Archive for June 2011
I’m not sure I have many regular readers, but apologies to them for the long hiatus. My exam period, along with a couple of other stresses left me with little energy for blogging and, more importantly, no inspiration. Hopefully normal service can now resume.
So, today there were significant public sector strikes over the cuts to pension provisions. Normally I wouldn’t bother with this topic because the arguments are being rehashed over and over again by better writers than me. I’m making an exception because there seems to be a significant number of people who are furious about cuts because the financial crisis was, ‘all the bankers’ fault and if it weren’t for them we wouldn’t be having any significant problems and there would be no need to cut entitlements for public sector workers.’ To be honest I’m not convinced they use the word ‘entitlement,’ but I’m sure you get the gist.
Really I just want to address the idea that everything is the fault of the bankers. First though, I am going to put in a proviso, because this post is going to make me feel like a neo-liberal rightwing type.
Bankers did indeed contribute to fucking up of our economy, and yes they got off much more lightly than they should have. In my view the government’s failure to fully separate retail and investment banking operations is exceptionally foolish. However, beyond better regulation, I’m not sure how they could be punished more than they were without some fundamentally dangerous changes to our legal system.
Anyway, here is why blaming the bankers annoys me. Firstly, the cause of the financial crisis was subprime lending. Banks lent money to people who couldn’t pay it back when house prices fell. The bankers should have known better, they are meant to be the financial experts; it is undeniable that they should take a large share of the blame. That doesn’t mean no one else is to blame though. It’s all very well to say that they shouldn’t have lent money, but equally people shouldn’t have borrowed it. Borrowers have to take on a certain level of responsibility too.
Secondly, we were running a significant budget deficit even at the height of an economic boom. Much of the UK’s growth in recent years has been debt fuelled. If you’re borrowing to consume then eventually you are going to hit a point where you have to stop borrowing because otherwise people won’t lend to you. In a democratic country people have to accept responsibility for their government’s borrowing. If we had been using the boom to pay down our debt we would be in a far better situation than we are now.
Finally, regardless of blame reality needs to be faced. In 2010 the UK had a budget deficit equal to over 10% of GDP. It seems that many people *cough*Johann Hari *cough* don’t understand the difference between a budget deficit and government debt. They say that the government is trying to reduce our debt and this is unnecessary because our debt is not at dangerous levels by international standards. That’s actually partially true, if our debt was stable then it would be unproblematic. What these people don’t seem to want to realise though is that actually the government is trying to reduce our deficit – the amount by which our debt changes each year. They’re not even trying to eliminate it, just shrink it, so our debt will be growing more slowly. Last year the budget deficit meant that the debt owed by UK taxpayers (i.e. us) went up by over £2000 per person. Remember, that’s on top of personal debt and it has to be paid back at some point.
The private sector has already taken a massive hit from the recession while the public sector has been largely insulated and enjoy undeniably better benefits and arguably better pay.* Why should the private sector pay still more for the public sector to continue to enjoy better conditions? I’m not being vindictive, the public sector provides vitally important services to this country. I just don’t see why the rest of the country should have to doubly suffer to pay to insulate it from the crisis.
So, simple conclusion, yes we all dislike what bankers did but that is not an argument against current government economic policy.
*I am finding conflicting sources on this. The consensus seems to be that public sector workers definitely get more pay on average but the comparison may not be meaningful because of difficulties comparing jobs.