UK austerity has inflicted 'great misery' on citizens, UN says
theguardian.com
theguardian.com
The first problem is measurement. Most current economic measurement methodologies don't consider history well enough - particularly where public funds have been used for infrastructure benefits.
Using the US as an example, the modern status quo of life is built upon the interstate highway system. That's just one (very big) example of how public works/infrastructure has benefited the entire society - especially the business owners who can be more efficient due to well-oiled transportation systems. Perhaps some other rail-based system would be even more effective, but that's beside the point.
But as humans are wont to forget the past, many people have forgotten that it took bold investment at a time when money was scarce to provide a foundation for the next 40+ years. So the fairly recent proclamations of small business owners that they built their own fortunes conveniently forgets that the entire population's investment some decades ago primed the situation that they find themselves in now.
Austerity says the reverse: we will not spend anything on anyone out of public funds (unless some powerful group deems it necessary... such as where military is concerned). But what it fails to recognize is that the more people you have dying around you, the lower your health becomes.
Ignoring ethical discussions, there are practical boundaries to questions of "how much is enough" for people on the upper end and "what is the minimum to live a better-than-horrible life" on the bottom end.
I do not enjoy paying practically double the tax rate in Netherlands as I did in the US, but I find daily life SO much better (and safer) here. Being a king of a ghetto is no life. I'd rather the people cooking my food and washing my dishes at the restaurant not be hating my existence because they're so miserable. In fact, I'd rather them feel essentially equal so that when I compliment them on the food or service they feel pleased to have a conversation with me. That is living.
Exactly. It seems common sense that the economy will grow when the people have money to spend...Which means the people who spend (i.e. not the high socioeconomic people) need money to spend.
"whose family couldn’t get school meals in Dumfries, Scotland, because of their immigration status"
Actually they couldn't get free school meals, just like anyone else with a household income over £16k. A subtle omission but one that makes it sound like they were excluded from food entirely:
You've assumed that this child has been refused free school meals because of their financial status. The rapporteur is talking about the mis-application of "no recourse to public funds" rules. A family that has NRPF should still be able to get free school meals, but sometimes the schools don't understand this.
This is a family who is poor, and who should be getting free school meals, but who aren't.
In fact applying for or using public funds while on an NRPF visa violates its terms and could result in deportation.
No it doesn't.
It can apply to students, spouses, people who are granted leave on the basis of family or private life, to people who have exhausted their appeals to leave, to asylum seekers; etc.
http://www.nrpfnetwork.org.uk/information/Pages/asylum-seeke...
https://www.childrenslegalcentre.com/resources/no-recourse-p...
This hits children because free school meals are sometimes gatewayed by access to child tax credit or working tax credit, and those are public funds.
Students can’t bring dependants without showing they are financially capable to support them, spouses and children of work permit holders are dependents which also means that their sponsor must meet base salary requirements + additional requirements for each dependent.
The rest are not here legally, are in the process of being deported or are in process of getting a permit so why the fuck would they have access to public funds in the first place?
People are blaming the wrong thing - it's long age which is causing this. Even though spending is rising, it's not rising 'fast' enough to keep up with the giant bill senior citizens are creating for the NHS and DWP. As the govt has massively ramped up NHS spending and locked pension rises at a historicallg high level, it means every department that isn't catering to this is seeing larger cuts.
Not really sure if just endlessly rising public sector spending to cope with old age can work long term.
In that situation, a government should increase the spending, not use the situation as an excuse for cutting the public sector because ideological reasons.
Or do you think that the intention is to restore those services when the economy goes better?
The UK is one of the richest countries in the world. Part of the reason for that is a long period of generally pro-business, economically conservative government. That's good in many ways, because in a modern economy, business and investment is needed to drive improvements in individual living standards.
But doing that relies on a sensible long-term strategy that can be used to achieve social goals. There is no point in cutting healthcare spending for preventative services, for example, if those cuts result in higher long-term costs. Cutting spending on disability benefits doesn't magically save money – it just transfers the cost of disability support to charities and carers, while in many cases destroying the lives of people who have worked and contributed for many years.
