Public finances explained

Writing about 'Crisis batters UK public sector revenues' in the Financial Times:

The Government gets its money from tax. So, when companies are making lots of money and when everyone has a job and is spending lots in the shops, the Government gets lots of money is corporate tax, income tax and VAT; it takes this money and spends it on public services from education through welfare to defense to name just a few.

When companies are doing badly, and when people are losing their jobs and not spending money in the shops, the Government collects less money in tax.

Current spending plans (i.e. what the Government has planned to spend its money on), were based on the belief that the economy would continue to be good. It has not.

This means that Government can no longer afford to buy the things it wanted to buy. This doesn't just mean that services may be cut to the individual citizen, it also means that, if the Government tries to make savings by sacking people who work in the public sector, then consumer confidence will further weaken and the economy will become even weaker - a vicious circle.

One way of avoiding this vicious circle is to borrow; the Government can borrow money to maintain public spending in the bad times and pay off this debt in the good times.

The problem we are now facing is that the sheer scale of the recession, and the level of borrowing that the Government has already engaged in to bale out failed banks, means that we can't borrow our way through the recession and that there is no guarantee that the economy will be recover to be anywhere near as strong as it has been for many, many years to come.

The folly of economists and the farce of history.

Two short letters in today's FT (16/03/09) nicely sum up both how the world got into the fine economic mess that its finds itself in and how, in a tragi-comic fashion, it is almost certain to find itself in again in the dim and distant future.

The first points out how 'investors were lazy and did not check the fundamentals of what they were investing in. Auditors failed to report or pick up unreliable data. Everyone seem[ed] to have put blind trust in the rating agencies' and that faith alone wasn't enough to make the market system function effectively. Free market economics, driven by ever-more complex financial instruments marketed at great profit by the banking industry, had become an article of faith for all, from Ivy league graduates through the worker-bees churned out by the lesser universities through to the aspiring would-be entrepreneurs who had been watching too much of TV's 'The Apprentice' and not enough of 'Only Fools and Horses'. As with Communism, it inevitably became a god that failed.

Karl Marx, pilloried during the neo-liberal ascendancy by people who knew little about him or his thought, famously said that history repeats itself, first as tragedy and then as farce. With the current financial crisis the great and the good are scratching their heads, wondering what could possibly have gone wrong, but we have been here before. Over half a century ago Karl Polanyi wrote 'The Great Transformation', a wonderful book chronicling the rise and fall of classical liberalism and its replacement with a more stable and sensible social-democratic compromise; this text wasn't widely read in the City of London.

The second letter looks at how this lethal cocktail of forgetfulness and complacency came about, identifying the rise to ascendancy of economics and the marginalisation of history as key enabling factors. Economics, or econometrics informed by a neo-liberal arrogance, was the 'truth language' of the free-market faith system in much the same way as Latin was the 'truth language' of the equally impenetrable pre-reformation Catholic Church; those who could not speak in its code had not right to speak at all.

Just as the recession and war-scarred post-war generation of politicians were eventually written off as obsolete in their thinking by the likes of Thatcher, Reagan and Blair, the current crop of 'decision-influencers who have been through the current fiasco will remember the lessons for a while, but eventually their memory will fade and it will happen all over again.'

Complacent Assumptions

Photo by John Harris

A colleague at work, an utterly disillusioned member of the Labour party no-less, said that the reason he opposes the extension of the data-base state is because there is no reason to believe that the state is, or will remain, fundamentally benign.

In other words, those who basically believe that 'those who have done nothing wrong have nothing to fear', and therefore are quite happy for the state to keep the entire population's DNA, movements and most intimate personal information on file, at best naive and at worst complacent in their attitude to the state.

In states with a more critical sense of self-awareness, usually as a result of a conscious effort on the part of society to 'never forget' the experience of a previous tyranny, such as with constitutionalism of United States or post-communist Germany, the polity has a more instinctive aversion to going back down the road of a surveillance state.

The police states of the past didn't have the technology that Britain is now employing to track, weigh and measure the movements, actions and thoughts of its own citizenry. If they had, then its possible that those regime would never have been successfully undermined from within and therefore would still be with us.

Supporters of the Government would claim that the British state is benign, and that it only claims these extensive powers in order to protect us from terrorism, or to protect the children etc. It should be remembered that authoritarian, including fascist and communist, regimes of the past have similarly claimed that their exercise of power was for the greater good of the people.

The British state isn't East Germany yet, though its technological and legal capability to monitor the everyday lives of its citizens has already long-since over-taken the capabilities of that pre-internet state. The British state, for those who do not have 'radical' political beliefs (such as being actively anti-war) or do not have offending aspects to their sexualities (an interest in sadomasochism for example), and are otherwise uninterested in voicing opposition to the state through word or deed, are quite safe.

However, the same could be said of the average, a-political, citizenry of even the most oppressive authoritarian regimes - in Saddam Hussein's Iraq or Stalin's Russia, if you kept your head down, then you would probably be left alone. In today's Britain it is a crime to protest within a mile of parliament without a license from the state, while the police maintain a database on political dissidents who dare to attend protests against the actions of the state.

Even before the current, technology and hysteria driven, onslaught against civil liberties, the British Government of the 1980s suspended any recognisable concept of justice or the rule of law and employed the police to beat up and detain striking miners, with the British courts unthinkingly turning striking miners into political prisoners on the basis of trumped-up charges.

It's hackneyed, but its true to say, that tyranny comes about bit-by-bit. One day they may come for you, or yours.

Rage

The overpowering surge of feeling that I experienced just a few minutes ago was rage. It wasn't the first time that I have experienced it.

I was at work, in my comfortable and well paid 9-5 office job, when it came over me like a wave breaking on a beach. The trigger was reading an email that related to a piece of work I had done yesterday, but the underlying cause was more seismic in nature: a grating rumble that welled and rippled from the deep until it broke out of my visage and crashed into the environment around me.

The result wasn't spectacular in any objective sense. I screwed up the email and threw it across the desk. I then stewed for a few moments, feeling the hate and anger swell in my stomach, then my chest and then my face. My senses sharpened and my muscles tensed and I little part of my snapped; I had to get out.

I grabbed my computer card, my pass and my bag and walked. I walked out of the building, up the road and into a small local coffee shop, which is where I am now. I will have to go back soon, before I am missed.

Rage in the movies:

A good example of rage, the sort of rage I can identify with, is exemplified in a scene from the 1999 film 'Fight Club', directed by David Fincher (buy it here).

The film is about an underground club where men from all walks of modern life come together to fight each other, not out of hate but out of a need to be men. As with boxing or rugby, the violence is a release more than anything else and members are friends when not fighting.

Edward Norton's character, a founding member of the Fight Club, fights an young blond man, brutally beating him around the face until he is dragged away by onlookers. Norton's alter ego, played by Brad Pitt, casually asks 'what got into you, psycho?' As Norton storms out of the scene, the rage only just beginning to dissipate, he replies 'I wanted to destroy something beautiful'.

That isn't to say that rage is always about wishing to destroy something beautiful, more often than not it is about wishing to destroy something ugly, but it does reflect the irrational will to destruction that is rage. As the film develops we come to see that, at heart, the rage of Edward Norton's character is ultimately a rage within, and directed against, himself.