h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

That's one perspective. Another one could be that a government forced to cut spending has to reduce public services which are primarily used by the less well-off and this could be interpreted as a policy that favours the rich as they are less affected by it.

>>I'd be suspicious of things that are "intuitively" correct just because they match your own world view/politics. See my comment about confirmation bias.

*shrug* Maybe. Conformation bias is a thing, and is one reason why I qualified my view by saying it was intuitive.

But is anyone seriously arguing the contrary, that the current government *hasn't* been running things in the interests of the 1%

I think it's down to interpretation. AFAIK every government in the West is cutting back on spending right now. The wealthy, by dint of being wealthy, are less affected by cuts in public spending and so you could argue that because cuts disproportionately impact upon middle and low incomes such policies "favour" the rich.

But that's not the intention behind the policies - the intention is for governments to stop hemorrhaging money.

But going back to that paper, and particularly to the graph that shows the change over time, the trend is for a fairly smooth transition to favouring the rich (and note that the graph only goes up to 2009 so the policies of the last few years don't even appear). You could interpret it instead as a transition to policies that - even if we charitably say that it wasn't their intention - hurt the poor more, but the trend is still the same. In the past, parties' policies hurt the poor less than they do now.

So regardless if we think of them as hurting the poor or favouring the rich, the trend is the same.

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Not *quite* correct. Governments are making the choice to cut *net* spending, even when interest rates are at record lows. Using govt spending to stimulate the economy is an option they're not taking. Also, to cut *net* spending, they could increase taxes, rather than, say, cut the top rate of income tax from 50-45%. Also, the increase in VAT that ****** Osborne put in place affects the poor more than the rich, as the poor, being poor, don't have the option not to spend. Property taxes are another method, although that would be politically 'brave', if not unfeasible.

I'd say that the reason for cuts in public spending derive from the neoliberal agenda, not vice versa.

Not that I got further than paragraph 3 of that paper, mind.

Are you suggesting that the Government borrows *more* money Pedro? Didn't even Ed Balls concede that was lunacy before the last General Election. There's a reason interest rates are so low on the international money markets - demand is low. No sensible government is increasing borrowing just now, to the point the markets are almost giving it away. (it's my own pet theory that Ratings Agencies are downgrading country's credit ratings purely to increase repayment interest rates and continue the healthy returns for lenders)

As for the top level of income tax, that was a political handgrenade thrown by the Labour Party out of spite. Throughout their 13 years in office they maintained the top rate at 40%, with Gordon Brown resisting pressure from within his party to raise it by pointing out that 40% was an optimum rate - anything higher leads to a fall in revenues. It wasn't until the last weeks & months of their government that they raised it, once it was clear they were likely to lose and in the full knowledge that a Tory Party cutting taxes for the rich would face public opprobrium. People sneer at the thought the rich will take steps to avoid paying tax they see as unfair but in 2009 there were 16000 people (1% funnily enough) paying taxes on income of £1 million and above. After the 50% rate came in, this fell to 6000 people. If anything, raising the tax rate *was* pandering to the 1% - they paid far less tax after that move, £7bn less since 2009 according to the Government.

In 1979 the top rate of tax was 83% and the top 10% contributed 35% of taxes.
In 2009 the top rate of tax was 40% and the top 10% contributed 53%.

In the same period the bottom 50% of taxpayers saw their contribution fall from 18% to 12%

How is all this a "shift to the right"? The rich are contributing more and the poor less.

A Keynesian stimulus isn't the lunacy you suggest, swl. I really can't be arsed goint into why right now (maybe tomorrow though).

And your tax 'stats' are pretty farcical. Why concentrate on people earning £1m and above when the starting rate's about £40k or so? cI don't know if you know that many of the very wealthy have a certain latitude about when they declare their income: many simply deferred theirs hoping the higher rate would be cut by their pals in office, as it was.

And your 'top 10%' one merely highlights how the super-rich have gained truly epic amounts of wealth under a neo-liberal ethos. Nothing more.

Nite

swl, you already made that last point. It's not valid, because inequality has increased during that time period. The rich got vastly richer compared to the poor, so of course their contribution to total tax revenues increased.

