by Martin Odoni

Forced patriotism is often sneered at by the British media when it is not British patriotism. For instance, film from the old Soviet Union of vast crowds of fervent Russian troops chestily roaring The State Anthem is Exhibit A when wanting to prove the phenomenon of Marxist brainwashing. Exhibit B will be examples of the Soviet Government lying to its population about its successful policies and what policies will be enacted in future. Exhibit C will be examples of the Soviet Government burying evidence of promises they have failed to keep.

So on reflection of this, I will ask a question; out of David Cameron and Jeremy Corbyn, which of the two most prominent leaders of political parties in the United Kingdom would you say is more Soviet Union-like in his conduct?

Regularly read a ‘newspaper’ like The Telegraph or The Daily Mail (heaven help you), and you would think the question so laughably easy to answer that it hardly merits asking. “Why, Corbyn of course!” you would scoff. “The USSR was Left, Corbyn is Left, so Corbyn is the Kommissar!”

Au contraire. The economic leanings of the Soviet Union might have been the opposite of Cameron’s unquestioning Free Market worship, but in all other respects, Cameron’s conduct and outlook are far closer to the USSR’s than Corbyn’s.

Cameron is the sort of rosy-eyed Conservative who could hardly resist the impulse to sing along whenever he hears a rendition of God Save The Queen, or Rule Britannia!, and he will sing them with so little pause-for-thought that the distinction between him and a lifetime Stalinist in the Red Army is purely a matter of parameters.

Compare that to Corbyn, who, in stark contrast to the brainwashed devotees of ‘Mother Russia’, refuses to sing his national anthem, even when hemmed in on all sides by the peer-pressure of a large crowd singing it with unrestrained gusto. Well in fact, he has apparently agreed he will sing it in future, but we can be sure it will be without the slightest trace of jingoism in his heart. He is a lifelong republican and does not see what a song idealising a talentless elderly woman – whom people have only heard of due to the accident of her being born a distant descendant of a Franco-Viking warlord who conquered England in the Eleventh Century and brutalised much of its population (oh, our Royals and their philanthropic heritage!) – has to do with being respectful to people who died during this nation’s many, many wars. The non-necessity of most of those wars is one of the reasons why Corbyn is no jingoist.

So, in our ‘How-Much-Do-You-Resemble-A-Soviet?’ contest, after the mindless-patriotism category, Cameron is one-nil up.

How about the breaking-promises-to-the-population category? Well in all fairness, as Corbyn has, to date, never been Prime Minister, it is difficult to provide an even assessment; he has not broken any notable promises to the electorate because he has never been in the position of having to. But nevertheless, were we to compare Cameron with Stalin and other Soviet leaders, we find plenty of common ground. For instance, only yesterday Cameron’s Government pushed several important cuts to tax credits through Parliament. One of the credits that is being reduced, after a fashion, is child tax credit.

Now the exact nature of the cut to it is quite complicated – here is the Daily Mirror’s attempt to decode it for us – and it can be presented in such a way that it could be argued that it is not a cut as such. But whatever the case, it does clearly run contrary to what was implied before the Election when David Cameron was speaking on the BBC. Once again, the Tories are punishing the poor for a gigantic National Debt created mainly by the mistakes of the rich, in a way they had specifically promised not to.

Apparently, this move merits less attention in the media than Jeremy Corbyn showing precisely as much Royalist patriotism as he has always claimed to possess. (I glanced through a copy of The Metro on the way into work this morning – I know, I know, The Daily Mail without cash, but it was either that or stare at the tram ceiling for fifteen minutes – and while I concede I was not looking very closely, I could see no sign of tax credit cuts even being mentioned, while several pages were devoted to the apparent ‘scandal’ of Jeremy Corbyn not singing God Save The Queen.)

Cameron lied about not cutting tax credits, Corbyn didn't sing a song. Guess who the media are getting angry with?

Corbyn not singing GSTQ is apparently more important than David Cameron lying to the electorate.

But surely this broken promise by Cameron marks him out as behaving in a manner similar to Soviet propagandists, which is a reason in itself to highlight it.

Two-nil to Cameron in the race for the title of ‘The New Stalin’ then. This makes the third and final category – the change-of-historical-facts event – something of a ‘dead-rubber’, but even there, Cameron is a clear winner. Remember November 2013, when the Tories deleted a whole archive of speeches from before the previous General Election? Well, at least Cameron did not issue a whole line-up of replacement speeches to fill the gap, and claim that they were what he and his colleagues had actually said – that would be truly Orwellian – but deletion is half the crime. (My brother argues that it was not deliberate censorship, but simply routine server-maintenance by Conservative Party staff who had no idea what it was they were deleting. Possible, and I must stress that my brother is an I.T. expert and is no more a Tory sympathiser than I am, but I remain unconvinced.) While I am unaware of any examples of Corbyn rewriting history, Stalin would certainly be proud to call Cameron ‘a creature of his own’. Remember what Stalin did to the memory of Leon Trotsky, and others?

So, it is three-nil to Cameron, a far more impressive victory than either of his General Election performances. Surely that is worth consideration, next time Corbyn is attacked in the press as a ‘Trotskyist‘?

by Martin Odoni

I would just like to express my admiration and heartfelt condolences to Mike Sivier over on the Vox Political blog. After a very long, arduous and hair-tearing battle against the delaying tactics of the Department of Work & Pensions, to get the real numbers of deaths of people claiming incapacity benefits, today he won, as the figures were revealed to the world. It genuinely is a great achievement, managing to force one of the most stubborn, secretive and underhand departments in all of the British Government to give way. But has there ever been a more heartbreaking boon at the end of such a long and gruelling journey?

What the statistics today revealed is that, near-enough, ninety-two thousand people claiming Incapacity Benefits died in the space of a little over two years leading up to February 2014. Across the three years from January 2011 to February 2014, the overall death-rate was about ninety-nine per day. But it was just thirty-two per day in the first year. Overall, the acceleration in the two subsequent years means an increased death-rate of two hundred per cent. That is only people claiming Incapacity Benefits, please note, not people who had been on benefits of any other description; we are yet to learn how many of them have died of impoverishment by other means. Even more alarming is that over four thousand have died within just six weeks of being classified as ‘fit-to-work’, making a very bleak joke of the Work-Capability Assessments. (Four thousand, please note, is roughly the number of Britons who died at the Battle Of Marston Moor, and as that battle is always presented as one of the most important chapters in our nation’s history, it seems reasonable to suggest that today’s discoveries should be treated with similar gravity.)

Arguments could be made – indeed have been made – that the deaths cannot be reliably confirmed as caused by the DWP’s policies, as the cause-of-death in each case has not been recorded. But the astonishing rate-of-acceleration among the deaths since 2011 leaves little room for doubt; DWP policies, as they have kicked in, have clearly had a very substantial impact, and one for the worse. If the acceleration were caused by something else, for instance the recession, why did the death-rate not start accelerating a couple of years earlier, and why has it not slowed down again over the two years since the so-called ‘economic recovery‘ began?

The figures, in the end, are only numbers and so I suspect many people will take a while to grasp their full significance. Trying to imagine ninety-two thousand faces, and trying to assign a name to each one, is perhaps the only way of turning a number into humanity. But for over ninety thousand people? That would take a very long time. That is the point.

So often in recent times, when challenged on the heartless cruelty of his Sanctions Regime, the Work & Pensions Secretary, Iain Duncan-Smith, has offered only pseudo-religious platitudes of, “I am doing what I believe to be right” or some variation. How can this possibly be ‘right’? How can he possibly carry on insisting that he is doing people good when thousands of them are literally dying as a direct result of his malevolence?

Duncan-Smith’s conduct towards the unemployed and the disabled while he has been in office has often been described as ‘bullying‘, but is that really an adequate word? He is not just reducing people to tears, he is not just imposing his will on them in an unfair and intimidating way, he is not just making them feel small. He is killing them, he knows that is the consequence of his deeds, and he carries on doing them, usually looking for more and more people to victimise by cutting away more and more lifelines. That is not bullying, it is not even persecution, it is a blood-vendetta.

It says a lot about Duncan-Smith’s priorities, and those of many in the wider public, that the rapidly-increasing rate of deaths among Britain’s most vulnerable people is likely to be seen in many quarters as a ‘price-worth-paying’, in the fight against ‘sponging’. Even if benefit fraud were really as prevalent as many imagine – in reality it is less than one per cent of the bill and has been around that level for a very long time – is culling people really ‘better’ than wasting money? Never mind that it is a false economy anyway as no net money is being saved as a result of all this, but how sick must our culture be when it has come to believe equations like that?

What Iain Duncan-Smith has done is preside over a completely pointless and utterly avoidable humanitarian disaster in one of the richest countries in the world, and then imagined he could keep such a disaster neatly brushed under the carpet. So while I congratulate Mike on lifting that carpet enough to reveal what we had all feared lay beneath it, I commiserate him on what it has taught us. If ever there were a victory to despair at, it is this one. However necessary it is to reveal ugly truths, that does not mean we have to enjoy them. Instead, they should be seen with the disgust that motivates us to correct them.