The thing is, when you say "a little belt tightening", this actually means that people in the UK with the lowest incomes start to suffer and in some cases die. I struggle to believe that it is good long-term economic policy to have a large share of the population struggling to afford basic essentials, while the richest demographics continue to increase their wealth.
In the most recent UK budget, I received a large tax cut despite being a relatively high earner. Indeed, UK policy seems to be continuing to shift in that direction, and the only possible reason I can see for that is a deliberate, ideological attempt to enact a policy of minimal public spending.
The UK has many economic and structural problems which could be dealt with, but it's hard to see how continuing to redistribute wealth to the richest parts of the country is going to do that. And of course we now have an entire government that will be paralysed by the economic and political aspects of Brexit for the next decade, so I guess there's no immediate chance of salvation.
Yes but you are neglecting to mention the other side of this coin: also one of the most expensive countries in the world. Look at purchasing power parity and the UK doesn’t seem rich at all, it’s all on paper only. Housing, fuel, transportation etc are all disproportionately expensive here.
Politicians on both sides keep banging on about mobility but the real problem is inequality.
By that logic the government should simply increase spending 10x on disability and everything will be great!
Everything has an ROI, everything has an efficiency.
Canada and Germany both went through massive austerity in the 1990's to re-tool their economies from massive debt overhang - and it worked. Both Canada and Germany emerged on reasonable footing.
I think arguments should be less about spending and more about efficiencies.
No, you've made a logical leap that isn't warranted.
There is nothing wrong with running a balanced and cautious budget, and I didn't say there was. But cutting spending on a service unnecessarily, when doing so raises the total long-term spending on that service is categorically inefficient. It's a classic example of short-termism – government ends up simultaneously forking over more money, and achieving less!
Everything has an ROI, everything has an efficiency.
Yes, I agree. That's why UK government austerity should focus less on inefficient spending cuts to essential services, and more on restructuring the economy.
Increased spending on disability won't reduce future spending; whilst selling off children's playground, say, is likely to be detrimental later.
AFAIK, for Germany that was mostly consequences of reunification. Economic growth slowed in the early 2000s and the centre left instituted the Harz benefit reforms etc. They certainly didn't pay down goverment debt in the 1990s: https://tradingeconomics.com/germany/government-debt-to-gdp
There are two parts to England: London and not London. All the money is centered in the capital and the rest of the country is neglected. House prices in London are driven up to insane levels due to the money laundering through real estate transactions for empty housing.
The majority of the working class people in England live in poverty.
We still need to get the money from somewhere, so instead of fairly increasing progressive taxes, we get lots of little (often unfair) hidden tax rises and huge cuts in public spending.
The weird part is, the british public go along with this. The Conservatives are actively talking about more corporation tax cuts at a time where we still have a large defecit and huge problems with underspending in the public sector.
I don't think they're 'going along with it' - you're making it sound like they don't know what they want.
UK society doesn't have much of an anti-government movement like in the US, but low taxation and leaner governance is a pretty common, mainstream preference here. I think if you speak to a diverse group of voters in the UK you will find a lot of support for austerity and low taxation.
It's not even a Conservative thing! See my sibling comment for an example.
The NHS is a strong outlier in people's preference for extra funding. Child education is another. But for social security? I think the appetite in the UK is less than you think it is.
Personally I didn't mention Social security, I know the attitude to people claiming benefits from those not on them in the UK
I was thinking of the problems in local gov. spending where the central grant has radically decreased, the problems in police spending with far fewer front line officers, the problem in the courts system which is having major impacts there.
The bit about "going along with it" was primarily about the corporation tax cuts.
Those cut revenue and don't directly help citizens (unless you believe in trickle down economics!). A more rational approach would be to want lower personal taxes surely?
