WHEN I wrote Boom Bust in 2005, I used the word “depression” with care. What was going to happen would not be a recession. What we see unfolding, now, is the beginning of the mid-way phase of the depression.
Prepare for the violence, in all its forms, in the Age of Austerity. Instead of adopting policies that could free Europe to build its way out of the downward spiral, the European Central Bank and European Union are imposing strategies to kill competitiveness in the global markets.
After the trauma in Greece, Spain is slashing wages and forcing unemployment above 20%. Portugal has shelved its investment in infrastructure projects and Britain will now cut public spending to push unemployment above 8%. This is the reverse of what ought to be happening. Public policy remains straight-jacketed by the economic doctrines that delivered the boom/bust in the first place.
A Funny Way to Re-build Society
The British electoral settlement illuminates the schizophrenic nature of what passes for political philosophy. Prime Minister David Cameron fought for a mandate to heal what he calls a broken society. His coalition with the Liberal Democrats will deepen the fault lines that divide communities.
Public debt needs to be reduced, yes. But the Coalition Government is advised by a battery of new MPs and consultants who have come straight out of the financial sector. What hope is there of a realignment of the economy to liberate the millions who are relegated into that state of dependency which triggers the anti-social behaviour and causes Cameron sleepless nights?
The West is now locked into a trend which eerily echoes the 1930s. But there is one major difference, this time. Countries in the rest of the world are not clients of the imperial powers, available to subsidise Europe and North America. We will not be bailed out by the strategies of colonialism.
What’s to be Done?
We ought to be going for growth, re-building trust in governance and protecting our communities by raising productivity. There is one way only to achieve this complex outcome within the available time and resources.
The Liberal Democrats ought to be briefing David Cameron on how to shift taxes off people’s earnings and savings to reduce costs of production without reducing take-home pay. But how would government then pay for public services? By obliging people to pay for those services they receive at the locations where they chose to live and establish their enterprises.
But the Lib Dems have turned their backs on this policy, which will once again prove fatal for Britain. The policy was introduced (by a Labour Chancellor) in 1931. It was not implemented, and deleted from the statute book by the Tories in 1934. Which is why the stock market crash of 1929 turned into the Depression of the 1930s, and why we will endure the Depression of the 2010s.