EDIT 28-8-2015: Correction – the number of people who died after being categorised as ‘fit-to-work’ is two thousand six hundred-and-fifty. The four thousand figure is taken from several media sources who counted a number of the claimants twice due to a misunderstanding of two groups of statistics. The real figure is substantially fewer, thankfully, but still terrifyingly high, and while it does not rival the death-toll at Marston Moor after all, it is still high enough for the Battle Of Bosworth Field nearly three times over.

by Martin Odoni

I have decided I should throw in a few quick observations about the latest cruel folly to emerge from the Government’s thinking – or what passes for thinking in the modern Conservative Party – on welfare. Iain Duncan-Smith, the man of jealous privilege who thinks he is entitled to have the public pay for his super-expensive breakfasts while not receiving enough money themselves just to stay alive, has been having ‘ideas’ again. Yes, taking cover probably is a good idea any time you read those words. Including this time.

The Work & Pensions Secretary’s latest gem of pointless vindictiveness towards people born poorer than he is to suggest replacing statutory sick pay with private bank accounts that workers would have to pay into from their wages to save up for periods when they are out-of-work or off sick. Now in fairness to the Prime Minister, David Cameron, he has certainly not made this official policy, at least not yet, but he has not dismissed the idea either. That is worrying enough, because it is difficult to believe a response to this preposterous idea is even necessary. There are two huge flaws in it, and as is so often the case with Tory policy, one is practical, the other is ethical.

The ethical flaw is also the really obvious one. Quite simply, the fund RTU (Returned To Unit) is asking for already exists. It is called National Insurance, and while it is not a private bank account, anybody who has been making regular contributions to it during their working life is morally entitled to sick pay when they fall ill. When people talk about ‘pulling a sickie because it’s paid for by the Government’, they quite overlook the reality that the money paid by the Government was put in by themselves to begin with. Yet again, a high-profile member of this inept Tory Government appears disturbingly unaware of something that really should be among the basics of their job. (N.I. is also, on a separate note, the reason why Jeremy Hunt’s attempts to privatise the NHS without explicit permission from a majority of the public are possibly illegal.)

The practical flaw is perhaps less obvious, but no less important. Quite simply, how can this be implemented when the Government is continually taking money away from the working poor? It keeps scrapping tax credits and in-work benefits for those on the bottom rung of the employment ladder, and opposes any genuine attempt to raise the Minimum Wage just to match the Living Wage. (The claim in last week’s ‘Emergency Budget‘ – such an emergency it was unveiled two months after it was announced – that the Living Wage was to be enforced by this Government, was a damp squib, as it will not apply to under-25’s, who are subject to illnesses as well, and will not even be in place for five years anyway.) When people are not even being paid a Living Wage and are not receiving tax credits to supplement their income, they will, by definition, have no money to spare from their pay packets to put into a sick-pay account. So from where is this cash that ITIAVI wants them to save up going to come? I doubt that the Gentleman Ranker has even paused to consider this drawback, as in his entire, vulgarly privileged life, he has never had to live on a poor man’s wage for even one month.

There is a broader practical problem regarding general economics that this touches upon; even if the poorest can find the extra money, with having to redirect funds to these accounts, they will be spending less in shops. When we consider how many millions of people that is going to apply to, it becomes obvious that the idea is certain to cause another economic slowdown due to lost private sector business. That is a serious hamstring-pull caused by Austerity policies in general, and if YANSM is still unable to grasp, after all this time, how the health of an economy is dependent on the majority having money to spend, he is in a job of which he should not be allowed within a hundred miles

But we already knew that about him anyway, right?

It is telling that, somehow, the Tories never seem able to relate to the poor in any way that does not involve ‘incentivising’ them, rather than, say, just talking to them. Talking to them from on-high, perhaps, but only so they can berate them to do more.

I suppose you can rationalise that idea when it comes purely to the principle of a fair day’s work. I do not agree with it, as I still find it to be massively over-simplified, but I can at least acknowledge there is some reasoning in the idea. But illness is another matter. Most of the Human Race long ago realised that it is silly to think about ‘incentivising’ people not to be ill. Even as I type, I am recovering from a bout of tonsillitis (yes, I did still go into work every day) and I can promise you that I have plenty of incentive not to be ill without people threatening to take money away from me for it. That incentive not to be ill is called ‘being ill’. It is already very unpleasant, and it is stupidity to make the times when people are well instead unpleasant too. Especially as, if people on low pay have to give up more money in the present to have sick pay in the future, that future will arrive quickly; many of them will have to give up the occasional meal to be able to cover the cost, and not eating is one of the surest paths to becoming ill in the first place.

And people say the Left are detached from reality…

by Martin Odoni

One of the things about Godwin’s Law is that it is only supposed to apply to discussions that take place over the Internet. It asserts that the longer a discussion lasts, the higher the chances of someone mentioning Nazi Germany, usually as an insulting comparison to a debating opponent. (In truth, this is something of a redundant point when looked at broadly. Think about it – the longer a discussion lasts, the higher the chances are of anything being mentioned.)

But invocation of the Nazis does very much happen in spoken-word discussions too, and not always as an insult. Sometimes it happens as a result of history-paranoia. This can be seen particularly among the lunatic fringe of the Far Right in the USA; the likes of Glenn Beck and Louie Gohmert play the ‘Nazi card’ almost as a matter of reflex. If you are in the mood for a good laugh, by the way, see what Lewis Black made of Beck five years ago.

Trying to compare the behaviour of modern people to the behaviour of the Nazis is therefore something of a lazy hot-button. But the phenomenon sometimes takes a subtler, but no less insidious, appearance. It is the ‘warning from history’, not about behaving like the Nazis, but about behaving in a way that opens the door to the Nazis. One of the most frequent forms this takes is the ‘Beware-The-Mistakes-Of-The-1920’s’ argument.

This refers to the aftermath of World War I, in which the German Empire was given exclusive blame for the War starting*, and the brief history of the Weimar Republic that followed. The warning focuses on how the phenomenon of ‘Hyperinflation’ supposedly killed it off. (This common understanding of it was given voice in the revived TV series Yes, Prime Minister two years ago, when Jim Hacker declared that the Germans are “terrified of runaway inflation because that’s what destroyed the Weimar Republic and brought them Hitler”.)

This is a commonly-held view, and is often held up as one of the great lessons of the early Twentieth Century – that ‘Hyperinflation’, as it is sometimes called, must be avoided, even at the expense of all other aims.

It is not entirely without foundation. There was indeed a bewildering period of out-of-control inflation in the Weimar Republic in the early-1920’s, and it led to terrible hardship for its people. The notorious ‘Reparations’ that the British and French Governments had imposed on Germany in the Treaty Of Versailles required regular payments of vast quantities of money and raw materials, more than the fledgling Republic, itself still struggling to recover from the War, could afford.

When Germany fell behind in its payments in 1923, French and Belgian forces invaded and occupied the region of the Ruhr, Germany’s industrial heartland. With the Germans unable to muster remotely enough troops to defend their borders, they were swiftly strong-armed into resuming payments, even though the Weimar Government did not have enough capital in its reserves to do so. It therefore resorted to the only option it had available; it simply printed vast quantities of new Deutschmarks and shipped them straight to the French and British Governments. The Ruhr’s industries were largely idle due to the ongoing occupation – the Government had even ordered the workers in the region to go on a general strike in protest against the invasion – and were thus not producing many saleable goods. Therefore, the range and the amount of goods that could be purchased with the German currency were both getting very small, making it a less useful form of money, and thus less valuable. And with so many extra marks now in free circulation, having been freshly printed by the Government, the ease with which they could be obtained encouraged markets to put prices up, knowing that at least some potential customers would have enough marks to meet the cost. Prices going up, by definition, meant that the value of the money was going down even further, as purchasing the same item one day required more money than it had the previous day.

The value of the German currency was receding so rapidly in fact that people soon found that prices were climbing many times per day. This caused public panic, and motivated tides of ‘rush-buying’; many Germans were desperate to buy as many goods as they could as quickly as possible, fearing that if they waited more than a couple of hours, the prices would go up again and the money they had in their pockets would no longer be enough.

But of course, when everybody is buying goods in a panic, that means general demand is going up. At a time when the country’s manufacturing industry was limping, there was no chance that supply could ever meet such a surge in demand. Goods on German markets rapidly became scarcer and scarcer, which in turn made them more valuable, and this again caused prices that could be charged for them to go up even faster. Soon, no purchase was possible for any goods worth less than thousands of marks. So in response – if nothing else it might have reduced the amount of paper being used – the German Government issued fresh notes with extra zeroes added to the ends of the sums e.g. a 100 mark note could be replaced with a 100,000 mark note. But this just made it easier for people to possess and carry tens of thousands, or even hundreds of thousands of marks in their pockets, and to spend them quickly, and therefore made it likely that prices would go up still faster.

