Thursday, 1 December 2011

Striking for justice?

After two days of political spectacle, what have we learnt?

Well, there's a number of things which are being said and several things which should be said in response, so if you're not sick of reading about it already, here's my take.

The strikes were not a demonstration of opposition to public sector pension cuts - the important facts are that strike votes were taken months ago before the first pension deal was offered and the strike occurred while discussions are still ongoing. In reality the strike was timed to coincide with the Chancellor's autumn PBR, and was designed as a political tool to express more general opposition to the coalition's austerity programme which George Osborne laid out in his statement to the House of Commons.

2m people think the country didn't vote for the coalition - in an electoral system under FPTP nobody votes for a coalition, yet it is certainly true that more people voted for the coalition parties than the opposition parties. The main question falls on whether LibDem supporters voted for austerity, but it would also be fair to ask whether Labour supporters voted for the disruption their backers have instigated when turnout among trade union members on the subject also suggested strong divisions. Polling bears out scepticism towards striking, indicating the political motive has overriden the economic motive.

The private sector debate does influence the public sector debate - while private sector workers have traded job security and benefits such as employer pension schemes for higher pay, public sector workers have traded higher pay for security and benefits. Equalising the status of one with the other sounds wonderful in theory, but the reality is that the conditions of each have created a divergent dynamic, and their respective status is already balanced: pension and benefit cuts for those in the public sector are being matched by pay cuts and increased job insecurity in private companies.

In a democracy you deserve the government you get - public sector workers have fooled themselves into the assumption that Government promises are worth anything more than promises made by parties in opposition: governments change and policies change with them, conditions change and parties adapt too. We know that state income has always been treated like a political slush fund to favour the latest interest group, and pensions are no different. If you make a demand for a promise which you know can't be kept, it makes no sense for you to then complain after those willing to tell you that it can find out that, actually, it can't.

The state pension has been under pressure since it was first conceived. While the bods in Downing Street sold us on their moral missions, those clever beancounters over at the Treasury did not concede to introduce it out of any moral compunction, but because they saw an ability to recycle cash and increase the nation's credit-worthiness to enable increased spending across the board according the the standard Keynesian model.

This model has broken down. It did so because where the additional spending could previously be justified on economic grounds to 'get things moving again' during declines, it began to be used during periods of relative economic health under Gordon Brown's Chancellorship from 1999, and increasingly so as he angled to become PM after 2003, thereby blunting any effect during the following downturn as the totals became unsustainable.

Keynesian economics uses the term 'anti-cyclical deficit spending' for a reason, it means spending on a rainy day and infers saving for it.

So if you haven't saved for it, there's nothing in the kitty when you need it.

Which is just as Liam Byrne explained.

While Callaghan was wrong in principle when he stated "it is no longer possible to spend our way out of recession" he was however correct in practice that this depends on your national credit rating - so we should be very wary about managing interest repayments by breaking the other of Brown's rules, to borrow only to invest.

No comments: