Sunday, 8 May 2011

Why I support 'Rally against Debt'

For most of you that are on Twitter or Facebook you may have come across #RallyagainstDebt before.

This post will be used to introduce it to you if you haven't already and will be a brief explanation of why it has my 100% support.

On the 26th of March, I like many in the UK was sat at home, little did I know that while most people were at home, at work, at the zoo or booking a day out to a pirate exhibition, we were apparently also supporting the 'March for The Alternative'.

I found this out when reading lefter-than-Lenin's-left-sock newspapers and news reports telling me that it was a view held by the majority of Britons...and good ole Red Ed Miliband told me that if I opposed the march that I, supported apartheid? Hmm..this went too far for even the action loving press.

I could not reconcile this, however with the fact that most people that I tutted to about the march didn't even seem aware of it's existence.

The newspaper reports were  'proved' by a poll by YouGov.

Total sample size was 2,720 adults and was asked online.

         Liberal Democrat
Don't know

The first thing you will notice is that you are only likely to support the March if you're a Labour supporter..if you look at the General Election '10 results you will see that you are statistically not likely to be a Labour supporter.

Not a surprise that a lot of Labour people were supporting the March, officially it is a TUC march and secondly it is a march against the actions that were taken to fix the problems inherited by Labour. It would be political suicide to NOT back it if you're the Labour leader because you would pretty much be saying "Yes, sorry guys, all these things that are being cut...that is to pay for OUR faults".

Anyway, enough back story. It was at this point that Rally Against Debt was dreamt up I believe. With the simple premise that yes, of course if there was a way to fix everything without every having to take responsibility that would be the most popular order of the day (this is why the the March for the Alternative was well attended, promoting new taxes like the Robin Hood tax, which even if it went well has no scope for fixing any problems even by its own advocate's figures and a clamp down on Tax planning methods..all ways by the public that can help them escape any need for austerity).

Coincidentally (smirk), a lot of the marchers had financial interest in the public sector not being cut. From the workers who benefit from a bigger salary and better pensions on average than their private sector brethren and the unions themselves that feed off of them. However, it did seem to have escape people's minds. I doubt that this would be allowed to go unmentioned if the banking sector ripped through London on a  'Bankers against the Banking Levy' march...but that is the mentality I guess, it's only greed when other people do it.

One thing should be noted and I think should be widely agreed before we continue. The public sector is too big. That is a fact. 'Whether we should cut it now, instead of keeping it too big in order to try and kick start growth' is the question, not 'is it too big?'.
That is mathematical, not ideological.

The amount of people in interviews who started by saying that the public sector wasn't too big had me sighing deeply, they don't even know why they are there. Even their beloved Labour party were going to cut back the public sector and when Labour are planning on cutting the public sector, that is a good indication that it has ballooned FAR beyond what is efficient.

I will not mention blame for this problem by Party from this point on, because it doesn't really change what our options are. It doesn't make a blind bit of difference which party ran up the debt or presided over the problems, the problems are here and we need to fix them.

Let's start off our thought process slightly differently.
What is economic growth? and is it always a good thing?
Growth is the expansion of GDP, is the common answer..however I do not see that as an accurate way to describe it. This doesn't take into account the reason for a higher GDP.

To bring it into loose terms that could be understood easier. GDP is like the value of all your possessions, your home, car, bank balance and furnishings. It is presumed that that any growth in the value of these things is a good thing.
What we do not consider though is the difference in growth because you spent wages ...or borrowed to buy goods.

This makes a crucial difference.
If we use our wages for it, it is sustainable, yes, we may have cash flow troubles sometimes, but as we are not committed to future liabilities, we are safe.

If, on the other hand, we use all our wages, but in an attempt to 'grow' our assets decide to get a loan using our friends as guarantors on the loan, this is very different. Firstly, our assets value will never grow by the amount we spend, that is the nature of commodities, there will always be value lost in the process of manufacturing them in labour costs and profit, meaning in affect, our £500 TV is made up of £250 worth of assets.

This is not normally a problem if spending your own money, but if its borrowed, it means that the value of your item is less than the loan, PLUS you will need to pay interest on the loan.*

*Real World- It has been shown that for every £1 borrowed and spent to encourage growth, it succeeds in growing the economy by 30p, and as that pound is borrowed, we pay back closer £1.05 to get 30p worth of growth.

The best option in our analogy would be to A) increase our REAL income or B) make efficiency savings (or both, which is what the current government are trying to do)
Neither of these options increase our asset value as much as borrowing but it is real and not tampered with.

However, what we had before the crash was a high growth, powered by the dynamo of credit. Sooner or later this had to stop and it caused just as much trouble as the boom had caused success. Economics has a way of balancing itself like that.

I would suggest that, excluding an event of Industrial revolution scope, we should ALWAYS fear the line on the graph steeply going up just as much as the steep decline, the later is caused by the former in most cases.

To suggest that we should start this cycle off again after we are still struggling from the last is ludicrous, but that is what is being demanded. Yes, they suggest sources for this money, but as discussed briefly, they are very unrealistic and even when achievable are so ineffective that the nature of the game doesn't change.
They are asking the country to take on debt to pay for the current spending, with the add-on line of "So it kick starts the economy".

This brings together their two reasons for fighting the cuts, they don't want to suffer cuts themselves and they do not see the problem with artificial growth. Not the strongest position.

What I believe in is real organic growth, based on more produce at same cost / same produce at less cost and/or new markets. The other concept I believe in is self-responsibility. By suggesting we borrow against our future tax income, we are getting something for nothing. The future generations that have to pay it off will be getting nothing for something ( a something bigger than what we received too!).

I cannot do this in good conscience, I cannot sit back and let the overly optomistic, who benefit in the short term on the gamble that over-spending might solve our problems, go unopposed.

I strongly agree with the sentiment of the following quote

"we do not inherit the earth from our ancestors, we borrow it from our children"

This may not be our mess (another article is to come on the cause of our current situation), but either we clean it up, or our children do. That is the only choice..and the cleaning method has to work!

Support 'Rally against Debt', a fair, honest and most importantly, realistic alternative to pretending 'boom and bust' do not exist.

Tell us why YOU support Rally against Debt by emailing the organisers here

Visit the website at and Facebook page to get more info on the first Rally on the 14th of May in London (say hi if you see me).
Alternatively, follow the #rallyagainstdebt or #rad hashtag and @debtrally.

And me, obviously @DBirkin

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