The graph that shows how far David Cameron wants to shrink the state

If the Tories get their way, within five years the UK will have a smaller public sector than any major developed nation

• 
• • Aditya Chakrabortty
  • The Guardian, Monday 15 October 2012 20.00 BST

Government spending as a percentage of national GDP. Photograph: IMF WEO Database Oct 2012

This column is normally accompanied by a photo; an illustration that takes its cue from the text. But not today. The chart you see on this page is plainly not decorative: it is the main event. All I'm going to discuss is its implications.

Drawing on IMF figures published last week, the graph compares what will happen to government spending in Britain up to 2017 with the outlook for Germany and the US. And what it shows is that the UK will plunge from public spending on a par with Germany in 2009, to spending less than the US by 2017. Had France, Sweden or Canada been included on this graph, the UK would still come bottom. If George Osborne gets his way, within the next five years, Britain will have a smaller public sector than any other major developed nation.

Fan or critic, nearly everyone now agrees that this government wants to shrink the state, but very few take on board what that means. This graph shows just how radical those ministerial plans are. Particularly striking is the fact that Britain will end up spending less as a proportion of its national income than even the US, the international byword for a decrepit public sector. According to Peter Taylor-Gooby, professor of social policy at Kent, this will be the first time it has happened since at least 1980 and possibly in recorded history. For it to take place within half a decade is a shift so dramatic that few people in frontline politics, let alone among the electorate, have understood its implications.

Forget all that ministerial guff about the necessity of cutting the public sector to spur economic growth. Had that argument been true, British businesses would be in leonine form by now, instead of their current chronic enfeeblement. It was notable at last week's Tory party conference how Osborne and David Cameron didn't even try to argue for the economic benefits of austerity – how could they? – but grimly asserted that there was no alternative.

Forget, too, the argument that only cuts have kept Britain's borrowing costs from rocketing. In the IMF's summer healthcheck for the UK was another chart which showed that the only nations where interest rates had spiralled upwards were those in the eurozone, and those without control of their own currency and monetary policy. Every other major economy, no matter what their debt load, was able to borrow from the financial markets as cheaply as ever.

Strip away the usual economic and financial alibis for such drastic austerity and what you're inevitably left with is a purely political motive: namely, a desire to transform the British state from being recognisably European, with continental levels of public spending, to something sub-American in its miserliness.

Let me make two caveats. First, there was no way Britain was going to maintain public spending at 2009 levels. That year, the Labour government threw the kitchen sink at the economy, after which you would expect some belt-tightening. Still, as Carl Emmerson of the Institute for Fiscal Studies points out, after both world wars, the level of public spending in Britain rose permanently; you might expect something similar after a once-in-a-lifetime financial crisis. Given how fast Britain is ageing, and how much we will need to spend on pensions and care for the elderly, there is no reason why the state in Britain should shrink back to some magic level of 40% of the economy.

Second, this chart is based on current US budget plans: if Mitt Romney moves into the White House next January, or even if Barack Obama is re-elected and has to strike a bargain with intransigent Republicans, then Washington is also likely to make stringent cuts. But that last qualification only reinforces the larger argument. Whether in Britain or the US, the right are trying to whip the rest of us into a giant race to the bottom, where public services, welfare entitlements and employment rights are all to be tossed overboard.

Cameron admitted as much in last Wednesday's conference speech. Lumping together Nigeria with China and India and Brazil, he described them as "the countries on the rise … lean, fit, obsessed with enterprise, spending money on the future – on education, incredible infrastructure and technology". As anyone who has ever tried to keep a car on the potholed roads of Bihar, in northern India, will know, that description is a giant porky. But Cameron wanted to draw a comparison with "the countries on the slide … fat, sclerotic, over-regulated, spending money on unaffordable welfare systems, huge pension bills, unreformed public services".

From compassionate Conservative to growth rainmaker to state-shrinker, Cameron has gone through a huge change since 2005. But that is nothing like what lies ahead for the rest of Britain in the next five years. Prepare yourself for welfare to be downsized into American-style workfare, for public-sector jobs to be turned into a second-class employment and for services, from school to healthcare, to demand that users pay more to get something decent. The future is American.

