Clearly it can now be revealed that the main cause of the great financial crash of 2008 was the fact that we had too many libraries. Thank goodness the government has bought this scourge under control and has now turned the tide both in the number of libraries and the numbers using them.
The huge unregulated financial institutions speculating in complex derivatives which many of them did not understand have had to be bailed out with huge quantities of taxpayer’s money due to the reckless lending of too many books by public libraries.
Clearly access to the unfettered lending of books has to be bought to a halt. This unsecured lending encouraging reading and education has done untold damage to our nation. Who knows what the scale of the problem could have been if we had a well read literate population.
Fortunately we are now imposing some serious restrictions on library lending, by closing libraries altogether where possible and restricting the opening hours of the remainder. These timely actions should bring a halt to unfettered reading.
This seemed to be the sub-text to George Osborne’s Autumn Statement. Of course it is not just libraries that are to blame but the whole of our public services. He and many of his supporters in the media seem to have been convinced that that the initial crisis was caused by irresponsible public borrowing.
Never let the truth get in the way of a good story. The conditions for crisis were created by a system of production that goes on strike whenever there are insufficient profits. This was hidden by excessive private sector borrowing and lending in particular by over-leveraged banks.
Eventually profits from credit-fuelled speculation in the stock market and in property, using financial instruments of mass destruction ceased to deliver. The collapse of this bubble led to massive falls in output and therefore in tax revenue.Government deficits are a consequence not the cause of this mess. When the real estate bubble burst corporations and banks slashed spending in an attempt to pay down their debts. Perfectly rational but just like in the 1930s self-defeating, profits continue to fall. Falling profits have lead to a private sector investment strike.
The resulting investment collapse has lead to an economic depression that has worsened the public debt. At a time when the private sector is engaged in a collective effort to spend less despite in many cases sitting on huge piles of cash public policy should not be making things worse by big cuts in government spending (or big increases in tax rates on ordinary people).
After doing the right thing in rescuing the banks that caused the economic crisis conventional policy wisdom has quickly switched the focus onto government deficits. The result is that fiscal policy is reinforcing the dampening effects of private sector spending cuts. Monetary policy cannot solve this problem as interest rates are close to zero besides the problem is the profitability of the private sector not the lack of credit.
It is not even the right policy to propose a medium-term plan for reducing the government deficit as Labour has done. Based on cuts and tax rises as it is front-loaded and will further delay recovery and be self-defeating, indeed the IMF has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction.
There have been a handful of cases in which fiscal consolidation was followed by growth but this was due to currency depreciation in a strong world market. Current global economic conditions make this scenario highly improbable.
What is needed is more public investment not less. Only investment can increase productivity and growth and in this equation the government deficit is irrelevant.
In the Autumn Statement Osborne was crowing about the level of our economic growth (let us park for a moment how this largesse was shared across the population). When we break this down we can see that there where some extraordinary factors driving it. The corrupt bankers paying back to their customers £23 billion they had fraudulently received in “mis-sold” PPI insurance, the adoption of the new European national accountancy standards which include the growth in prostitution, illegal gambling and drug dealing and of course all the extra borrowing.
Bizarrely it is only the latter Osborne finds offensive or indeed immoral. Even with crime and corruption on the increase growth for next year is predicted at being lower than this.
Some of my old Labour friends have accused me of being too hard on Gordon Brown and too soft on Osborne. Brown was well meaning but misguided, Osborne is a sociopath. For me there is a clear distinction. Of course Labour is better than the Tories but I fear the danger with Ed Balls economic strategy is that Labour will do a “Francois Hollande” promise little and deliver less inadvertently opening the door to the far right.