israel by ignoring them and you are not going to be able to remove them by purely military means as long as they maintain that support of the people.

So both Hezbollah and Hamas will be involved in any peace deal that will come in the near future. They will have to be, otherwise that deal will not work. It would be like if the UK had refused to acknowledge Sinn Fein due to its suspected links with the IRA.

 A Town Called Malus wrote:

 SDFarsight wrote:
Labour seems to be split between impotent wannabie-tories and back-to-the-1980's militant unionism. It's a shame that there's no real centre-ground there.

It was interesting watching Corbyn squirm on Panarama over his alleged links to Hezbolla and Hamas; he didn't deny it or say that it's all lies from the Daily Mail, he just said something along the lines of 'they were people who happend to be at the rallies.'

Thing is, Hezbollah and Hamas are both political parties and paramilitary forces, often with large presences in their countries respective governments.

As such they will, for now at least, inevitably be part of the peace protest. Also, in the UK the political sections are not listed as terrorist organizations, only the military wing. You are not going to secure a peace in the area around Israel by ignoring them and you are not going to be able to remove them by purely military means as long as they maintain that support of the people.

So both Hezbollah and Hamas will be involved in any peace deal that will come in the near future. They will have to be, otherwise that deal will not work. It would be like if the UK had refused to acknowledge Sinn Fein due to its suspected links with the IRA.

I don't know if this was just Panarama making association fallacies, but it looked like Corbyn was actively taking sides rather than truely looking for peace.

 SDFarsight wrote:

 A Town Called Malus wrote:

 SDFarsight wrote:
Labour seems to be split between impotent wannabie-tories and back-to-the-1980's militant unionism. It's a shame that there's no real centre-ground there.

It was interesting watching Corbyn squirm on Panarama over his alleged links to Hezbolla and Hamas; he didn't deny it or say that it's all lies from the Daily Mail, he just said something along the lines of 'they were people who happend to be at the rallies.'

Thing is, Hezbollah and Hamas are both political parties and paramilitary forces, often with large presences in their countries respective governments.

As such they will, for now at least, inevitably be part of the peace protest. Also, in the UK the political sections are not listed as terrorist organizations, only the military wing. You are not going to secure a peace in the area around Israel by ignoring them and you are not going to be able to remove them by purely military means as long as they maintain that support of the people.

So both Hezbollah and Hamas will be involved in any peace deal that will come in the near future. They will have to be, otherwise that deal will not work. It would be like if the UK had refused to acknowledge Sinn Fein due to its suspected links with the IRA.

I don't know if this was just Panarama making association fallacies, but it looked like Corbyn was actively taking sides rather than truely looking for peace.

The Labour leftists have associated with groups like Hezzbolah for years. I just think it has been popular with certain politicans to cosy up to such groups because the central party, the Tories, Americans (or whoever they can take a shot at to gain popularity) have deigned to align themselves with Israel (using Hezbollah as an example).
Its edgy to support the underdog you see.

 SDFarsight wrote:
but it looked like Corbyn was actively taking sides rather than truely looking for peace.

This has been true for virtually everyone involved to the slightest degree with the 'peace process'.