The international outlook for the mark was no better. Foreign goods cost more and more to import, as there were so few German goods even being manufactured, let alone being made available for export, that foreign traders saw very little use in possessing marks in any quantity – thus an importer had to offer gigantic sums just to bring in a few basic items.

The Hyperinflation was a dizzying, disastrous cycle that rendered the Deutschmark worthless in less than two years. To illustrate; for most of 1922, an ordinary loaf of bread would have cost about 160 marks. By September the following year, it cost 1,500,000 marks. And just two months after that, it cost an unimaginable two hundred billion marks.

Most of the stories you have probably heard about the Weimar Hyperinflation are true. Widescale starvation, people unable to afford fuel or clothing, money often being carted around in wheelbarrows just to buy small quantities of food, paper actually becoming far, far less valuable when turned into banknotes than it had been when it was blank, basketsful of money being left in the street and only the baskets being stolen by passers-by, the money just being tipped all over the pavement.

In this light, it becomes understandable that people in Germany ended up rejecting democracy and adopted authoritarianism in the years ahead. The Republic had, after all, been the country’s first real experience of liberal democracy, and after just five years Germany was in the grip of destitution, starvation, poverty – a total catastrophe. Thus an uprising of extremism is entirely predictable, yes?

There is just one problem with this interpretation of the time. It is completely untrue.

It involves directly and immediately linking two events that in reality were over half-a-decade apart, and ignoring everything that happened in between times. And a lot of very significant events did happen in between times. There was no inevitability whatever during Hyperinflation that an extremist right-wing Government would take over, and for some years after 1923, the possibility became very much more, not less, remote.

Adolf Hitler and the National Socialist German Workers’ (‘Nazi’) Party did attempt an uprising in Bavaria late in 1923, but the so-called ‘Beer-Hall Putsch’ was an abject failure, not least because it had very little support. Hitler spent nine months in prison for it, and the odds at that stage were that that would be the last history would know of him.

In September, Gustav Streseman became the new Chancellor of the Republic, and he introduced a new raft of policies that pulled the country out of its rut with impressive speed. He ended the strike and ordered a fullscale return to work in the Ruhr. He also formally abandoned the old mark as a currency, and introduced a brand new version called the Rentenmark, which was immediately given a very high, stable starting value through the backing of US gold. This quickly brought the Hyperinflation screeching to a halt. But at least as important, the following year, employing fine political skills Streseman managed to negotiate a new, more realistic arrangement with Britain, France and the USA for the payment of Reparations. Taking proposals from the American diplomat Charles Dawes, a framework was drawn up that reduced the total that had to be paid from the wildly-punitive two billion pounds demanded at Versailles to a much more reasonable fifty million pounds. Streseman also managed to secure a loan of two hundred million dollars from the USA, to inject into the ailing German industries.

(This had the bizarre upshot that the USA was sending money to Germany, so that Germany could produce enough industry to make payments to Britain and France, so that Britain and France could pay back war-loans owed to… the USA. Yes, I know, I think it sounds as potty as you doubtless think too. But it did work for a while.)

With German manufacturing back on its feet, the loans from the USA providing much-needed support, and a strong, restored national currency, the Weimar Republic in fact spent most of the rest of the 1920’s doing very nicely indeed. New factories were built rapidly, high employment rates were re-established, and a cultural revival, especially in Berlin, made Germany seem one of the most elegant and refined nations in Europe once more.

So you see, the years 1924-1929, far from being a period of ‘Nazification’, were a period of real prosperity in Germany. The period was even referred to as the ‘Golden Age Of Weimar’. If you had told a German trader in, say, 1928, that the now-flourishing Republic would cease to exist within five years and be replaced by a military dictatorship, he would probably have given you a sad look and told you how much he pitied you your pessimistic outlook. The very notion of Hitler and his extreme ideas being the way forward would have seemed absurd, and he and his Nazi followers were viewed as rather silly and embarrassing cranks. (In fact, the Nazi Party had very nearly gone bankrupt that very year.)

What could possibly go so wrong from this position as to bring Hitler to power?

Well, there was one drawback to the Dawes Plan; the fate of the big economies of Western/Central Europe were now heavily-locked into the fate of the US economy, because Britain, France and Germany all owed large amounts of money to the US banks. While the American economy remained in the rudest of health, this would not be a problem, as it meant the banks could be as patient about receiving the repayments from Europe as conditions required.

The problem was that, of course, the US economy was not to remain in the rudest of health. Instead, in 1929, it was to enter the most unhealthy condition in its history. When the London Stock Exchange crashed in September, in response to the notorious Clarence Hatry scandal – a fraud involving millions of pounds-worth of fake share certificates – the news filtered through to Wall Street, causing panic, especially among bankers who were still owed money by the British Government. Related holdings suddenly looked very unpromising, and stocks started being sold off at ‘cut-the-losses’ prices. All foreign investments now looking distinctly unsafe, and average stock-prices started to go down.

After weeks of nervous instability, it was at the end of October that the US economy finally choked in a crazed spree of panicked any-cost selling. On 29th October 1929, over sixteen million shares were sold off at rock-bottom prices in a desperate bid by investors to separate themselves from what they now believed were worthless stocks, and just to get anything they could in exchange for them.

The Wall Street Crash had shifted the very geography of world economics. All of a sudden, the stockmarket was flooded with goods that were of no apparent value. Banks that had lent to the investors who had purchased the stocks now found that repayments halted. Many investors who had taken advantage of easy credit that had previously been made available now could not pay it back. Other people who held shares that were now worthless could no longer afford to buy general, even day-to-day goods, and so all across the US economy, business spiralled downwards. Goods could not even be sold at the price of manufacture, and many retailers either folded, or turned to banks in a desperate bid for emergency loans. The banks did not have enough capital available to support the number of loans being requested. All they could do, therefore, was to call in debts already owed to them. Including foreign debts.

Britain, already reeling from the smaller crash on the London Stock Exchange, now found the creditors who had sent loans during the War were demanding their money back. France faced similar demands, and so both countries, in need of money quickly, now decided to call a halt to the Dawes Plan and to make a demand of their own – that Germany resume paying full Reparations.

The German position was not helped by the fact that Streseman had died shortly before the Wall Street Crash. He had warned not long before of the danger to the German economy if the American loans were recalled: “If the short-term credits are called in, a large section of our economy could collapse.” Now, just as they had lost his leadership, the German Government received a demand for renewed Reparation payments, and a ninety-day notice for the first repayment of the 1924 loan from the USA.

Crippling taxes now had to be raised to start the repayments, at a time when frightened American investors were withdrawing their capital from the country. Many German businesses folded under the strain of consequent lost revenues and an increased tax burden, and with that, unemployment began to rise. With every worker who lost his job, money was lost to those businesses he had previously purchased goods from, and so those businesses faced the strain of paying increased amounts while selling fewer and fewer goods. The only solution for many of them was to lay off staff to reduce the wage-bill, repeating the cycle.

A new economic downward spiral had set in, and by September 1930, unemployment had leapt from about one-point-two million a year earlier to over three million. Over the next couple of years, the jobless total would race past six million. With huge numbers of increasingly-desperate people out-of-work, and resentful of what they saw as foreigners taking their misfortune out on Germany once again, extremism was on the up – the Nazis took over one hundred-and-forty seats in the 1930 Reichstag Election – and the rise of Adolf Hitler and The Third Reich was finally under way.

The interesting aspect of this part of the story though is that there was no particular Hyperinflation of the rentenmark. Inevitably, with the value of US gold declining, there had been significant inflation of the mark, but nothing remotely resembling what was seen in 1923. Now it is probably fair to suggest that the terrifying memory of Hyperinflation might have played a psychological role in the growing radicalisation of the German working class in the early-1930’s, but that was about as much a part as the phenomenon had to play in Hitler’s accession. In reality, the Hyperinflation problem had been solved by 1925, and since then the country had gone through a boom period. What really caused the collapse of the Weimar Republic was a financial over-dependence on one country that was suddenly having trouble just supporting itself. The ‘trigger’ was not Hyperinflation at all, but the Wall Street Crash. (And the Crash was, in a manner of speaking, the reverse phenomenon; a collapse in stockmarket prices is a form of rapid deflation, as the same amount of money is able to buy more goods as time passes – if only anybody had wanted them.)

