We can only pray that the current “austerity chic” exhausts itself while the global economy is still standing.
Canadian MPs who took in David Cameron’s address to a joint session of Parliament last Thursday are well-advised to forget what they heard from the British PM. Save, of course, the obligatory acknowledgement that without Canada’s military heroism in the World War II, Britain might have lost its independence.
“Yes, demand matters,” Cameron said. “But let me say it again, it’s a debt crisis,” not a crisis of demand and income scarcity, our distinguished visitor said in contradiction of everything history teaches us about battling our way out of recessions.
Cameron’s message was that governments cannot spend anemic economies out of recession. He should have delivered it on the banks of the Thames rather than the Ottawa River.
While Cameron was preaching austerity Thursday, Cameron’s own ministers were hastily drawing up plans to jumpstart job creation and cut taxes on low-income earners in order to, of all things, revive demand.
Soon to be unveiled is a British “Green Deal” program to create 100,000 jobs making Britain’s homes more energy efficient. And a plan to electrify British diesel-power passenger trains to save 1,400 jobs at Bombardier Inc.’s plant in Derby, Eng. after it lost a major contract.
Unemployment in Britain has swollen to 2.5 million. The coalition government Cameron leads is running scared. It is retreating from plans for what Cameron last year billed as the most drastic British austerity regime in more than half a century.
That so-called Plan A of austerity and spending cuts went over as well as Churchill’s botched scheme for Dieppe. Cameron, a Tory, was forced early into embarrassing climbdowns on proposed cuts to the National Health Service (the rough equivalent of Canada’s Medicare) and to state-funded schools.
More recently, Cameron’s “Employment Red Tape Challenge” to accelerate business start-ups has become mired in intramural Whitehall disputes. It got out that among those spared of the gimmick are the Treasury and tax and customs ministries – whose overflow of red-tape spools are rumoured to be stored in the Tower of London.
In Ottawa, Cameron hectored the troubled eurozone nations, in particular, to summon the “political will” to confront “the heart of the problem – the high level of indebtedness in many Euro countries.”
Few things are so common as conservatives invoking a noble-sounding “political will” when inflicting austerity on those with no voice – though social unrest around the world suggests that tens of millions of unemployed people finally may be finding one.
“Highly indebted households and governments simply cannot spend their way out of a debt crisis,” Cameron said Thursday.
That is true of tapped-out households. Also of central banks, which can’t further lower interest rates already reduced to zero. And of a corporate sector flush with cash, which prefers to hoard rather than invest it in new jobs.
That is known as a demand crisis – or an income crisis, if you prefer. More precisely, it’s a crisis of demand and income scarcity. And the solution to it, as we learned from Cameron’s fellow Briton, the late economist John Maynard Keynes, is for government – the only player with resources in such crises – to stimulate demand with deficit-financed public spending that provides income to everyday people when no one else can or will.
On Thursday, Cameron was rhapsodic about the “Arab Spring,” for which he and French President Nicolas Sarkozy can take lead credit among Western leaders in promoting. What Cameron seems to overlook is that the regional uprisings have been driven by impoverished youth denied employment since their long-ago university graduation, not by religious or nationalist zealots. And in the recent rioting across Britain, disenchanted youth were out in force.
Cameron’s hoary bromides included scrapping regulations, more tax breaks to “incent” business start-ups that by definition don’t yet have taxable income, and slashing corporate tax rates to spur investment from offshore – a gambit that worked like a charm until it didn’t for a since bailed-out Ireland.
From Rob Ford to Angela Merkel to America’s G.O.P., the global leadership class is willingly hostage to an intellectually bankrupt dogma that only worsens the crisis of widespread income deprivation.
We’re back to where we started in this crisis, desperately in need of an encore to the deficit-funded stimulus programs launched in 2009-10 from Beijing to Ottawa, and from Berlin to Washington.
Those programs worked, creating and saving jobs, rebuilding decrepit infrastructure, and generating deficit-reducing tax revenue, before the stimulus was abruptly curtailed.
The B-school axiom that you must spend money to make money derives from Galatians: “For whatever a man soweth, that shall he also reap.” We seem intent now on sowing misery, and you really don’t want to be around for the harvest.