Austerity has never worked

It's not just about the current economic environment. History shows that slashing budgets always leads to recession

• 
• • Ha-Joon Chang
  • guardian.co.uk, Monday 4 June 2012 22.14 BST

David Cameron and EC president, José Manuel Barroso, at a meeting of EU leaders in Brussels. Photograph: Lionel Bonaventure/AFP/Getty Images

Last week saw a string of bad economic news reports. The eurozone leaders seem unwilling or unable to change from their austerity policies, even as Greece and Spain fall apart and the core eurozone economies contract. Britain watches on as its economy is heading for the third consecutive quarter of contraction, with an unexpectedly sharp fall in manufacturing. Last week's jobs figures confirmed that the US recovery is stuttering. The largest developing economies that have so far provided some support for world demand levels – especially India and Brazil but even China – are slowing down too. Four years after the financial crisis began, many rich capitalist economies have not recovered their pre-crisis output levels.

Even more serious is the unemployment problem. The International Labour Organisation estimates there are 60 million fewer people employed worldwide than if the pre-crisis trend had continued. In countries like Spain and Greece, overall jobless rates are approaching 25%, with youth unemployment over 50%. Even in countries experiencing "milder" unemployment problems, like the US and the UK, between 8% and 10% are out of work. If we include those who have given up looking for jobs or those who are forced to work part-time for want of fulltime opportunities, "real" unemployment could be easily over 15% even in these countries.

The remedies on offer are well known. Reduce budget deficits by cutting spending – especially "unproductive" social welfare spending that reduces growth by making poor people less willing to work. Cut taxes at the top and deregulate business (euphemistically called "cutting red tape") so that the "wealth creators" have greater incentives to invest and generate growth; and make hiring and firing easier.

It is increasingly accepted that these policies are not working in the current environment. But less widespread is the recognition that there is also plenty of historical evidence showing that they have never worked. The same happened during the 1982 developing world debt crisis, the 1994 Mexican crisis, the 1997 Asian crisis, the Brazilian and the Russian crises in 1998, and the Argentinian crisis of 2002. All the crisis-stricken countries were forced (usually by the IMF) to cut spending and run budget surpluses, only to see their economies sink deeper into recession. Going back a bit further, the Great Depression also showed that cutting budget deficits too far and too quickly in the middle of a recession only makes things worse.

As for the need to cut social spending to revive growth, there is no historical evidence to support it either. From 1945 to 1990, per capita income in Europe grew considerably faster than in the US, despite its countries having welfare states on average a third larger than that of the US. Even after 1990, when European growth slowed down, countries like Sweden and Finland, with much larger welfare spending, grew faster than the US.

As for the belief that making life easier for the rich through tax cuts and deregulation is good for investment and growth, we need to remind ourselves that this was tried in many countries after 1980, with very poor results. Compared to the previous three decades of higher taxes and stronger regulation, investment (as a proportion of GDP) and economic growth fell in those countries. Also, the world economy in the 19th century grew much more slowly than in the high-tax, high-regulation era of 1945-80, despite the fact that taxes were much lower (most countries didn't even have income tax) and regulation thinner on the ground.

The argument on hiring and firing is also not grounded in historical evidence. Unemployment rates in the major capitalist economies were between 0% (some years in Switzerland) and 4% from 1945-80, despite increasing labour market regulation. There were more jobless people during the 19th century, when there was effectively no regulation on hiring and firing.

So, if the whole history of capitalism, and not just the experiences of the last few years, shows that the supposed remedies for today's economic crisis are not going to work, what are our political and economic leaders doing? Perhaps they are insane – if we follow Albert Einstein's definition of insanity as "doing the same thing over and over again and expecting different results". But the more likely explanation is that, by pushing these policies against all evidence, our leaders are really telling us that they want to preserve – or even intensify, in areas like welfare policy – the economic system that has served them so well in the past three decades.

For the rest of us, the time has come to choose whether we go along with that agenda or make these leaders change course.