They think this can be achieved be being more efficient (all the newspaper articles about NHS wastage and middle managers), and spending less money on things they don't want (overseas aid is a common example.) So the two things aren't necessarily at odds.
> unless you believe in trickle down economics!
I think a lot of people do.
> A more rational approach would be to want lower personal taxes surely?
I think a lot of British people see a large successful business as a virtuous success story, and so want them 'punished' less with less taxes.
(I'm not saying any of this is my opinion, but it's definitely what a lot of people here think.)
I'd say that kind of attitude is common in the US, but less so in the UK.
Albeit I'm seeing things from a Scottish rather than English perspective, but I've not seen an appetite for lower company taxes..
My guess for continued support of this kind of policy is that people think other things are more important (e.g. brexit) + tribalism in voting habits (we've always voted that way round here) + of course the terminally broken FPTP voting system.
the only close example I can think of in the UK is the higher rate income tax band bit and that turned out to be clever accountants banking on the fact that a change in gov. would lower the rate so they time shifted income into the period where it was lower...
We would be better off moving that tax back to dividends, capital gains and property which are much harder to avoid.
Well, I say never; never is a long time, but as long as they keep trying to win my favour by cutting my taxes, they can get bent. I'm not some kind of Pavlovian econo-rational robot, and I object to them treating me as one. These days I tend to vote for the most crazy left-wing party on the ballot, but if there isn't one (there's usually one in local elections, isn't one in nationals), not bother.
I will pay hundreds of pounds less tax in the next tax year. It seems like an absolutely pointless tax cut. It will make essentially no difference to my quality of life. In the meantime, local services that I use are deteriorating – let alone the ones that people in much more need than I use – and the police force and health service are continuing to head towards an absolute meltdown. There are thousands of people in my local council area relying on charity-run food banks. It's a baffling state of affairs.
This myth that gets rolled out that any increase in tax will cause higher rate payers to flee the country in droves is really harmful, I'm happy to pay tax if it improves the services provided by the country.
For instance if you don't need a few hundred pounds per year, why not buy a friend private health insurance.
The doctors are mostly trained in the NHS system. When a surgery happens there's a reasonable chance that it's in the private floor of an NHS hospital, using a private doctor but the rest of the team is NHS. You'll get a private room. But if anything goes wrong, or if you need more after care, you'll be back in the NHS system.
In the UK private health care is at best queue-jumping, but at worst it's poor quality care from doctors who couldn't keep a job in the NHS.
I'd prefer my money went to a central budget and was used effectively at a country level :)
I don't want charities having to rescue people from defunded services that were defunded to give money to people who will never notice it; I want the government to come up with better policies than "let's just cut some more taxes for people who don't need it and won't even notice".
The Inland Revenue does accept overpayments. You could give yourself a tax rise and be the change you wish to see in the world. If you don't then it seems like you're not being entirely straight-laced.
Austerity brings the cliff closer and reduces it's height.
You'll notice the fall and blame austerity but it's better than the alternative.
How do you think that makes the cliff less high?
Not bailing out the banks during 2008 would have been austerity. It would also have made things probably twice as bad (2008 was bad, but the 30s were way worse, like 30% unemployment bad)
There is no actual logical path between austerity and improved short or midterm economic performance. It’s feel good politics, simple and easy to understand but also plain wrong
Where do they get that money to spend?
Money spent by individuals and companies is usually better spent than that by the government. (given a law-abiding high trust society)
Money that passes through government is not magically imbued with some extra quality. More the opposite. Remember that story about it being cheaper to hire a taxi than go by train for two or passengers in Greece? That the Greek train system had more employees than passengers and lost a billion per year?
https://www.bbc.com/news/world-europe-16834815
Of course I don't want to go overboard here; money spent wisely by the government on the public good can be more effectively (productively) than the individual or company.
In your analogy, it only pushed the cliff further away. The cliff is still there, it's still as steep and still as high and we will still, inevitably, fall off it and suffer the consequences.