The worry of the “Hyperinflation-gave-the-world-Hitler!!!!” scare-story is that it still plays a substantial role in economic thought even today. Now, I am certainly not trying to make light of Hyperinflation as a phenomenon, it is horrendously damaging when it happens and causes unthinkable misery and hardship. But that is a problem in itself. There should be no need to add a horn-headed demon at the foot of the path, with warnings of “Hyperinflation will lead to Nazism” or some other such Godwin’s Law mimickry. It quite emphatically did not lead to any such thing in Germany – the Beer Hall Putsch failed completely. But the myth causes many a mind at the Exchequer to think that any amount of inflation is undesirable, and to imagine that it is the one danger, above all others, that must be guarded against at any cost. Hence George Osborne’s smug pride in recent very low inflation figures, even though inflation this low is, as Alex Little has recently explained, no less a problem than high inflation. And let us keep in mind that the Wall Street Crash had a deflation element to it.

In the interest of preventing inflation, lock-stock-and-barrel, neoliberal ideology argues that there should always be a substantial standing army of the unemployed, as the more that the working classes are competing with each other, the less able they will be to band together to bargain for better wages (the questionable assumption being that improved wages are what causes inflation). This school-of-thought fails to consider that it was in fact precisely when unemployment – not inflation – was spiralling out-of-control in the Weimar Republic that large numbers of dispossessed workers started turning to extremist political parties and rejecting classic liberal democracy. Surely therefore, neoliberalism has learned exactly the wrong lesson from history, and encourages the very folly that fuelled the extremism it supposedly wants to avoid i.e. over-dependence of the British economy on the USA, and high unemployment?

Surely if we wish to take the real lessons from inter-war-period Germany, we have to accept that large-scale unemployment (and probably starvation-wage employment as well) is the true danger that we need to avoid at all costs. With the Government’s constant figure-fiddling to get around that issue, they could well be sleepwalking into precisely the terrible danger that the Friedmanite handbook tells them it will prevent.

Indeed, that may well be a key factor in the rise of Far Right groups in Britain such as the UK Independence Party. Far be it from me to trigger Godwin’s Law, but by consciously telling ourselves not to, we are in fact behaving in the way that once opened the door to the Nazis.


* I am of the view that, while it is grossly wrong and unfair that Germany took all of the blame for the First World War, the reckless policies adopted by Kaiser Wilhelm II probably were the chief, most immediate cause of the conflict. Written evidence shows that the Habsburg Emperor of Austria-Hungary, Francis-Joseph I, did not move to avenge the assassination of the Arch-Duke Franz Ferdinand until the Kaiser’s Government pushed him into declaring war on Serbia. Furthermore, when Germany and Austria were faced with a consequent invasion by the Russian Empire, Wilhelm ordered a pre-emptive invasion of France, who, in spite of their alliances, still might have stayed out of the War if left alone. The Kaiser also endorsed the scheme to make the invasion via Belgium, which was a clear violation of a Belgian neutrality agreement that the German provinces had signed up to in the previous century, and which made British intervention pretty much unavoidable. At every trigger-point of conflict, the German Empire was one of the key players driving events, and in ways that violated treaties and International Law.

by Martin Odoni

Sorry for forgetting to get all excited over the last year or so, but it hasn’t been easy to. We’ve been told repeatedly over that time how the thrifty ingenuity of the Conservative Party has rescued and revived the British economy. We have had some growth in the economy since the summer in 2013, I suppose, but somehow, looking at it just doesn’t get me going.

But then, what I can never quite grasp is why the Tories expect everyone to have an orgasm about it. I mean, when have somewhat positive economic performance figures ever had that kind of effect on people?

Still, having said that, have you read the romantic tale of the year, about our delectable heroine, Edith Connie Mee? You haven’t? Well boy, are you missing out! Here’s an excerpt from the – mysteriously-not-bestselling – novel E. Connie Mee’s Diary; –

She stepped into the soft, candle-lit accounting office, the promise of indiscretion ever hanging above the balance-sheet print-outs. Then Gideon put his strong, masculine hand on her arm, well-practised and toned by the writer’s block brought on from endless filling in stationery-requisition reports in triplicate, and then with a romantic flourish, he leaned close and whispered a few sweet annual-debt-divided-by-quarters-and-recalculated-deficits-as-percentages-of-GDP in her ear… and then he… OH YES!!! YES-YES-YES!!! He nibbled seductively on her disability benefits, biting away just enough for her to really feel it. He ran his nimble fingers over her welfare-history file, uncladding all her papers and letting the folder drop to the floor between them. Then, he brought her to the height of ecstasy with the revelation that increased commercial sales from private borrowing had resulted in the satisfying elongation of the activity column of the graph for the year by three per cent! OHHHHHHH!!!!

“Oh Gideon,” she simpered, “Gideon! This has never happened to me before!!!!”

Well actually, that last sentence may even be true. George Osborne getting good performance figures out of the economy is something that has probably never happened to any of us before. And, in terms of figures that will give us something to get excited about on a personal level, no, we are still waiting.

Now, the BBC are reporting that the lukewarm economic ‘recovery’ of the last year-and-a-bit is already slowing down, which is not really a surprise given how unbalanced it is. It might improve again before too long if we’re lucky, but even so, the growth for this year was expected to be the aforementioned three per cent, but has already been downgraded by a significant margin, to two-point-six per cent (thus invalidating projected figures from the OBR that were only published at the beginning of this month). Certainly a long way from recessionary news, but still, a bit of a rushed, damp, premature withdrawal from the recent throes of heated economic passion.

Let’s get back to that book though! About two-and-a-quarter, rather short, paragraphs later…

“Oh dear, Gideon, was that it?” Connie asked, disappointed. “Never mind. We can try again next Parliamentary term.”

“I’m sorry, Connie, I’m not sure I can get my voting slip into your ballot box again that soon…”

It would seem that Tory economics really are a little like reputed Tory sex-lives. A lot of tedious, clumsy foreplay that reduces stimulation much more than it increases it, a much-delayed enlargement finally getting half-into-effect, a brief burst of boisterous, boastful bragging, and other even less eloquent grunting noises as the Tory imagines he has everything ‘turned-on’, and then the whole process just completely runs out of steam much too early for all the people left flat on their back to get any pleasure or benefit out of it.

Oh well, that’s Tory economic recoveries for you. It never feels like they last longer than ninety seconds.

How was it for you, everyone?

by Martin Odoni

An observation for any reader who doesn’t have any money; the Conservative Party really hates you for being poor, doesn’t it? Sure, they’ll talk about you having bad manners, or being loud, or not having a ‘proper’ accent, or not being well-dressed, and, if they’re in the mood to try and sound more sophisticated, they may even invoke pseudo-economic arguments about you being non-productive and a burden on the state. But none of this quite detracts from the inescapable reality that it is your poverty itself that really gets up their noses. You are actually poor, and that really spoils the view for them. They especially can’t stand you if you’re out-of-work, no matter what the reason is for that, and they will go after you, lambaste you, demonise you and scapegoat you for every ill the nation suffers. They hate you for being poor so much, in fact, that, as a punishment, they will do everything they can to stop giving you even the tiny amounts of money you might receive every fortnight, even when that is the only money that will keep you alive. And if taking money away from you doesn’t bloody well teach you to stop being poor, well, what will it do? Well, it’ll make you even poorer of course, but that will only make them hate you even more, so don’t draw attention to it when it happens, will you?

But let’s not imagine for one moment that the poor only extend as far as the unemployed. There are many, many British people in work on low pay, especially the Minimum Wage, and such people are poor as well. Hardly surprising really, given how measly the Minimum Wage in the UK is – £6.19 per hour (going up to the giddy heights of £6.31 per hour as of October 1st. With current inflation at just under 3%, a rise in the Minimum Wage of 12p is effectively a very slight pay-cut – an inflation-beater would have been 13p or upwards). This is not enough in some parts of the country to live on, so there is no way for an individual on that rate to build capital, and so they are relentlessly broke. So they are poor. And the Tories have suddenly noticed this and have realised that they must hate them as well.

Hence the Work & Pensions Secretary, Iain Duncan-Smith (or ‘Inept Drunken Sh*t’, as I am finding it increasingly difficult to resist calling him with every passing week) has been developing a new raft of policies to attack, not the unemployed, but people who are actually in work but not receiving enough money to not be poor. Hey, it’s the only way he can be consistent, isn’t it, bullying all poor people equally? Having spent so long aggressing against people for being out-of-work, the Tories have realised that the only thing they find more disgusting is people in work.

The logic of this programme in development goes like this.

Anyone who is earning less than £1,000 per month is probably not earning enough to meet the cost of living, and so will have to supplement their income through state-support, such as tax credits. This is clearly scrounging – there is no more obvious example of fecklessness than expecting to receive an adequate pay-packet for being in work after all – so it is time to cut the state-support. Therefore anyone on Tax Credits who is not earning more each month is now going to be compelled to get a higher-paying job, or a second job, or to work longer hours, or have their credits withdrawn. That sounds like a perfectly fair way to ease the pinch that all those unfortunate rich people are currently experiencing, right? And it will encourage greater aspiration from those on low pay to work harder and to move up the pay-scale, right? That will end the culture-of-entitlement, right?