Do we want a society where 50% of young people are kept out of work in order to bring the deficit down from 9% of GDP to 3% in three years? A society in which the rich have to be made richer to work harder (at their supposed jobs of investing and creating wealth) while the poor have to be made poorer in order to work harder? Where a tiny minority (often called the 1% but more like the 0.1% or even 0.01%) control a disproportionate, and increasing, share of everything – not just income and wealth but also political power and influence (through control of the media, thinktanks, and even academia)?

Maybe we do, but these choices need to be made consciously, rather than by default. The time has come to choose the kind of society we want to live in.

Naomi Klein - The Shock Doctrine: The Rise of Disaster Capitalism

David Cameron has to maintain that the unrest has no cause except criminality – or he and his friends might be held responsible

These riots reflect a society run on greed and looting

• 
• • Seumas Milne
  • guardian.co.uk, Wednesday 10 August 2011 22.39 BST
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David Cameron talks to acting borough commander superintendent Jo Oakley during a visit to Croydon to view the destruction from the riots. Photograph: Wpa Pool/Getty Images
It is essential for those in power in Britain that the riots now sweeping the country can have no cause beyond feral wickedness. This is nothing but "criminality, pure and simple", David Cameron declared after cutting short his holiday in Tuscany. The London mayor and fellow former Bullingdon Club member Boris Johnson, heckled by hostile Londoners in Clapham Junction, warned that rioters must stop hearing "economic and sociological justifications" (though who was offering them he never explained) for what they were doing. When his predecessor Ken Livingstone linked the riots to the impact of public spending cuts, it was almost as if he'd torched a building himself. The Daily Mail thundered that blaming cuts was "immoral and cynical", echoed by a string of armchair riot control enthusiasts. There was nothing to explain, they've insisted, and the only response should be plastic bullets, water cannon and troops on the streets. We'll hear a lot more of that when parliament meets – and it's not hard to see why. If these riots have no social or political causes, then clearly no one in authority can be held responsible. What's more, with many people terrified by the mayhem and angry at the failure of the police to halt its spread, it offers the government a chance to get back on the front foot and regain its seriously damaged credibility as a force for social order. But it's also a nonsensical position. If this week's eruption is an expression of pure criminality and has nothing to do with police harassment or youth unemployment or rampant inequality or deepening economic crisis, why is it happening now and not a decade ago? The criminal classes, as the Victorians branded those at the margins of society, are always with us, after all. And if it has no connection with Britain's savage social divide and ghettoes of deprivation, why did it kick off in Haringey and not Henley? To accuse those who make those obvious links of being apologists or "making excuses" for attacks on firefighters or robbing small shopkeepers is equally fatuous. To refuse to recognise the causes of the unrest is to make it more likely to recur – and ministers themselves certainly won't be making that mistake behind closed doors if they care about their own political futures. It was the same when riots erupted in London and Liverpool 30 years ago, also triggered by confrontation between the police and black community, when another Conservative government was driving through cuts during a recession. The people of Brixton and Toxteth were denounced as criminals and thugs, but within weeks Michael Heseltine was writing a private memo to the cabinet, beginning with "it took a riot", and setting out the urgent necessity to take action over urban deprivation. This time, the multi-ethnic unrest has spread far further and faster. It's been less politicised and there's been far more looting, to the point where in many areas grabbing "free stuff" has been the main action. But there's no mystery as to where the upheaval came from. It was triggered by the police killing a young black man in a country where black people are 26 times more likely to be stopped and searched by police than their white counterparts. The riot that exploded in Tottenham in response at the weekend took place in an area with the highest unemployment in London, whose youth clubs have been closed to meet a 75% cut in its youth services budget. It then erupted across what is now by some measures the most unequal city in the developed world, where the wealth of the richest 10% has risen to 273 times that of the poorest, drawing in young people who have had their educational maintenance allowance axed just as official youth unemployment has reached a record high and university places are being cut back under the weight of a tripling of tuition fees. Now the unrest has gone nationwide. But it's not as if rioting was unexpected when the government embarked on its reckless programme to shrink the state. Last autumn the Police Superintendents' Association warned of the dangers of slashing police numbers at a time when they were likely to be needed to deal with "social tensions" or "widespread disorder". Less than a fortnight ago, Tottenham youths told the Guardian they expected a riot. Politicians and media talking heads counter that none of that has anything to do with sociopathic teenagers smashing shop windows to walk off with plasma TVs and trainers. But where exactly did the rioters get the idea that there is no higher value than acquiring individual wealth, or that branded goods are the route to identity and self-respect? While bankers have publicly looted the country's wealth and got away with it, it's not hard to see why those who are locked out of the gravy train might think they were entitled to help themselves to a mobile phone. Some of the rioters make the connection explicitly. "The politicians say that we loot and rob, they are the original gangsters," one told a reporter. Another explained to the BBC: "We're showing the rich people we can do what we want." Most have no stake in a society which has shut them out or an economic model which has now run into the sand. It's already become clear that divided Britain is in no state to absorb the austerity now being administered because three decades of neoliberal capitalism have already shattered so many social bonds of work and community. What we're now seeing across the cities of England is the reflection of a society run on greed – and a poisonous failure of politics and social solidarity. There is now a danger that rioting might feed into ethnic conflict. Meanwhile, the latest phase of the economic crisis lurching back and forth between the United States and Europe risks tipping austerity Britain into slump or prolonged stagnation. We're starting to see the devastating costs of refusing to change course.

• © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved.

For the public, the primary domestic concern is unemployment. For financial institutions the primary concern is the deficit. Therefore, only the deficit is under discussion.

America In Decline

Noam Chomsky

“It is a common theme” that the United States, which “only a few years ago was hailed to stride the world as a colossus with unparalleled power and unmatched appeal is in decline, ominously facing the prospect of its final decay,” Giacomo Chiozza writes in the current Political Science Quarterly.

The theme is indeed widely believed. And with some reason, though a number of qualifications are in order. To start with, the decline has proceeded since the high point of U.S. power after World War II, and the remarkable triumphalism of the post-Gulf War '90s was mostly self-delusion.

Another common theme, at least among those who are not willfully blind, is that American decline is in no small measure self-inflicted. The comic opera in Washington this summer, which disgusts the country and bewilders the world, may have no analogue in the annals of parliamentary democracy.

The spectacle is even coming to frighten the sponsors of the charade. Corporate power is now concerned that the extremists they helped put in office may in fact bring down the edifice on which their own wealth and privilege relies, the powerful nanny state that caters to their interests.

Corporate power’s ascendancy over politics and society – by now mostly financial – has reached the point that both political organizations, which at this stage barely resemble traditional parties, are far to the right of the population on the major issues under debate.

For the public, the primary domestic concern is unemployment. Under current circumstances, that crisis can be overcome only by a significant government stimulus, well beyond the recent one, which barely matched decline in state and local spending – though even that limited initiative probably saved millions of jobs.

For financial institutions the primary concern is the deficit. Therefore, only the deficit is under discussion. A large majority of the population favor addressing the deficit by taxing the very rich (72 percent, 27 percent opposed), reports a Washington Post-ABC News poll. Cutting health programs is opposed by overwhelming majorities (69 percent Medicaid, 78 percent Medicare). The likely outcome is therefore the opposite.

The Program on International Policy Attitudes surveyed how the public would eliminate the deficit. PIPA director Steven Kull writes, “Clearly both the administration and the Republican-led House (of Representatives) are out of step with the public’s values and priorities in regard to the budget.”

The survey illustrates the deep divide: “The biggest difference in spending is that the public favored deep cuts in defense spending, while the administration and the House propose modest increases. The public also favored more spending on job training, education and pollution control than did either the administration or the House.”

The final “compromise” – more accurately, capitulation to the far right – is the opposite throughout, and is almost certain to lead to slower growth and long-term harm to all but the rich and the corporations, which are enjoying record profits.

Not even discussed is that the deficit would be eliminated if, as economist Dean Baker has shown, the dysfunctional privatized health care system in the U.S. were replaced by one similar to other industrial societies’, which have half the per capita costs and health outcomes that are comparable or better.

The financial institutions and Big Pharma are far too powerful for such options even to be considered, though the thought seems hardly Utopian. Off the agenda for similar reasons are other economically sensible options, such as a small financial transactions tax.

