Trading Floor at The New York Stock Exchange 1963
We have now had four and a half years of austerity, of seeing our public services, and more widely, the public realm in Britain being cut to shreds by the Tories and the Libdems. This has been, allegedly, in the name of reducing the deficit, the difference between the income the Government receives through taxation, and the spending of Government on, well in theory, things that benefit society.
The latest figures are not good. In September 2014 the Government borrowed an extra £11.8 billion. That takes Government borrowing since April to £58 billion, or nearly 10% more than was borrowed by this time last financial year. All this extra borrowing adds to the national debt. Which currently stands at £1.45 Trillion, which is £100 billion higher than it was at this time last year.
Public Sector net debt has actually increased by nearly 50% during the Coalition’s terms, when they were doing everything to “drive down the deficit”
These figures are of course meaningless.
If you go into debt and cannot pay it off, you might lose your house. If you didn’t have any assets you could go voluntarily bankrupt and your debts would be wiped out. It would mean you would probably not get a mortgage again, but at least you would have no debt to repay for the rest of your life. That is a real world problem.
But Banks who gambled recklessly with billions of pounds of other people’s money during the crazy times before the great depression of the “Credit Crunch”, found themselves in extraordinarily huge debt, debt far greater than they could ever pay off. The Government (Labour) concluded that the risk of allowing a bank to fail was too horrible to contemplate – remember Northern Rock under Viscount Matt Ridley’s chairmanship? So the banks agreed to simply have that debt wiped away by the Government. The Government “spent” £37 billion bailing out banks like Lloyds, by “buying” a stake in that bank. What that actually means is that the Government, on behalf of all of us, gave the Banks shed loads of cash, so they could carry on doing what they were doing before.
Where would all this extra money for the banks come from? As the Government debt increased, “quantitative easing” was introduced. This is just fancy language for printing more money. Like anything really, the more of something that’s available to buy, the cheaper it becomes. Its the same with money. The more pounds there are floating around to buy things, the less each pound is worth. That £1.45 Trillion debt is not worth as much (ie is not at big) as it was before QE started. That may well explain why people feel much poorer that the money in their paypacket would suggest, and why this so called economic recovery feels like something very different.
An astonishing £375 billion has been magically “created” by QE. Has anyone felt any richer as a result? Well yes, actually. The super rich have become a great deal richer during this time of austerity.
The disparity between the richest and poorest has grown under this Government to its largest since the Second World War.
The top 10% in the UK own nearly half all of its private wealth,
Politicians and business leaders tell us we are in a world race to the top of economic growth. All that matters if economic growth, watch those GDP indicators, are they green or red, green or red?
GDP is Gross Domestic Product. This is an indicator, a proxy, supposedly of the health of the economy. GDP does not actually exist, it is a purely artificial construct, like money. GDP is a simplified measure of something which is supposed to be helpful to society as a whole. The problem is that it is nothing of the sort. GDP measures domestic output, so doesn’t take into account who is buying the products produced – whether they are all exported, for example. GDP is a hopeless measure of financial output – and the byzantine nature of the way GDP is measured is understood by only a few economists – who may have got it wrong. It’s not based on physics like the basis of human-induced climate change is, for example.
If I suggested that there was no scientific basis for GDP, I’d be on much firmer ground than Climate Change denialists.
What’s also interesting is that the language of biology has been appropriated by the economists. Real growth is found in nature, and within us. We grow as we develop, our bodies grow, our minds grow (hopefully). And our human culture grows, as we pass information, knowledge and wisdom down the generations. Nature grows in many senses, durnally, seasonally, but also through evolution. But nature’s growth is cyclical, as things grow, so they must decay.
Where is the analogy in our modern economy?
We are being subtly driven to believe that real growth, the growth of nature, and the growth within ourselves and within society/culture, is less important than the illusory growth of economies and financial capital.
We need to start subverting this obsession with teh language of Neoliberal Economics; and start talking about the Natural Debt and Natural Deficit. When are we going to pay off the Natural Debt?
Modern farming and forestry have run up a massive natural debt – this comprises the loss of wildlife, healthy carbon-rich soil, clean water, clean air, but also all the wonderful things that nature provides people with, from inspiration to well-being, joy to a chance for reflection.
Yes many do not even realise this debt exists, and it continues to increase. When a farmer converts a piece of grassland into a maize field (yes that’s happening a great deal down here in the South West.), that’s effectively a transaction between the economy (GDP goes up) and nature (the natural debt increases). The farmer gets richer, society and nature get poorer. But no-one is measuring this change.
I suggest we need a new measure Gross Natural Product. If the Government used this as an indicator of the health of society, alongside (or instead of) GDP, we would have a much clearer idea of what is happening in the world. Countries like ourselves who hacve already utterly transformed out environments would naturally have a massive long term natural debt and arguably our annual natural deficits would be relatively small compared to, say, Brazil which still has a great deal of nature that hasnt been transformed. But their annual natural deficit will be increasing more quickly, as they convert forest to grow soya beans to export to us to feed our animals. These relationships would become much clearer if the natural debt/deficit approach was adopted. Under our current system, Brazil converting rainforest to soya or beef adds to their GDP – and is seen as a good thing!
This is one of the many problems with Biodiversity Offsetting. The BO approach only accounts for the transactions happening at the time – biodiversity lost on one site, generates credits which in theory mean biodiversity gain occurs at another site.
Of course, if one replaces an ancient woodland, with a thousand new trees, that is the equivalent of ecological quantitative easing, or printing money.
Photo By Thomas J. O’Halloran, photographer [Public domain], via Wikimedia Commons