"We" (I'm Greek) as in those of us who haven't yet crashed- haven't yet been rendered homeless, or forced to live hand-to-mouth, supported by soup kitchens and community handouts and so on.
In other words you're saying the exact opposite of what conventional economics says here - massive levels of borrow and spend is exactly why the Greek economy is so bad, and austerity on an equally massive scale is the only long term solution. When the Greek state is a smaller proportion of the economy, actual growth can occur.
Someone who has won IOCCC four times and who was the General Secretary of Information Systems at the Greek Ministry of Finance has got to be worth listening to.
Greece's fate was sealed when they joined the Euro and started borrowing huge amounts of money that they could never repay, whilst also not carrying out structural reforms to improve tax receipts (like reducing some of the tax evasion in the country)
Their government appears to have decided that this path is "least bad". Not sure that I'd agree but I'm not in Greece to see the options first hand.
Edit: as I'm getting downvotes, I'll provide references :)
https://www.theguardian.com/world/2015/jul/03/greece-overspe...
or maybe
Austerity is a great example of this. They intentionally starved the Greek economy to make a political point rather than produce an economically rational deal. Yet, at every anecdata like, HN, The office lunch table, etc. too many assume with confidence they have only themselves to blame and parrot obvious propaganda about the lazy, barely working, tax-dodging Greeks that's applied to them all, bottom-up.
"They intentionally starved the Greek economy to make a political point"
Greeks are smart people, that they are begging for free money from Germany does not mean that Germany is 'starving' anyone.
"parrot obvious propaganda about the lazy, barely working, tax-dodging Greeks that's applied to them all, bottom-up."
It's not propaganda - or at least not the 'non tax paying' part.
Not only does Greece not have a functional tax system, they also demand to retire earlier with full benefits than workers in other nations.
The Greeks have nobody to blame but themselves.
Also when you say 'do a deal' what you mean is 'give Greece more free money' - i.e. throw good money after bad.
The Germans would in fact, do a deal with the Greeks if they instituted proper economic reforms, by the way, which would not necessarily have to include austerity, but would definitely have to include reform of the tax system, possibly tourism industry etc. etc..
But Greece cannot do that, they are not functional enough to pull it off.
The easiest option would be simply to devalue their currency, which they cannot do ... which might give you a clue as to the real source of economic Imperialism that is the Eurozone.
Countries that cannot keep their books straight for whatever reason, but are otherwise functional, may have an intrinsic need to devalue their currency. It might be the best way for them to move forward - but the EU does not allow for that ...
... so maybe the Eurozone should be more of a 'trade zone' and less of a currency/political union, as so many people would like.
Thanks for confirming my point so well. It's lovely how bottom-up democratic everything becomes as soon as blame and punishment are being thrown about.
> The Germans would in fact, do a deal with the Greeks if they instituted proper economic reforms
What do you think austerity is if not widespread drastic "reforms" among other things? The Greeks did go to great lengths to appease the eurogroup but still needed a fundamental debt trimming.
--> The Greeks, collectively are responsible for their own destiny, and their problems are essentially of their own making.
"as blame and punishment"
Your application of such emotional sentiment I think is hiding the reality from you.
There is no 'blame'.
There is no 'punishment'.
There is just reality.
The Greeks will thrive and be wealthy when they decide to institute social, cultural and economic reforms that enable them to be wealthy.
Have you ever investigated the Greek situation? The country is a basket case of epic proportions. The best description I ever saw of it is "a third world country temporarily able to pretend it's not due to the EU".
Tax collection has already been mentioned. There are many other problems. For instance in most countries workers retire at 65. In theory so do Greeks. But not in practice: Greece has the notion of a "arduous and unhealthy job" which lets you retire at 50. Some of the jobs considered so bad you can retire a decade or more early, on a full pension, include trombonist, bakers, masseuses, hairdressers (this job also qualifies as dangerous!), and pastry chefs.
The notion that Greeks are hard working is systematically undermined by facts about their own laws. The country lived off borrowed money for many years, and is now being brought back to something resembling the correct level of wealth given their laws and economic fundamentals.