Meanwhile new gifts are regularly lavished on Wall Street. The House Appropriations Committee cut the budget request for the Securities and Exchange Commission, the prime barrier against financial fraud. The Consumer Protection Agency is unlikely to survive intact.

Congress wields other weapons in its battle against future generations. Faced with Republican opposition to environmental protection, American Electric Power, a major utility, shelved “the nation’s most prominent effort to capture carbon dioxide from an existing coal-burning power plant, dealing a severe blow to efforts to rein in emissions responsible for global warming,” The New York Times reported.

The self-inflicted blows, while increasingly powerful, are not a recent innovation. They trace back to the 1970s, when the national political economy underwent major transformations, ending what is commonly called “the Golden Age” of (state) capitalism.

Two major elements were financialization (the shift of investor preference from industrial production to so-called FIRE: finance, insurance, real estate) and the offshoring of production. The ideological triumph of “free market doctrines,” highly selective as always, administered further blows, as they were translated into deregulation, rules of corporate governance linking huge CEO rewards to short-term profit, and other such policy decisions.

The resulting concentration of wealth yielded greater political power, accelerating a vicious cycle that has led to extraordinary wealth for a fraction of 1 percent of the population, mainly CEOs of major corporations, hedge fund managers and the like, while for the large majority real incomes have virtually stagnated.

In parallel, the cost of elections skyrocketed, driving both parties even deeper into corporate pockets. What remains of political democracy has been undermined further as both parties have turned to auctioning congressional leadership positions, as political economist Thomas Ferguson outlines in the Financial Times.

“The major political parties borrowed a practice from big box retailers like Walmart, Best Buy or Target,” Ferguson writes. “Uniquely among legislatures in the developed world, U.S. congressional parties now post prices for key slots in the lawmaking process.” The legislators who contribute the most funds to the party get the posts.

The result, according to Ferguson, is that debates “rely heavily on the endless repetition of a handful of slogans that have been battle-tested for their appeal to national investor blocs and interest groups that the leadership relies on for resources.” The country be damned.

Before the 2007 crash for which they were largely responsible, the new post-Golden Age financial institutions had gained startling economic power, more than tripling their share of corporate profits. After the crash, a number of economists began to inquire into their function in purely economic terms. Nobel laureate Robert Solow concludes that their general impact may be negative: “The successes probably add little or nothing to the efficiency of the real economy, while the disasters transfer wealth from taxpayers to financiers.”

By shredding the remnants of political democracy, the financial institutions lay the basis for carrying the lethal process forward – as long as their victims are willing to suffer in silence.

---

Noam Chomsky is emeritus professor of linguistics and philosophy at the Massachusetts Institute of Technology in Cambridge, Mass. His most recent book is '9-11:Tenth Anniversary

We can't deny that race plays a part

Christina Patterson: The Independent

Too many black men have been killed by the police. This is not the cause of these riots, but it's in the mix

Wednesday, 10 August 2011

August, historians will tell you, is a good time to start a war. And, boy, does this feel like a war. This feels, when you switch on the TV, and see footage of burning cars, and burning buildings, and of people jumping out of burning buildings, and of people too scared to walk down their street, and of dark silhouettes in helmets waving shields, and of dark silhouettes in hoodies waving iron bars, like the nearest to war most of us have been.

This feels, when you talk to friends, and find that they're staying in with their children all day, because the area outside their front door has been turned into something that looks as though a bomb has hit it, and when you talk to friends who do open their front door, and find a looter in a balaclava hiding in their garden, like the end of something, and the start of something else. It feels like the end of getting up in the morning, and knowing that you'll be able to go to work safely, and get home safely, and do your job safely when you're there.

For some of us, the only sign on our doorsteps was even more police cars screeching past than usual, and shops that closed early, and helicopters overhead. For my neighbours, down the road in Dalston, and down the road in Hackney, it wasn't. For the man, for example, who runs a pharmacy in Mare Street, and watched a group of teenagers try to trash his shop, which was, he said, "everything he had", and who pleaded with them not to, it must have felt like the end of everything he'd spent his whole life working to build up.

