Are we solving the UK Debt Crisis?

I started researching a blog about the current recession in the UK, wanting to understand whether we really had a debt crisis and whether carrying out massive cuts to public spending was the best way of dealing with it.

Then somebody sent me this link

Which contained all the information I was searching for, laid out clearly and calmly, like I was hoping to do and with expert opinions and information about campaigns happening all over the UK, which I probably wouldn’t have been able to do at all.

Anyone alarmed, curious, angry or confused about the cuts and the debt crisis should have a read. It shows that debt is not a new thing and that the current debt is not particularly drastic and perfectly normal in a recession. It explains why cuts to public spending are not a good solution and how the poor are being made to carry the weight of the recession far more than the rich.

Here is another straightforward explanation. It gives examples of how public spending encourages economic growth, so cutting it in a recession is counterproductive.

What both these sites show beautifully is that making public spending cuts as an antidote to our National debt is illogical and is not supported by our economic history. In the first part of the century our national debt was up to 250% of our GDP (it is currently only 50%) and to counteract that there was a huge increase in public spending, the welfare state and the NHS were introduced, plus widespread nationalisation, at the same time our debt dropped incredibly quickly until it was down to 50% in the seventies.

The red lines show the introduction of the welfare state in 1945 and NHS in 1948. This is very much a simplification of the economic situation, but hopefully it does show that high national debt and large public spending do not automatically lead to an increase in economic problems.

The Shock Doctrine?

One possible reason behind the government cuts is that the government is pursuing the Chicago School of Economics method, this involves privatisation of all state run companies, ending free healthcare, education and welfare and removing all barriers to trade. In order to bring in such extreme changes, a climate of fear and confusion has to be created. The Shock Doctrine by Naomi Kline explains this method and how it has been used in a number of countries, resulting in mass unemployment and poverty, plus a few people becoming very rich.

The book is excellent, if alarming. In particular, the situation created in Canada stands out as having possible similarity to the recent events in the UK: In 1993 it was declared that Canada was experiencing a Debt Crisis so severe that within two years the money would run out and the country would be plunged into recession.

“The only solution we were told was to radically cut spending on such programs such as unemployment insurance and healthcare”

These cuts were made, but…

“Two years after the deficit hysteria, the investigative journalist Linda McQuaig definitively exposed that a sense of crisis had been carefully stoked and manipulated by a handful of think tanks funded by the largest banks and corporations in Canada”

And the reason…

“…a major campaign was afoot to push the government to lower taxes by cutting spending on social programs such as health and education. Since these programs are supported by an overwhelming majority of Canadians, the only way the cuts could be justified was if the alternative was national economic collapse – a full blown crisis”

Here is a site for The Shock Doctrine

And here is one protesting against the use of the Shock Doctrine method in the UK

This is a mini-blog. Hopefully, I will post more on this subject later. Until then I welcome any additional information, either in support or disagreement with what I have posted. Please email me with any thoughts, analysis, websites or blogs on the subject, thank you.

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