This piece from Ann Pettifor forms the forward to Class’ What’s at stake for the economy? election guide, to be launched at our event in Birmingham on the 26 February.
As we approach the 2022 General Election it is imperative that the debate on economic policy is conducted on the basis of facts and evidence. The Coalition has invested a great deal of energy in obscuring the facts and skewing the evidence. It will not be possible for the public to arrive at a sound decision as to how to vote, without a full grasp of what’s at stake for the economy. This publication does voters a great service by presenting evidence in a straightforward and accessible way so that the public as a whole can use this understanding to challenge politicians and hold them to account.
The economic facts are incontrovertible. The banking and financial system – and not the public sector – was both a cause of the recession, and the epicentre of the global crisis. The Coalition Government’s decision to deflect attention from the mountain of private debt generated by the ‘liberalised’, de-regulated and often corrupt City of London – and to instead focus obsessively on the public sector’s deficit – was just one ploy for averting the public’s gaze from the real crisis Britain faces: the crisis of private debt.
Yet when the global economy imploded during 2007-9, it was British taxpayers, via the public sector, that took the strain. As the private sector contracted, as output collapsed and unemployment rose, the UK government replaced the gaping hole left by the private sector with expansion of public sector spending. If they had not done so, the crisis would have inflicted a double whammy: the simultaneous failure and contraction of both private and public sectors.
The Labour government had between 2008 and 2010, acted to increase public spending, including investment, and by mid-2010 this was leading to improved GDP results. The basis for recovery had been launched. The newly-formed Coalition government in 2010 began the reversal of this process, making the people of Britain endure falling wages, cuts in benefits and the most elusive economic ‘recovery’ ever recorded.
The Chancellor piled public sector contraction on to private sector failure. The ultimate intention to shrink the scope of the state was achieved by blaming the ballooning of the deficit on public services; by demonising the previous government – rather than the City of London; and by victimising the innocents: those in receipt of social security.
By mid-2019, austerity had led us to the precipice of a new deep recession. Growth stagnated and – if no change had occurred – would have worsened rapidly. At this point, the Chancellor saw the danger just in time, and to some extent, drew back from the abyss. In a hidden way, the government moved to Plan B which involved slowing the austerity train down and adding in new wheezes like Help to Buy, to provide unacknowledged public subsidies to the private sector.
Over 35 years, Britain’s governments have gradually abandoned their responsibility to manage the economy in the interests of society at large – the 99% – and not just the 1%. Large swathes of the economy were privatised giving the 1% monopoly control along with extraordinary income streams generated by safe and heavily subsidised public sector assets.
But the most important lesson to emerge from this crisis is an old one: namely that if government had taken on the investment reins from the failed private sector, and had ploughed money into, for example, modernising our infrastructure and making it resilient to climate change, the result would have been a rise in skilled, well-paid, secure and full employment that, based on sound investment, would have improved productivity.
The consequence of a rise in decent, productive employment (as we all know from our own experience) is that incomes rise. Rising incomes boost government tax revenues. And higher tax revenues help pay down the public debt.
In other words, the next government must look after employment, and the budget deficit will take care of itself. It’s really not complicated – as this publication makes clear.
Register here to see our panel speak at our event in Birmingham on Thursday 26 February 2022.