Origin
Source: Toronto Star
Canadian MPs who took in David Cameron’s address to a joint session of Parliament last Thursday are well-advised to forget what they heard from the British PM. Save, of course, the obligatory acknowledgement that without Canada’s military heroism in the World War II, Britain might have lost its independence.
“Yes, demand matters,” Cameron said. “But let me say it again, it’s a debt crisis,” not a crisis of demand and income scarcity, our distinguished visitor said in contradiction of everything history teaches us about battling our way out of recessions.
Cameron’s message was that governments cannot spend anemic economies out of recession. He should have delivered it on the banks of the Thames rather than the Ottawa River.
While Cameron was preaching austerity Thursday, Cameron’s own ministers were hastily drawing up plans to jumpstart job creation and cut taxes on low-income earners in order to, of all things, revive demand.
Soon to be unveiled is a British “Green Deal” program to create 100,000 jobs making Britain’s homes more energy efficient. And a plan to electrify British diesel-power passenger trains to save 1,400 jobs at Bombardier Inc.’s plant in Derby, Eng. after it lost a major contract.
Unemployment in Britain has swollen to 2.5 million. The coalition government Cameron leads is running scared. It is retreating from plans for what Cameron last year billed as the most drastic British austerity regime in more than half a century.
That so-called Plan A of austerity and spending cuts went over as well as Churchill’s botched scheme for Dieppe. Cameron, a Tory, was forced early into embarrassing climbdowns on proposed cuts to the National Health Service (the rough equivalent of Canada’s Medicare) and to state-funded schools.
More recently, Cameron’s “Employment Red Tape Challenge” to accelerate business start-ups has become mired in intramural Whitehall disputes. It got out that among those spared of the gimmick are the Treasury and tax and customs ministries – whose overflow of red-tape spools are rumoured to be stored in the Tower of London.
In Ottawa, Cameron hectored the troubled eurozone nations, in particular, to summon the “political will” to confront “the heart of the problem – the high level of indebtedness in many Euro countries.”
Few things are so common as conservatives invoking a noble-sounding “political will” when inflicting austerity on those with no voice – though social unrest around the world suggests that tens of millions of unemployed people finally may be finding one.
“Highly indebted households and governments simply cannot spend their way out of a debt crisis,” Cameron said Thursday.
That is true of tapped-out households. Also of central banks, which can’t further lower interest rates already reduced to zero. And of a corporate sector flush with cash, which prefers to hoard rather than invest it in new jobs.
That is known as a demand crisis – or an income crisis, if you prefer. More precisely, it’s a crisis of demand and income scarcity. And the solution to it, as we learned from Cameron’s fellow Briton, the late economist John Maynard Keynes, is for government – the only player with resources in such crises – to stimulate demand with deficit-financed public spending that provides income to everyday people when no one else can or will.
On Thursday, Cameron was rhapsodic about the “Arab Spring,” for which he and French President Nicolas Sarkozy can take lead credit among Western leaders in promoting. What Cameron seems to overlook is that the regional uprisings have been driven by impoverished youth denied employment since their long-ago university graduation, not by religious or nationalist zealots. And in the recent rioting across Britain, disenchanted youth were out in force.
Cameron’s hoary bromides included scrapping regulations, more tax breaks to “incent” business start-ups that by definition don’t yet have taxable income, and slashing corporate tax rates to spur investment from offshore – a gambit that worked like a charm until it didn’t for a since bailed-out Ireland.
From Rob Ford to Angela Merkel to America’s G.O.P., the global leadership class is willingly hostage to an intellectually bankrupt dogma that only worsens the crisis of widespread income deprivation.
We’re back to where we started in this crisis, desperately in need of an encore to the deficit-funded stimulus programs launched in 2009-10 from Beijing to Ottawa, and from Berlin to Washington.
Those programs worked, creating and saving jobs, rebuilding decrepit infrastructure, and generating deficit-reducing tax revenue, before the stimulus was abruptly curtailed.
The B-school axiom that you must spend money to make money derives from Galatians: “For whatever a man soweth, that shall he also reap.” We seem intent now on sowing misery, and you really don’t want to be around for the harvest.
Origin
Source: Toronto Star
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