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‘We are in this together.’ ‘It is time to tighten our belts’. ‘The only means out of this unprecedented period of economic uncertainty is through deep austerity measures, and it’s going to hurt’. These are common phrases, sound bites, heard today, regarding UK’s ‘so-called’ economic crisis - and it unceremoniously waves the Fiscal responsibility back to the public, our hard working citizens. This sort of statement is systematically spilled out of the mouths of politicians and economic spokesman as if our woeful national economic status has never been encountered before – it has: ever since the early 1800’s. Blighty isn’t in uncharted waters.
Our national debt is 64.2% of our GDP (Gross Domestic Product). Less than half than it was after WWI – whereby debt was 135% of UK’s GDP – the 1920’s was set to become an austere period, and lo and behold the decade is famously known as the ‘roaring twenties’ – out of nowhere, a sustained period of prosperity reaped our shores. In 1947, our national debt inflated to 238% of our GDP (almost at the level as it was in 1815 – when UK’s national debt was 260% of GDP) – both were due to Napoleonic and world wars. Yet two years after WWII, during the period that national debt was 238% of GDP; Aneurin Bevan introduced the National Health Service - and funding the grandiose project, indeed reaped huge rewards - this evolved into the welfare program, both were the envies of the developed world. Huge investment aided these programs; the percentage of national
debt to national GDP was secondary.
By the time 1974 arrived the national debt had lowered to 55% (close to what it is now) and that was in a ‘boom’ period of prosperity, again. Unemployment deemed as being at capacity and manufacturing lead the way when it came to exporting across the Channel. The UK had the confidence to produce and invigorate global markets, and this was done pre ‘glocalisation’. UK’s GDP growth was inevitable and its ethos emulated in our governance – ‘investment in the nation was paramount’. Austere in economic terms was shunned as corrosive language - it damaged markets. A great example of this since the free-market mechanism derived; was on ‘Black Wednesday’ in August 1991 - the pound sterling base rate dropped below what was it’s lowest default setting, and the Sterling had to come out of the ERM (Exchange Rate Mechanism); overall 27 Billion was propped up by the Tory treasury (taxpayer). Shockwaves across the developed world catapulted UK into a ‘homemade’ recession – economists claimed it had thwarted market confidence for over twenty years. An early warning signal to how volatile monetary mechanisms can be in a free market mechanism perhaps. You could’ve been forgiven to think, that ‘Black Wednesday’ was proof that capitalism is not a viable long term economic system – so our treasury made the finance sector the main provider of service to the developed world. Whilst simultaneously chopping up our hard graft manufacturing sector into saleable components, for the biggest bid. Now our nation is purely living on the deviations of the markets – as if a Vegas gambler sweating it out on the roulette wheel. The problem is: the guarantor is the taxpayer.
Affluence in the modern world was built on credit alone – capitalism wouldn’t survive without it. Complex monetary systems capitalized via banking markets short-selling i.e. gambling, at high returns and high losses. Derivative formulas are made incredibly attractive to monetary systems for UK and banks in the US. These methods are legal and most bankers learned their trade via such ludicrous financial practices – short-selling for quick returns is all they know; the ‘crash and burn’ ethos is at pandemic levels – because the guarantor is the taxpayer – it’s win, win - the only loser is the taxpayer. After the collapse of US‘s Leymann Bros and the bail-outs for Northern Rock (subsequently sold off at a 400 million GBP loss) and subsequent UK banks, whom were/still are caught up with the seismic financial black hole. Subsequently UK’s debt wasn’t an issue when it came to the bailout of Ireland, Portugal, and the Greek’s initial bailout package – nor is UK’s current economic status, not due to ‘not’ being able to obtain credit from the IMF (International Monetary Fund), which is used to annually prop up our ailing banking system, instead of reinvestment in the nation’s people. Sustainable growth only derives from a fiscal stimulus directly to the core of innovative programs. It works, economic history trends is the proof. Economics don’t change, but politics do. Sadly, the policy makers and Christine Lagarde the Chief of the IMF are too close for comfort therefore the messages from the hierarchies of finance are notably incoherent – this is due to the politicians meddling - hence, why the worldwide ‘Occupy Movement’ is manifesting a plethora of support in the EU.
The GDP comparisons were valid to provide a reality check-point that debt v GDP attitude was different during the post-ware era. Much of the information wasn't widely known either. Now we're more transparent with information and it's available 24/7; due to this, a comparable perspective is paramount, which was evident in my review. It's obvious to me that this alleged transparency is now used as a form of scaremongering, (not dissimilar to the Cold War pandemonium).The only solution is investment and that'll stimulate growth, confidence in the markets. Austere measures flat-line growth, oppress markets; just look what it has done across the EU? Viable data is still being collected in regards to the public pensions and PFI burden.No credible figure has been published. The question is in regards to the 'current economic status' - so by mentioning pensions and the PFI, you're comment is digressing off the debate subject.
Claiiiree 11.06.2012 23:15
I dont think it is relevant to compare debt v gdp today versus debt v gdp in previous years.
Firstly this percentage has increased rapidlty in the last two - three years compared to say after the 2nd world war, and the circs are very different. The government has bailed out many banks in the last 4 years or so plus a recession will always mean low receipts v expenditure on benefits (not the case post war).
However even if it was like for like with the debt/gdp ratio then the UK government can no longer borrow at that level either, hence there needs to be a solution, and it is also complicated as these figures (i.e. your 64.2%) exclude pensions and PFI and these are massive burdens.