Would you prefer to live in a country with a high public debt and industry, infrastructure and an educated population or in a dessert with zero public debt?
What even means the 'public debt' number when a country have its own currency and inflation is under control? Nothing at all.
This is a question that you have to ask when using the analogy between a country's finances and e.g. a household. It _can_ mean that one part of the country (government, central banks) has created and loaned money to _other parts of the same country_. In other words, liquidity and investment. i.e. good things! This is fundamentally unlike a household.
That's about the most direct example of 'borrowing off the next generation'
Someone has to pay the debts, and it mostly won't be those who benefited from it.
In Canada we have marginally less 'government spending' and lower taxes and we have a very low unemployment rate.
Now, a country certainly could operate effectively with higher rates of government spending, but my point is that this is not really the factor.
Spain does not have a competitive economy and that's that.
Competitive how? Salaries are lower than in Canada.
Competitive with who? Do you mean the productivity is low? That's a function of industry development, that is impossible without investment.
Productivity is not just a function of investment.
Spain doesn't form large organizations like they do in Germany and the UK. More people in Germany for example are employed in large organizations wherein they can create more sophisticated products like cars.
Do they have extensive coop/internship programs for young people to work at large organizations?
Is the civil service actually productive?
My experience with our own Spanish office is that they are slack. I would say professionally disorganized. They'd probably just accuse me of bad 'life work balance' , which is fine. But the office hours, long lunches, absenteeism ... nobody really ever seemed to be doing anything. And FYI the work days were long .... Now that is anecdotal - my personal experience, I know that a lot of places hum along obvious, but most of my Spanish friends would concur with what I'm saying though probably not my language. Call it weather, culture, whatever but there's a different culture outlook and this cannot be ignored.
Here's a good take that matched my sentiment [1]
The problem with this 'investment' argument as it relates to Greece, Spain etc. is that only systems that are prepared for investment can possibly make good with it.
Think of a company like a startup: should every startup receive $100M - would that make everyone successful? No - because most startups don't have 'product market fit' and they are not creating value. If a nation has the wherewithal and are ready for investment, well that's another thing. And of course consider how that capital is distributed ... by governments often to their civil servants and pensioners, which might be good, but it's also not exactly going to result in any kind of industrial development.
[1] https://elpais.com/elpais/2014/12/17/inenglish/1418816737_69...
False dichotomy right there. Why not also include say, Sweden, France or Germany as more realistic comparisons?
(much of Europe has been victimized by the cult of "austerity", and several countries have probably lost an entire generation's productivity thanks to these policies)
What cult? Capital markets decided that Greece is too risky to lend money to at reasonable rate. Same happened with Spain and Italy, but they were saved by European Central Bank which became a lender of last resort and bought plenty of their bonds, driving interest rate lower.
It's not like Italy and Spain can easily tap capital markets borrowing trillions of euros at 1% interest rate, but decided not to do so because of 'cult of austerity'.
This had nothing to do with free markets (which really are not very free, they are massively impacted by central bank actions).
So, if they can't afford austerity what makes you think they will repay debts in the future?
"Pensioners" yes, usually from an inflated public sector. Untouchables. Who pays the price? The youth
What about passing needed reforms? LOL, of course not, that will hurt the inflated public sector and their pensioners, never mind no one wants to invest there anymore.
And the worse thing is, if you turn the tap on, you'll probably get the lovely results of "Abenomics", that is, people investing in BS like (existing or low demand) real estate or on non efficiency improving activities (like buying old computer parts for old systems)
Before the "evil" ECB that lends with few guarantees those countries were paying the real cost of their debts (incl. currency devaluation) But then it was "Evil Germany" that could borrow with low interest rates while they had to pay high rates.
Did the cleaners at the finance ministry deserve to be fired because of arbitrary austerity? Does a grandmother in Athens who worked and paid into a pension all her life deserve a cut in her pension from €1300 to €600 a month? Does the widow of ansailor deserve cuts from €1900 to €650 a month because of a financial crisis far away?