So the official position of the Government will now become that someone on an extremely low wage is under-paid because he/she is ‘Not Working Enough’. The possibility that employers might be guilty of not offering a high enough wage just cannot be processed in Tory minds. The reality that the employer chooses the wage-rate (and neoliberal economics have created, over the last thirty-odd years, a situation in which it is almost impossible for a job candidate to negotiate a better deal), and the employee simply has to live with it, is also inadmissible in the Government’s thoughts. The built-in dead-ends of the hierarchical pyramid-structure of most companies barring the possibility of everybody being promoted is another stumbling block the Government will not allow itself to notice. The truly absurd concept that many people get paid more for a 35-hour week than some do for a 40-hour week, and yet it will only be the ones working 40 hours in this scenario who will be classed as ‘Not Working Enough’ is a paradox that again will escape the Government’s attention completely. The simple notion that one can force an increase of income for the entire bottom rung of the working ladder by simply, let’s say, raising the Minimum Wage some way above inflation is not just unthinkable to a Tory, it is an outright thoughtcrime (even though the much-needed increase in market demand that such a rise in income for the poor would generate means it would effectively pay for itself).

It goes without saying that these prospective ‘Not Working Enough’ policies are completely amoral. That is merely what is to be expected of the Conservative Party; to make a big show of ‘dealing with’ the problems of the country by hitting exactly the people who are least able to cope or fight back, instead of confronting those elements in society that cause the most serious problems in the first place e.g. banks, corporate interests, tax evaders etc. Morality is an irrelevance to Conservative thinking in almost all circumstances, and it only ever kicks in when the property of rich people is under threat of theft or vandalism. In any other circumstances, appeals to morality will never make the slightest impact.

But, as is so often the case with IDS – see segment 2 here – his ideas aren’t just cruel, they are bloody stupid. In fairness, given the inarticulate, ranting reactiveness of the average Tory supporter, arguments that appeal to intelligence are unlikely to have more effect on them than moral arguments. But seeing that Conservatives within the Party itself always pride themselves on being ‘sensible’, ‘sound’ and ‘level-headed’, while accusing arguments from the Left of always being ‘based on emotion’ and never on judgement, it is a lot harder for them to evade points that demonstrate how stupid their policies are.

So here is why this prospective programme is so stupid; –

Firstly, given that companies have an innate wish to cut their overheads, including their taxes, while maximising the amount of work they extract from their staff, it stands to reason that this policy is going to encourage them only to offer the lowest wage possible to employees. Why? Simple. If they know that their lowest-paid employees are not going to get benefits, on the basis of their take-home pay, unless they do extra work, the employers will keep offering the lowest amount of money, precisely because it will force their staff into doing the extra work. As a bonus, the cut in benefits may well result in fresh tax-cuts, but the main thing is, the amount of increased hours that staff are forced to do will mean more work output (the employers will imagine anyway – studies actually show that beyond forty hours per week, worker efficiency and output tend to decline due to sheer exhaustion).

Secondly, and this is the real killer to the idea, this is a ridiculous approach during a period of high unemployment. When people in work are suddenly forced to work extra hours, or even to get a secondary job to supplement their income, that means they are taking extra work away that could otherwise be offered to the unemployed. If the Government truly want to get people off benefits and into paid employment – and I have never been convinced that they do (again see here) nearly so much as they want to try and scapegoat jobless people to draw attention away from what they are really trying to do – what is required is far more work to become available. Instead, people who are already doing work are being pushed into doing what extra there is, and so there will be fewer jobs for the unemployed to apply for. Certainly an employer will always prefer to get someone who is already on the payroll to do extra work than to get in someone new, for various reasons of convenience and potential expense.

It’s a bit much for a man living rent-free in his multi-millionaire father-in-law’s mansion to bemoan the poor living in a ‘culture-of-entitlement’, especially when he once put a £39 breakfast bill on his Parliamentary expenses. But if that sounds like hypocrisy, again, what more do we expect from the Tories? The Conservative Party – and nowadays the UK Independence Party (‘UK Tea Party’? Possibly) – have made an entire way-of-life out of twisting the most basic thoughts that language can convey. They wish to hammer poor people, even those who are in work, for ‘not working enough’, while showering ever more money onto the rich. The rich, who as a rule never do half as much work as their underlings, are far better placed to cope with a hammering, should it ever come their way, but that will never happen because it might ‘harm the country’ by taking away the resources required to create jobs. Meanwhile, at IDS’ behest, Atos are effectively killing the most desperate and disadvantaged people in the country at a rate of over thirty per week, but this is ‘not harming the country’.

Given how gross the gap between rich and poor is in the United Kingdom – it is the widest in the EU and has been since the early-1990’s while continuing to grow year-on-year – it is pretty blatant that, if the hypothesis that throwing money at the rich to encourage more job-creation really is the solution to all the nation’s ills, the country would have run out of problems to worry about long before John Major was defeated in the 1997 General Election.

Since the Coalition Government came to power in 2010, the Conservatives have effectively been saying; –

Throwing more and more money at the rich for thirty years hasn’t worked, so we’re going to try and solve things by throwing more and more money at the rich.

by Martin Odoni

Two major but basic economic terms are routinely confused by many in the wider public. They are debt and deficit. They are two very closely linked terms, but there is a very important difference between them; –

A debt is the total amount of money owed.

A deficit is the total amount of money that has to be borrowed to meet spending commitments.

In effect therefore, an annual structural deficit is the amount of money a debt is set to increase by. A deficit will only develop when the country’s tax yields are lower than the total price of its spending commitments, and so it has to borrow extra money to make up the shortfall. When there is an outstanding National Debt, it will keep increasing so long as there is any deficit; even a substantial reduction in the size of a deficit will not mean the debt goes down, it will simply continue to rise, only more slowly. The debt can only start being brought down when the tax yields are higher than the spending commitments, which is called a surplus.

In the case of the UK, it has a current National Debt of approximately one-point-four trillion pounds. It further has an annual structural deficit of roughly one hundred and twenty billion pounds. Were the deficit to remain at its present level, this time next year the National Debt would rise to over one-point-five trillion pounds (interest rates notwithstanding).

In tandem, these figures look very sobering. The obvious, logical reaction to them would seem on the face of it to be that to get rid of the deficit, the UK needs to reduce spending to the tune of approximately one hundred and twenty billion pounds. So let’s find bills the Government pays each year of that total and stop the spending programs, and the National Debt will stop rising. Right? Sure, the programs that get cut will be bad news for people who currently benefit from them, but if the country can’t afford them, it can’t keep paying for them. Right?

In fact, this is more or less what the coalition Government has been trying to do over the last three years, since coming to power. George Osborne, the Chancellor Of The Exchequer, has cut scores of billions of pounds from the public sector budget, in terms of large staff cutbacks and reductions in spending programs. This was the return to what is sometimes called ‘Austerity’; a severe, pared-to-the-bone reduction in Government spending, with all services that are not urgently necessary either starved of funding or cut off completely. Somewhat counter-intuitively, while the deficit has reduced by approximately a third – roughly sixty billion pounds – since the Government was elected, this deficit-reduction is substantially less than the Government was expecting. The Office for Budget Responsibility (OBR) had calculated back in 2010 that the structural deficit for 2013 would be down to eighty-nine billion pounds if its Austerity plan were strictly adhered to.

Furthermore, the cuts to public sector spending programs have allowed the Government to cut taxes for employers and companies. Money that was previously being diverted from the private sector to the Government was now being retained by companies again. This should have made money available for firms to hire more staff, increasing income tax yields, as well as more private funds available for people to make more purchases, which would logically increase VAT receipts. This would, in theory, allow the economy to grow, for the country’s total economic output i.e. its annual Gross Domestic Product (GDP) to rise, and so eat further into the deficit.

The problem in all this reassuring theory is that, no, the economy has not grown pretty much at all. Instead, the nation’s GDP has more or less flat-lined from the moment the coalition got in. Indeed, there was a rather weak spell of growth in the last months of the outgoing Labour Government, and it stopped when the coalition started its Austerity measures. Since that time, there have been spells of recession, including late in 2012 the dreaded ‘double-dip’ recession, where the economy shrank in two periods either side of a very, very slight period of growth.

If, as the theory goes, an ultra-low tax-and-spend Government program should lead to a healthy and vibrant private sector, free of the financial burden of propping up the public sector, something appears to be going quite bizarrely wrong. The economy is actually, and has remained steadly for the entire period of the coalition, far more sluggish and listless than it was at any stage under Labour (bar during the ‘Credit Crunch’ of 2008), when public spending was consistently a good deal higher than it is now. If lower public spending should lead to a healthier economy, why is it instead remaining slow and unresponsive?

Well, there are many and varied reasons, some of which are beyond my fairly basic understanding of economics, but I can give you the five main ones here.

