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The Third Rock Forum - Politics

Article Title
Why does running on tick make Labour tick?
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Submitted : 04-01-2011 16:12
Amended : 10-11-2014 12:14
Status : Approved:  
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It seems that every time we have a Labour government, the country ends up with a massive structural budget deficit: i.e. Labour Governments embark on a programme of public spending which is greater than the tax revenues they can reasonably expect to gather, even when the economy is running well.  

Of course, when the economy is not running well, the deficit gets much worse but the structural part of the deficit will remain even when the economy recovers - unless public spending is cut back.

So why do Labour governments have this tendency to spend more money than they are able to gather, more than the country can afford, with the result that they have to borrow?

It’s a serious question.  

Of course it may be, as some Conservatives believe, that Labour Governments are simply incompetent, well-meaning but incompetent. 
They have a long list of measures that they think will improve society and they really do want to see the measures implemented.   They don’t really care where the money comes from.   They don’t even know where the money comes from.   They just want to “do good” and let the money sort itself out.

But, if that is the case, they would have to be somewhere on the scale from short-sighted to unbelievably stupid.   As soon as the budget deficit gets too large, we either have to cut back savagely of our own volition (usually after an election which Labour loses) or we have
the cut-backs thrust upon us by the money markets who are perhaps less good-hearted but definitely better at managing money.

So let’s assume Labour Governments are not short-sighted or stupid.  Why else would Labour Governments do what they do?  Well, they wish to change society so perhaps they have a more revolutionary motive.  Could it be that they wish to engineer a financial crisis so great that we are compelled to confront the undoubted flaws in and the inherent instability of the capitalist system?    It’s an interesting thought.

If that is the case, it’s worrying on two counts. First, it would be deeply deceitful to set out to destroy the existing financial system without being open about the objective.  Not very democratic!  

But even more worrying, what are they proposing to put in place of the existing system if they succeed in destroying it.

There’s a lot wrong with the present system.  It is often very unfair and unmeritocratic.  It is also sometimes pretty inefficient.  And it relies on the premise of continual growth which on a planet with finite resources may be a dreadful premise on which to base an economic
system.  On the other hand, we have seen how the command economies of fascism and communism are even less fair and even more inefficient.

So what are these hypothetically revolutionary Labour Governments offering?  Where is the ferment of intellectual activity out of which a new fairer, more efficient economic system will emerge?  Nowhere!

If you’re a traditional socialist, you might suggest the answer is simple - Socialism, the urbane, civilised, socialism that accommodates a mixed economy (perhaps on the Swedish model or what was the Swedish model).  Fair enough.   Not everyone’s cup of tea but a suggestion worthy of consideration.

But if that is the goal, you can’t run a massive structural deficit because you’re not changing the system, you are working within it, and we know how the system deals with governmental extravagance and irresponsibility.

So I’m afraid I’m veering towards the “short-sighted/unbelievably stupid’ explanation.


Status: Approved
Reply Date : 14-02-2011 20:01
Author : georgebundle
Labour's 20th CEntury legacy
Nick is right to raise this question. He is almost right in the conclusion he arrived at. I have a slightly different approach based on the fact that I was brought up in a Socialist country. Socialists, a modern western term for Communists, believe that their ideology is both progressive and fair and as such is superior to all others. Everything they do to champion the interests of the poorest part of society must, therefore, be affordable and money well spent. With this attitude, they invented the biggest Ponzi Scheme of the 20th Century. Let me remind you. In 1010 Ponzi invented an investment scheme which promised exceptional returns. Investors flocked to be in the scheme. They received very good returns and they were happy. Unfortunately, Ponzi did not pay them from profits the scheme made but from the money the newcomers gave him. The number of the existing members grew and the number of newcomers shrank. The scheme, the biggest fraud at the time, was discovered and everyone lost their investment. The Socialists invented the biggest State Ponzi scheme in the mid 20th Century, known as the Welfare State. Social Security payments are made to an ever increasing number of the sick, the unemployed and the retired, from the taxes of an ever shrinking current workforce and their taxes. The scheme has been bankrupt now for at least twenty years. Only a limited number of things can be done about this now. Borrow, like there is no tomorrow. Since the 2008 global economic crisis, this option is now limited. Print new money is another option, but it reduces the value of the currency already in circulation. The third option is to introduce savage cuts to the budgets of the Government, including the Welfare State. That is what the Coalition Government is doing now. But this only means “treading water” financially as it deals only with the current financial state and does little to address the existing “black hole” in the system. Added to that we will spend years to reduce the Sovereign Debt as a greater priority So, Labour are not short-sighted or stupid. They are simply blinded by their own ideology.