busting the single narrative

Busting the single narrative Busting the single narrative

The debt crisis as just another story – or Why are we prey to a single narrative?

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This was ON Andrew Marr’s show……

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“We were on the brink of bankruptcy…”

“You clearly need to make the savings, the cuts and raise taxes...”

Professor Joseph Stiglitz, Nobel Prize For Economics In 2001, Daily Telegraph 08.09.10

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Professor Paul Krugman, Nobel Prize for Economics in 2008, New York Times 21.10.10

“The best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997.”

Professor Christopher Pissarides, Nobel Prize for Economics in 2010, Daily Mirror 09.01.11

“The Chancellor has exaggerated the sovereign risks that are threatening the country.”

"I think it is likely that the economic downturn will last far longer and human suffering will be all the greater."

of GDP4

BIGdebt is

when you compare it as apercentage

You can only understand how

But what is GDP?

The GDP for 2010 is……

£1.435 trillion5

NATIONAL DEBT

“Our debt is higher than it’s ever been…”

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(Coalition Government)

...The Maastricht Treaty EU limit on debt

60% of GDP

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Our Current debt – GDP ratio

64.6%8

• UK net debt is £952 bn• Excluding Financial sector

intervention, debt is £845 bn*

•Or 57.1% of GDP!

Source: Office National Statistics (November 2010)

IF YOU DEDUCT WHAT WE GAVE BANKS, debt

is EVEN LOWER

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*This includes £100bn+ of the banks’ debts that is now UK Government debt

Our debt is historically low

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....our debt is low compared to the rest of the world

Source: CIA World Factbook11

USA 95%

CANADA81%

GERMANY72%

FRANCE 77%

SPAIN70%

PORTUGAL 87%

ITALY 119%

JAPAN 200%

GREECE187%

UK65%

Source: CIA Factbook

THE DEFICIT

“The Deficit is caused by overspending…”

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(Coalition Government)

THERE ARE 2 SIDE TO deficit

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INCOMEMainly taxes

SPENDING Public services Investment Debt payments

Is spending too high or income too low?

Government

Growth and deficit are linked

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There is a tax deficit

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Without the recession tax revenues should have been £100bn more than today.

The UK TAX take 1995-2010

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Growth

Deficit

Oct 2009 to March 2010

£22bn

THE DEFICIT

“Interest repayments are higher than ever…”

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(Coalition Government)

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Conservative GovernmentConservative Government

Source: Public Finances Databank, ONS

SO WHY PAY OFF THE DEFICIT OVER 4 YEARS?

Our Borrowing is cheap, mainly from the UK and can be repaid over 13-15 years

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SERVICING THE DEBT….

• The Thatcher government paid the equivalent of £174m per day

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Thatcher Government

www.ukpublicspending.co.uk

THE DEFICIT

“We have to make cuts…”

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(Coalition Government)

LEVY TAX…..

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Is THIS where the deficit is?? We don’t pay enough in tax to cover what we spend.

Source - Eurostat newsrelease – June 22nd 2009

SINCE 1975 we have replaced direct with indirect taxes…

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The UK is now one of the MOST UNEQUAL societies in the OECD

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THE GINI CO-EFFICIENT – UN MEASURE OF INEQUALITYTHE GINI CO-EFFICIENT – UN MEASURE OF INEQUALITY

Inequality

THE DEFICIT

“What really caused the deficit?”

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Let’s not forget who’s to blame…

“…although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come.”

(Mervyn King’s Address to the TUC conference – 15.09.10)

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how the banks affect our gdp…..Increasing or reducing the supply of money into the economy through household and business lending artificially inflates or deflates our GDP – i.e. Banks manipulate the flow and quantity of money

EXAMPLE: in the 2000s banks pumped between £10-14bn into the economy every year through housing equity withdrawal .

Since 2009, banks are refusing to lend and have sucked £15bn out of the economy per year

(Source of statistics: Bank of England)

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Growing influence of finance

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The contribution of sectors as a % of GDP

Re-Balancing the economy

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No Yes

So do we need cuts?

Debt is low compared to our history and partner nations

Growth plays a key role in reducing the deficitIf tax is lagging behind spending, why not

borrow short term to encourage growth?What would 3% per year growth for 5 years

do to the deficit?

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SO What is this a crisis of?

• National debt? NO• Current account deficit? Depends on your

values - it’s political• Economic governance? YES• Employment? YES• Banking? YES • Democracy and public debate? YES

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OUR SOCIETY IS MORE THAN OUR ECONOMY!

“The gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials.”

Robert Kennedy, 1968

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Economyths: prepared by Barry Kushner

barry@blueurbansky.comSaville Kushner

savillekushner@hotmail.co.uk

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