1. National economies are cyclical and not linear in function.

The greatest problem with the low-tax-and-spend notion is that it fundamentally misunderstands the natures of both state funding and private enterprise, and the fact that money moves in cycles, and not in a one-way motion from being called into existence until ceasing to exist once it is spent.

One of the misleading illusions we suffer from is that when our money is spent, it is gone and will never return. But of course, this is not really true. All that has really happened is that the money has been transferred from one person’s possession to another. This is what happens pretty much indefinitely. Money goes round and round the population. National prosperity is not just a measure of how much capital it has, it is also a measure of how consistently the capital is able to keep cycling around. Every time money is spent, or paid out in wages to an employee, some of it is siphoned off in taxation to the Government, while the company or person receiving the money is able to spend money as well in turn, repeating the cycle. (This is why thrift with household income, or “good housekeeping” as the young Margaret Thatcher so erroneously called it in last year’s film, The Iron Lady, is a poor analogy for Government spending, as Government spending has money-generating feedbacks that the weekly household shopping will not, as we shall see below.)

With this in mind, it stands to reason that the more people in an economy have money to spend, the better the cycle is maintained, and the more broadly the money is spread around. Where a person becomes unemployed however, they cease receiving money, and so cannot spend. The businesses that they previously purchased from, be it a greengrocer, a supermarket, a corner shop, a tobacconist, a newsagent, a pub, or any of dozens of options, cease to do any trade with that person, resulting in a reduction in profits. (Fewer sales also mean less VAT for the Government.) If enough people become unemployed in an area – say a factory gets closed down and its entire workforce of a few hundred are left out-of-work – a number of the businesses they used to buy from will see a serious fall in profits. One or two of them may even have to lay off staff as well, meaning more unemployment, which will cause further loss of trade for other businesses in the area, and on and on.

However, if the Government intervenes and pays money to the people who have lost their jobs, then they can keep spending with the local businesses. Probably not as much as when they were in work, but enough to maintain sales that would otherwise be lost. With luck, it will probably be enough to make sure more job-losses don’t have to follow.

Therefore, benefits are not the damaging drain on resources that they are often assumed to be by one-dimensional thinkers who are usually looking for scapegoats for the nation’s problems.

Furthermore, public spending in other areas also has a positive consequence for the economy; investment in infrastructure such as roads and railways improves transportation and makes delivery of goods more efficient. Investment in an effective police force reduces crime, which otherwise does serious economic damage of various direct and indirect kinds too obvious to require explaining. Investment in education provides a literate and skilled workforce for the private sector to hire from. Investment in public healthcare provides a healthy workforce for the private sector to hire from. Investment in scientific research provides new technologies that can be used to run businesses more efficiently. All such investment by Government improves industrial efficiency and reduces the likelihood of extra overheads for private companies.

In other words, it does not necessarily follow that public sector spending is a burden on the private sector. It is true that it is an expense, but it should not be seen as the net-drain on resources it is often painted as. Instead, it has a more appropriate analogy within the private sector itself; it should be seen as an investment, in the same way that a commodities speculator invests in goods by paying money rather than by hoarding money – the speculator expects to get a larger sum of money later when he re-sells the stock to someone else who has a greater need for it.

These public sector investments are measured by a calculation known as a ‘Fiscal multiplier’. An investment that has a Fiscal multiplier rating of precisely 1.0 will result in a boost to the economy exactly equal to the amount of money paid into it in the first place. An investment that has a Fiscal multiplier rating of 0.5 will give a boost to the economy of half the value of the money put in. An investment that has a Fiscal multiplier rating of 2.5 will give a boost to the economy of exactly two-and-a-half times the value of the money put in, and so on.

The average Fiscal multiplier rating for public sector investments during the era of the Labour Government, not including the bail-out of the banks, was a little over 1.3, and none of the investments had a rating lower than 0.9. Therefore, the coalition cutting a lot of these services has actually stifled the economy, not boosted it, as although it has saved on the initial investment payments, it has also surrendered the greater profit that they had previously yielded. This has resulted in a net decline of about thirty per cent of the stimulus provided to the economy by public sector investment.

See 5. for more on the issue of Fiscal multipliers.

2. Benefits reforms are actively discouraging job creation.

This one isn’t so much the doing of George Osborne or the Treasury as it is the doing of Iain Duncan-Smith, alias ‘IDS’, at the Department of Work & Pensions (DWP). His handling of benefits during his time in office has so far been astonishingly bad, in a way that makes it all-the-more alarming that once upon a time he was briefly elected leader of the Conservative Party; if he was once considered the outstanding talent on the Tory frontbenches, how bad a shape must the rest of his party have been in after the 2001 General Election?

I am not just critical of his amoral stance on treatment of the out-of-work, or indeed on his equal heartlessness in his treatment of those on the lowest wages in the country. That sort of hatred-of-the-poor is merely to be expected, alas, of any Tory-led Government. I am equally critical of his amazing stupidity, as pretty well all of his changes to the benefits system have served only to make proper paid jobs less likely to become available – arguably have even encouraged increases in unemployment – have fundamentally worked against the Government’s own soundbite aim of, “Making Work Pay”, and actively reduced the stimulus created by general private spending.

The most critical blunder IDS has made is the scheme called ‘Workfare-in-the-UK’, which I am convinced he only introduced to make a big show of sounding ‘tough-on-scroungers’, to please the prejudicial snobs in the right-wing media. The Workfare system, in a nutshell, puts unemployed people into mandatory periods of work for private companies in return for receiving their Jobseeker’s Allowance, and any other benefits. (The DWP insists that the scheme is not mandatory, but as refusal to take part in it can result in the cancellation of an unemployed person’s benefits, this is a pretty empty objection.) This has been presented as a kind of ‘work experience’ scheme, as though everybody forced to do it has not yet left school.

Now, it is hardly necessary to go into too much detail about the moral void of forcing unemployed people to work for their Jobseeker’s Allowance, when the Allowance is so far below the Minimum Wage. It is not quite, as some people call it, slave labour, but it is still appallingly exploitative, and as the period on Workfare will not in any way improve a person’s chances of getting a job – the company recruiting staff through Workfare is under no obligation to offer them a paid appointment at the end of the period, and a Workfare term will not look very impressive on a CV, especially if all it says is, “Stacked shelves at J. Sainsbury for six weeks” – it is pretty well useless as work experience too.

But just as much as it is heartless, the scheme is also completely mindless, and has proven, as people were warning before it was even implemented, to be a free gift to employers whose only interest is to reduce their own overheads. When work needs doing, without a Workfare system in place, a company is forced actually to employ somebody and pay them at least the Minimum Wage. But if they sign up for the Workfare-in-the-UK system instead, they get allocated staff whom they do not have to pay anything, as the work done is effectively funded by the taxpayer. Therefore, many companies have simply signed up to Workfare and got extra staff at no cost at all, and so are now less inclined to hire anybody for real. So efforts to tackle unemployment have been hindered by a scheme that actively discourages companies from offering paid work. Furthermore, having to do unpaid work takes up a lot of the time the unemployed have, so they are given far less time in which to search for a job, presenting a further hindrance, while employees at some companies are resentful that exploitation of Workfare participants has made overtime a lot rarer – why should a company pay time-and-a-half when extra work needs doing when they can get in someone paid for by the taxpayer instead?

There are even claims from some out-of-work people – which I must stress I have no way of verifying – that they have been dismissed from their jobs to make way for Workfare participants. The most bizarre example of this I have heard so far is that one person was apparently laid off from her job at Poundstretcher, was put on Workfare as soon as she signed on as unemployed, and was allocated by her Jobcentre to do her Workfare at… Poundstretcher, where she resumed doing her old job, only now for no wages! (I repeat, I can’t verify whether this story is true or not, but it is entirely possible.) Given that Poundstretcher is part of Baron Philip Harris’ corporation of companies (the Baron, may I just point out, is a Tory member of the House of Lords), it is difficult to believe that it is so short of money that it needs the state to step in and pay its wage-bill.

Workfare kills employment

I don’t know whether this story is genuinely true, but there is certainly nothing in the Workfare system to prevent it.

The system is making unemployment worse. And as already explained in 1., unemployment is a key killer of economic growth.

So, the Workfare scheme is not only amoral, it is also economic suicide.

And it doesn’t stop with Workfare. In the last month, the so-called ‘2013 Benefits Uprating Bill’ (which is the paper-name equivalent of ‘Ministry Of Love’, seeing its only effective purpose is to downgrade benefits for the most disadvantaged in society) has done the passage through Parliament. With this legislative bullet-in-the-foot, IDS has set firm restrictions at precisely one per cent on how far benefits can increase during the remaining lifespan of the present Parliament. Given that one per cent is way below current inflation, this is in effect a serious reduction in benefits, and as I outlined in 1., this reduction can again stifle economic vigour. But more importantly, the overwhelming majority of people who will be affected by the caps in this Bill are not the unemployed, but people who are actually in work. Benefits such as Maternity Pay, Paternity Pay, Statutory Sickness Benefit, Council Tax Benefit, Working Families Tax Credits, and many more, are all being capped well below inflation. If unemployment is truly, as so many Tory-supporters in this country are so desperate to believe, a simple matter of lazy people who have no inclination to get off their backsides and earn their keep, a system that effectively reduces the amount of money working people receive will not do anything to incentivise them.