These are real and serious questions.
The worst part of this policy of austerity is that the only thing it is useful for is imposing subjugation on the politicians of Greece, it makes Greece unable to pay for its obligations and unable to recover from them. I agree Greece needs reform, needs to collect more tax, needs more jobs and industry, but pro-cyclical austerity is not the answer for anyone including the debtors of Greece.
This shouldn't be about winners and losers, and fairy tales about evil Germany or corrupt, feckless Greece - it should be about getting Greece back on its feet so it can contribute. The same way the EU helped Spain after Franco or Ireland after the troubles.
Destitution was not "imposed" to them. While I agree there are issues with the Euro zone/lack of a fiscal union, the end problem is lack of money going in. That shows up as austerity in this case BUT would have shown up as devaluations/debt/inflation in other cases. Coming from a 3rd world country I can say I have experience in this unfortunately (then the "evil guys" are the IMF, etc).
> Did the cleaners at the finance ministry deserve to be fired because of arbitrary austerity? Does a grandmother in Athens who worked and paid into a pension all her life deserve a cut in her pension from €1300 to €600 a month? Does the widow of ansailor deserve cuts from €1900 to €650 a month because of a financial crisis far away?
It's not "fair", and some of those issues are just a fundamental lack of jobs/work (same thing happens anywhere) but the issue is not with them. However it's easier to cut salaries/earnings of those people in your example while keeping the privileges of the higher levels. (See for example faculty/administration wage gap in American universities)
> it should be about getting Greece back on its feet so it can contribute. The same way the EU helped Spain after Franco or Ireland after the troubles.
Agreed, and austerity is not good in itself, it's more like making a fat person starve (which sucks and everybody hates) instead of making them eat better and exercise more (but if they don't do it themselves, then what).
I'd contend it absolutely was, this is why I gave examples of measures imposed by the troika like firing cleaners.
Austerity is the wrong solution at the wrong time and is especially galling given the central bank's largesse to other sectors/countries at the same time.
They should have imposed a large haircut on creditors and given long term loans to Greece, instead they imposed drastic budget cuts (aka destitution for the people of Greece) and sold it as justice. It was unfair, cruel, and fundamentally wrong.
What was the other choice? ECB printing money and lending it to Greece fully knowing it will be never paid back?
But once you default, you have to balance your budget, because nobody will lend to you, and until 2017 Greece were running a deficit. Default would cause even more pain than so much hated austerity.
One can discuss about austerity as an effective strategy to slim-fit a nation. Making the government and public processes more effective, streamlined and effective, using less manpower to reach the same goal and increasing the efficency, speed and simplicity at the same time – this is a good goal. BUT this is definitly not what usually happens when governments say they need to save money, because those who know how to make the processes more efficient usually don't like to cut their own jobs/salaries/responsibilities.
So they just cut some public service that affects nobody meaning-/powerful instead and sell it as a big reform.
Austerity [1] is a dubious predatory ideology pushed by neoliberal economists parroting the mantra of freemarkets, privatization while pushing crude policies that benefit special interests. The modus operandi is defund public services, raise a ruckus about ensuing chaos and build the rationale for privatization.
A country with its own currency is a not a household. In the case of the US the dollar being the global reserve currency provides even more freedom compared to any other country. Simplistic household type comparisons by agenda driven economists about complex modern economies are grossly misleading.
You cannot bailout banks to the tune of trillions and them impose austerity on the population, this is not capitalism or freemarkets, its gross corruption. Where did this money come from? What about all the scares of 'runway inflation' by such massive injections, why were creditors bailed out and not debtors? Why shouldn't these funds be spent on the people the government represent and not special interests?
Mark Blyth [1], Michael Hudson [2], Steve Keen and Joseph Stiglitz [3] are doing a lot of work on neoliberal economics and dubious policies like austerity.
[1] https://www.youtube.com/watch?v=JQuHSQXxsjM