Incidentally, where are you getting your figures? You seem to have very precise information.

Re Keynesian stimuli - I've lost the quote but Harold Wilson was asked about Keynesian policies whilst he was Chancellor and he was extremely dismissive of them, pointing out they were fine in theory but impracticable for anyone actually running a country. But then, what would he know?

<> Because they are the 1% referred to in the OP.

As for people getting rich, people have always gotten rich - especially in booming economic times like we saw in the mid 90s.

Links for figs Dogster - http://blogs.spectator.co.uk/coffeehouse/2013/03/celebrating-the-25th-anniversary-of-nigel-lawsons-tax-cutting-budget/
http://johnredwoodsdiary.com/2013/04/07/the-50p-tax-rate-2/

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Or that the supply of money is high maybe? The UK govt has minted £325bn of electronic money and given it to financial instituions, in the hope that a) they won't collapse, and b) they might lend some of it to businesses, because credit is really rather important in our economy. Also, interest rates are quite high for the likes of Spain and Greece, when the bond markets are worried about their ability to repay. When the markets have no fear of default, for example with the UK, US or Germany, rates are near historical lows. One reason for any lack of demand is the uncertainty of returns in shares (due to us being at or near recession), or commodities being so volatile, and dependent on China having a slowdown.

I believe the quote you've forgotten is 'You can't spend your way out of recession.' And he was right in 1976 (I think) because the economy was near equilibrium. Today it isn't. There's a huge demand deficit, and as private firms are choosing not to invest the huge cash piles they're sitting on, the economy will remain in the doldrums for far longer than it would it the govt spent in the right way.

Cameron's most telling and subtle lie was his 'maxing out the credit card' slogan. In aggregate, your spending is my income. My income was cut initially by the banks going into meltdown, and the recession that ensued. God bless Gordon Brown* for doing more than anyone else to stop that turning into an outright depression.

Contruction work fell by about 15% in 2008, and hasn't really recovered. Meanwhile, the bedroom tax is those bampots' response to the fact that there aren't enough houses for people to live in. Building, say, 500,000 houses a year for the next 3 years would provide accomodation, boost a sector whose benefits will stay in the UK more than just about any other, and provide an incentive for all the private firms who aren't hiring and investing to start doing so.





* I will probably never utter that sentence again, or in any other context.

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As an aside, real wages have rised by about 1% a year since around 1980. From 1950-1980 they averaged around 3.5% a year. That's the difference between wages doubling in 20 years, or in 70. One of the reasons for the 90s 'boom' was that those on the property ladder borrowed against the rising values of their homes, as opposed to earlier times when they spent more because they were earning far more than previously. Another mirage of neo-liberalism.

I agree with a lot of that Pedro, with a couple of caveats.

1) was it the IMF bailout in 1976 that put the economy in equilibrium?

2) the "bedroom tax" was introduced in 2008 by the Labour Party and they are on record as keeping it in it's present form if they get back into power.

http://notesbrokensociety.wordpress.com/2013/03/13/the-bedroom-tax-where-does-labour-really-stand/

1) Unemployment was less than 1m, so aggregate demand would've been fairly near to aggregate supply. A fairly narrow definition, but yes.

2) Fair enough. New Labour were neo-liberals too. The cart drives the horse for both of them. And obviously, the Tories could have stopped it, eh?

I was getting my quotes confuddled. it was the Labour Chancellor Dennis Healey who said in 1975 "I'd been very pro-Keynesian before I knew anything about economics". In fact Healey repeatedly cut public spending by drastic amounts, on the advice of Jim Callaghan. There's nothing new really.

From "when the lights went out, Britain in the Seventies" by Andy Beckett.

And Keynes knew less about economics than Dennis Healey? Every day's a school day..

To be fair though, in the sense that Marx said, 'I'm not a Marxist', then Keynesiansim didn't always represent what Keynes thought.

The rest of the quote goes on to say, "The world changes, dear boy"

That was a reply to your previous

Re unemployment in the 70s, that 1 million figure wouldn't include women in the same way they're included nowadays though I expect. Different eras, different ways of fiddling the figures.

Well it wouldn't include their spending power either. Result!