So much for ‘Making Work Pay’.

We can add to this IDS’ much-publicised direction of the multi-national private IT firm Atos to perform assessments on behalf of the DWP of people claiming incapacity benefits, to establish whether they are able to work. IDS incentivised the firm to find against claimants wherever possible by setting it targets to reduce the total number by. With these targets in mind, Atos has pulled every dirty trick it thinks it can get away with to find excuses to stop benefits for disabled people, either by unfairly loading questions at assessments, or even by making assessment appointments almost impossible for the claimants to be able to attend. (Claimants who are unable to walk being made to attend assessments on the top floors of buildings without wheelchair facilities, for instance.) The upshot is that large numbers of people who are not able to work are no longer receiving the benefits they need just to survive. And some of the people who have been ruled ‘fit-to-work’ are so transparently not fit-to-work at all that the amorality of the assessments has struck many members of the public dumb in shock. (See this video for one of the most brow-raising examples. EDIT: This article from the Daily Mirror provides a lot of numbing examples of Atos’ cynicism. And more here.)

Once again, this is not just deeply immoral, it is yet another economic backfire, for without any income, these jettisoned claimants are now unable to spend, and are effectively taken out of the economy’s spending power. So long as the private sector is dependent on selling its products to members of the public, an economy will require as many members of the public as it can find to have money to spend.

EDIT 8/9/2013: More IDS-shaped folly coming out of the DWP, read about it here.

3. The UK’s Debt issues are about private sector debt far more than public sector debt.

There is a bizarre myth that has taken root in this country over the five years of the economic crisis, a myth about where people seem to think most of the current National Debt problem came from. The idea that was allowed to take hold, especially in the aftermath of the General Election in 2010, was that excruciatingly high and reckless public sector spending through the years that Tony Blair and Gordon Brown were in office had piled up to trillions. Some people even seem to think that it was the cause of the financial crash – the notorious ‘Credit Crunch’ – of 2008. Now in fairness, public sector spending did add a lot to the National Debt in the last couple of years of the Labour Government, but nowhere near as much of it originated there as originated in the private sector. It’s not even close. The problem is that Gordon Brown’s administration managed to muddy the waters and make the public sector look like it was to blame, by effectively transferring the burden away from failed banks.

As recently as 2007, the whole public sector debt was around five hundred and one billion pounds. Still a lot, but at around forty-four per cent of GDP it was far lower than at present, while public spending was at a manageable forty-one per cent of GDP. These proportions were absolutely nothing out of the ordinary, and fairly consistent with previous Governments. (John Major’s Tory Government was never in surplus  in any of its seven years in power, and in 1993 it was running a deficit of fifty-one per cent.)

During this period, thanks to the absurdities of the US Derivatives Market, banks were lending crazy amounts of money to consumers who clearly had little chance of ever paying even half of it off. As many of their debtors were struggling to return funds on time, and in order to drum up extra business in the hope of eventually getting a better supply of capital in the longer term, the banks found even more customers to lend over-valued sums to, which inevitably increased the amount of bad debt, as still more of these customers proved unable to pay back their loans as well. By 2008, there were simply too many bad consumer debts that were going into default, and banks found they were suddenly running extremely low on liquid capital. A similar squeeze was occurring in the USA, some of whose banks had lent substantial sums to UK firms, and were now calling in the debts. The British banks hadn’t enough money to spare to make the repayments, and so finally the long-delayed-but-inevitable crash arrived. Some of the country’s largest banks, most notably Northern Rock, had choked, and they now went cap-in-hand to the Government, crying out for state investment to keep them from folding altogether.

(It is argued by some that blaming the banks exclusively for the crisis is unfair, as the customers who were unable to repay their loans still committed to something that they shouldn’t have. This may seem a fair objection from a personal responsibility standpoint, but it ignores two problems. Firstly, many of the loans were promoted by the banks in such ways that never really drew attention to how large the repayments would ultimately prove to be. Secondly, the general cost of living since Tony Blair had first come to power in 1997 had surged upwards, far in advance of the average wage-increase in the same period – house prices had worse than doubled, as had many basic living expenses (a loaf of bread, for instance, was nearly two-and-half times more expensive by 2009), whereas the average working wage by the late-2000’s had only risen by about fourteen per cent – in fact, consumer debt was deliberately used by the Labour Government to screen the fact that wages were rising far below inflation. So anyone down the social scale wanting to get on the property ladder, or even just wanting to ease the pressures of life on a low wage, needed to borrow quite a lot of money, and sometimes the deeply ill-suited loans the banks wanted to push were all that was available.)

In order to stave off a full meltdown, Gordon Brown’s Government agreed to bail out the banks. The initial bail-out was officially set at eight hundred and fifty billion pounds, which is startling enough, but in real terms it actually caused the National Debt to surge to over one trillion pounds, effectively quadrupling the public sector debt overnight. And of course, the bail-out was not conditional on any increased state regulation, nor, more importantly, on any consumer debts being written off.

None of this had anything to do with public sector spending on the unemployed, the disabled, or people in low-paid jobs, and yet it is the benefits system that the coalition Government is now putting the squeeze on in the name of cutting costs, reducing the deficit, and paying off the National Debt. The problem is, this approach actually makes the Debt problem worse; –

Many of the people who owe consumer debt in the UK are among the unemployed and low-paid – as highlighted in 1., the Austerity approach is killing stimulus and increasing unemployment. Even those who have lost their job but have received a new one are usually being paid less than previously, while other people have had to accept a pay-cut to avoid being laid off. This means the average working wage in the UK is slowly trickling downwards, while people on the bottom rung in general are getting less in benefits than before.

In short, even as the cost of living continues to rise, the poorest in society are receiving less money than they were a few years ago, and those of them who received unsuitable loans have now got less money with which to pay back what they owe. Many of them will be doing well just to pay off the monthly interest on their debts. Most cannot afford even that, and so the amounts they owe are rising faster than they can pay. And of course, as the debts get bigger, the amount of interest being charged each month increases as well. The Income Tax and VAT these people are paying back to the Government therefore isn’t rising.

This is why the National Debt is continuing to rise. Not because the public sector is paying too much in benefits, but because banks in the private sector have taken a huge bail-out of public money while still charging high interest rates on what the public, supposedly, still owes them. The attempt to make the public sector the scapegoat for the crisis is just a cynical blame-shift by the financial industry to evade the consequences of the chaos it created.

4. Tax-cuts have often resulted in money going out of the country instead of into creating more jobs.

Cuts in corporation tax and the top rate of income tax were supposedly designed, as I said above, to encourage firms to recruit more staff, and to help bring down unemployment. But unemployment has continued to rise. Why should that have happened?

Well, this is a quick, easy one to answer. There are the reasons listed in 1. about public spending cuts causing a loss of stimulus. But also, a lot of bigger companies have simply absorbed the extra cash that the tax-cuts have presented to them, and, taking the ‘let’s-bury-our-treasure-and-run-for-the-hills’ approach of the Dark Age Romano-British when boats of Anglo-Saxons arrived, they’ve transferred much of it off-shore into countries or provinces with far lower tax rates, such as the Cayman Islands, or even Jersey and Guernsey. (This technique of cowardice and greed is called ‘capital flight’.) Their hope appears to be to keep their money safely tucked away until the problems have all blown over, and to hell with trying to help with the business of making the problems blow over.

So all that the tax-cuts achieve is for banks in traditional tax-havens to get a juicy injection of liquid capital, while the UK has less money inside the national system. And of course, less well-off Britons – the people who are by far the most likely to spend money when they receive some (simply because they have to just to be able to eat) – have less to spend than they had before the crisis. And so the small businesses they used to purchase from are losing sales… oh, just go back and read 1. again – this is simply the other side of that.

5. The ‘Austerity’ program was based on data that the International Monetary Fund only arrived at by arbitrary – and very inaccurate – guesswork.

When the coalition Government was formed in 2010, one of the earliest policies they put into effect was to establish the OBR. (This was a jolly useful exercise that involved, a) setting up an office, and b) naming it the OBR. Other practicalities beyond that are still to manifest themselves.) To a large extent, this office has proven to be just a local mouthpiece for the International Monetary Fund (IMF), as all it seems to do is tell George Osborne the same things that the IMF have been mechanically reciting for thirty years. Rather than setting up a new Government department, it would surely have been less fuss or expense for Osborne just to pick up a telephone and call the IMF directly whenever he wanted advice. But then in truth it would have been even better if he had just ignored both of them altogether.