For the other shopkeepers in Mare Street, and the ones in Dalston, and the ones in Tottenham, and the ones in Brixton, who watched teenagers smash glass and fill their pockets with mobile phones, or jewellery, or grab trainers, or tracksuits, or even stagger under the weight of giant TVs, it must have felt as if one of the central pillars of their life was under threat.

And for the people who lost their homes, and all their possessions, and their children's toys, and every single photo of their children, which they will never, ever be able to get back, and who nearly lost their lives, and their children's lives, because someone thought it was a good laugh to throw a can of kerosene and a match, it must have felt as near as you get to losing your world, without losing your life.

This is what happens in a war. Wars start for a million different reasons, and the time to understand those reasons is not while the war is going on. They can start – even world wars can start – with a single gunshot. This one did. This one started with an old, old story, of a black man killed by police. It started when a woman wanted to know why four children would never see their father again. And when the police said nothing. And frustration turned, as it often does, and particularly in communities where there's a lot of frustration, to anger, and anger turned, as it often does, and particularly in communities where there are a lot of teenagers with not very much to do, to violence.

And it spread. Do we know if the boys, and young men, smashing windows, and trashing shops, and burning cars, and buses, and buildings, in Hackney, and Croydon, and Brixton, and telling passers-by that what they were doing was "fun", and that they were "trying to get their taxes back", knew about the shooting of the black man, or even cared? Do we know if they knew about the black teenager in Hackney who was stopped and searched by the police, and found to have nothing illegal on him?

We don't, and we can't. We don't, and can't, know why young men, and teenagers, and children as young as 10 suddenly decided that it was a good idea to do what everyone else was doing, which was to spread chaos, and violence, and fear. But we do know that when a tinderbox, or a car, or a carpet store, is set alight, this is what, throughout history, everywhere in the world, sometimes happens.
Race didn't cause these riots, but it played a part. Why else do you get three black men talking about them on
Newsnight, when you almost never see a black man talking about anything on Newsnight? And asked questions about "the black community", as if the people who had had their livelihoods destroyed would have the same views on anything as the 12-year-olds waving iron bars? And why else do you get people talking, as they are on newspaper websites, and radio phone-ins, about "thieving black scum"?

There is no excuse for wrecking people's livelihoods and lives. "She's working hard to make her business work," screamed a brave black woman at some of the rioters in Hackney, "and you lot want to burn it up, for what? To say you're warring, and you're 'bad man'? This is about a fucking man who got shot in Tottenham. This isn't about busting up the place. Get it real, black people. Get real!"

The woman was nearly in tears, and who wouldn't cry seeing their community destroyed, and who wouldn't cry knowing that this would be yet another excuse for people to associate black people with crime? The rioters weren't all black, of course. They were black, and mixed race, and white and wannabe black. They were people who are probably already in gangs, but who usually keep their violence to other gangs, but who, on Saturday, and Sunday, and Monday, and Tuesday, didn't. On Saturday, and Sunday, and Monday, and Tuesday, they discovered, perhaps for the first time outside their little world, the thrill of power.

There are 169 gangs in London. There are 22 in Hackney alone. These are people, often people who have grown up on estates where almost nobody works, often without fathers, and often without any qualifications, skills, or ambitions, who feel that the world has let them down. The guns and knives they carry make them feel that there's a tiny corner of the world they can control. And because of these boys – no more than 2,000 of them – who carry guns and knives, and because it takes more than reports on "institutional racism" to get rid of "institutional racism", you can hardly walk down a street, if you're black, without being stopped and searched.

Too many black men have been killed by the police. Too many black men and women have been treated like criminals when they're not. This is not the cause of these riots, but it's there in the mix, a mix where the key ingredient is feeling powerless. Cuts won't help. Growing unemployment won't help. Some investment, in youth services, and better schools, and mentoring schemes, might, but money alone isn't the answer.

It wasn't these children who created the culture that told them that what mattered was the brand of their trainers, or the glitter of their bling. It wasn't these children who created the culture that told them that their one hope of escape was hip hop, or fame. It wasn't these children who created the institutions of a country where all the black workers were in the canteens. We have, as a society, created this monster and, as a society, and like those people heading into the trouble spots with dustpans and brushes, we must pick up the pieces.

c.patterson@independent.co.uk; twitter.com/queenchristina_