When the OBR set out its opening Austerity plan, it of course set the tone for its consistent behaviour since, as it simply took calculations from the IMF and set out a projected year-by-year budget entirely on that basis; how much should be cut from public spending each year, and what the structural deficit would look like at the end of each year accordingly.

There was a snag that neither the OBR nor George Osborne was aware of until late in 2012.

The IMF had spent most of the previous thirty years trying to push the whole planet into a uniform monetarist system. Almost everyone who has ever run the Fund has swallowed the ‘Friedmanite’ dictionary (see below) whole, and as a rule has spent far less time examining what effects its implementation has in the real world. This is why the IMF is often taken completely by surprise when economic crises occur, and will usually single out exactly the wrong things to blame for them – consequent remedial action therefore has a tendency to be ineffective, or to make matters worse. (See what is presently happening in Spain and Greece for examples.)

In this case, the snag of ‘heads-buried-in-the-books-so-intently-as-they-walk-that-they-don’t-notice-what-they-are-about-to-trip-over’ was an assumption the IMF had held for about three decades; a wild overestimation of the net expense of public sector spending. As explained in 1., the net expense of Government spending varies quite widely from service to service, and many services create an effective profit for an economy by generating knock-on stimuli. The measure of how profitable or profligate a public sector expense can be, as mentioned above, is called a ‘Fiscal multiplier’. The rather startling, and lazy, parameter that the IMF had been fouling up its own calculations with for decades was a completely arbitrary assumption that the Fiscal multiplier for all Government spending is 0.5. In other words, the IMF had been assuming for about thirty years that all Government spending generates a feedback of precisely half the value of the amount spent. No wonder that the IMF has always pictured all Government spending to be a burden and ipso facto a nuisance to be avoided as far as possible.

And this was a central parameter in the OBR’s calculations when helping Osborne to draw up an Austerity program in 2010. It was just assumed that all Government spending was running an automatic loss of fifty per cent for the country, in which case every time they cut a spending program, they would automatically get a net increase in money of one hundred per cent the value of the former feedback, which would help the private sector to generate growth.

It is hardly necessary to point out that the IMF’s assumption seemed highly unlikely even before it was finally checked late last year – it would seem an amazing coincidence that all services would generate exactly the same proportion of loss – but worse, no one at the IMF has ever been able adequately to explain where they got that figure of 0.5 from. It seems likely that they just made it up.

Needless to say, the figure was not just wrong, it was hopelessly wrong, as the IMF discovered to its deep embarrassment in the autumn of 2012. As mentioned in 1., no long-term British spending program prior to the bail-outs had a multiplier lower than 0.9, and although 0.9 still constitutes a loss, it is only a loss of about ten per cent, nowhere near the fifty per cent that the IMF had plucked out of thin air. Far more importantly though, the IMF discovered, and announced rather sheepishly in October (in a great blaze of suspiciously-little publicity across the British media), that most of the long-term public spending in Britain had actually been generating a profit through knock-on stimulus effects. The Fiscal multiplier range extended from no lower than 0.9 to as high as 1.7. In other words, at the high end of the range, for every pound that the Government invested, it was returning one pound and seventy pence to the economy. This was essential growth for tackling the deficit, growth that the Austerity cuts were sweeping away.

And Osborne shows absolutely no sign of grasping it, even though both the IMF and the OBR have finally admitted to him that they had got it completely wrong.

The interesting thing is that, historically, Austerity has never really worked when it has been tried. In the inter-war period, Britain, and many other countries, entered a period of Austerity, in the hopes it would help the country recover from the First World War. It failed to generate prosperity then, or to reduce the enormous debt burden the country owed the USA. And in the late 1920’s, the Wall Street Crash caused the Great Depression. Bizarre that such a Crash could occur during a period of prudent international Austerity, perhaps? Either way, it is noticeable that the Depression never really showed signs of ending until the US Government decided to take direct control of its economy with President Franklin Roosevelt’s ‘New Deal’ program from 1933. A Government intervening in the economy is the very antithesis of Austerity, or of Neoliberalism (which is really just the more typical modern name for Austerity). But the intervention worked, and it helped change the USA from an industrial power into a super-power.

It is also worth considering that there was substantial nationalisation of Britain’s industries after the Second World War. Now there were certainly many problems during the period, but between the early 1950s and the mid-1970s, Britain saw its longest ever sustained period of continuous growth. Growth averaged at over four per cent during that period, the proportional National Debt reduced from over two hundred per cent of GDP to a little over forty per cent, and even though there were frequently declines in growth, in only one year was there an outright recession. That was in 1974, and the Government had been powerless to prevent it due to the sudden surge in world oil prices caused by the ‘OPEC Oil Shock’ and the International Stock Market crash. Other than that hitch, growth was continuous for over a quarter of a century.

Recessions happen more in a free market than in a regulated one

You think regulation is what causes economic downturns? Think again.

And all of this was happening while the welfare state was being built from the ground up. It seems public spending and state intervention were not the burdens they are routinely painted as by right wing economists.

Yes, there were economic problems, especially in the 1970’s, but those who saw the Neoliberal/monetarist ideas of Milton Friedman as the answer were trying to solve the wrong problem. They saw regulation of the market and the nationalisation of industry as stifling the economy, when in truth many of the international circumstances of the period meant a decline was going to be difficult to avoid. But recessions became a more frequent event after Margaret Thatcher began the job of dismantling the post-war state institutions that Clement Atlee had started building, while spells of economic growth became far shorter and less pronounced than before. Regulation is not necessarily a safeguard against economic hardship of course, but it is clear that deregulation is even less reliable.

And the current crisis is absolutely a symptom of deregulation, regardless of Conservative claims to the contrary. The banks were reckless in lending to people they should not have lent to vast sums that should not have been lent. They did it in large part because policymakers refused to keep an eye on them, for apparent fear that to do so would ‘stifle’ economic growth – even though there was the obvious danger that, without oversight, some bankers would be tempted to fiddle the figures. This meant that the ‘growth’ could at any time have proven completely illusory, which is indeed what happened.

The odd reality is that Friedman’s monetarist ideas were always entirely hypothetical, and were never based on anything other than his own imagination. They were thought-provoking and ‘outside-the-box’ for sure, but they were completely untested in the real world when they started becoming popular in the 1970s, and part of the reason they appeared to be successful, at least in patches, for about thirty years is that the complete lack of market regulation meant it was very easy for failures in the system to be covered up. Fraud was a standard free market tactic from the early-1980’s right up to the very recent past.

But the current Government – and probably Labour as well should they get back into power in two years’ time – looks certain to persist with Austerity, like a World War I Army General persisting with constant trench attacks, even as hundreds of his own men get mowed down by machine gun-fire. In this stubbornness, there seems to be an ingredient of ‘doublethink’, almost.

Partly, the Tories have taken the Austerity route because it is good for their core supporters – or at least appears to be in the very short term – and by extension improves their own chances of re-election; lower taxes mean richer upper class people, as a rule.

But also, with at least parts of their minds, the Tories genuinely seem to believe that what they are doing will lead to fresh growth, when in fact it is killing it. They have their eyes so firmly fixed on the Friedmanite literature that keeps telling them that what they are doing is for the betterment of the whole economy – and it’s always a nice sop to your conscience to be reassured that what you are doing for your own good will also be for the greater good (it makes choices so much simpler) – that it genuinely catches them completely off-guard when it has the opposite effect.

I am fairly sure that Osborne’s stubborn persistence is as much because he has no wish to face an ugly fact – the fact that rich-people-friendly theories he has believed in religiously his whole life are inherently flawed – as it is because his current course is good for his chums. Hence his reaction is the same no matter what happens; –

When it’s bad economic news, he proclaims it a sign that the situation for the country is precarious and so we must stick with Austerity – we must not risk increases in spending when there is so little money available.

When it’s good economic news – is it ever – he proclaims it a sign that Austerity is clearly working, and so… we must stick with Austerity, because that is what has produced the good results. (Quarterly growth of 0.3%, as announced in the last few days, is a good result. Or at least that is what I am assured… by Conservatives.)

Osborne wants it both ways, as that allows him to continue denying to himself that his lifelong ideas are wrong. Osborne has never exactly been what you would call ‘a man of first-rate intelligence’, and his selection in 2010 to be Chancellor of the Exchequer was frankly mind-numbing, given the Prime Minister David Cameron had the options of both Kenneth Clarke and Vince Cable to appoint instead, both of whom are experienced economists. Osborne’s comparative inability is almost painful to behold at times, his attempts to take pro-active measures always taking him in the wrong direction, while his ideological blinkers stop him even from offering the right reactive responses.

Osborne’s denial – indeed the denial of most of his monetarist Cabinet colleagues – is a bit like Creationists when you try to explain to them why we know the Bible is a book of fantasy.

Although in this analogy, for the Bible you can substitute almost any book written by Milton Friedman.


More on monetarist fallacies can be read at How Thatcher Embodied The Conservative Lie