Myth-busting in the age of austerity

Sometimes it’s important to have some key potential rebuttals at your disposal. Here are some that, if you don’t already have up your sleeve, you may very well find handy.

1) Financial markets do not exist
I think, you think, but markets don’t think, eat, smell, or contemplate. As blogger and journo Dave Osler wrote, ‘one of the most striking aspects of the blanket media coverage of the eurozone crisis is the way in which financial markets are routinely spoken of as entities with a life of their own. Ostensibly they can experience such human emotions as tension, and even desperation, fear, panic and the jitters.’ Markets do not approve or disapprove: people who work for banks and other financial institutions approve or disapprove. Instead of the BBC and other media outlets telling us what the market thinks about suffering, whether it’s upset or happy about something, why don’t they name names. Who is upset with Greece? Who do we constantly need to appease when it comes to matters of economic policy?

2) The government shouldn’t get into debt, just as your own household shouldn’t
This type of common sense is plausible but pernicious.  Firstly, the cry that one shouldn’t take on debt was not to the fore when the only way many people had to get back the wealth that they themselves had generated was to have it lent back to them in the form of mortgages and credit cards. Secondly, it ignores the point of investment: what you wisely sow now, you will reap later. And, crucially, while a 2.4 “hard-working” family of spendaholics may save themselves them from immediate financial ruin by cancelling the holiday or burning their Ikea store card, this act of totalitarian avarice hurts someone else in the chain of economic exchange: the holiday provider or the Ikea worker. Apply this to a macro-economic scale, and it becomes clear that those charged with running an economy have bigger responsibilities of scale. To suddenly stop spending means a dramatic contraction of the economy with its many and varied participants

3) Public sector workers are overpaid
‘What the data shows’, points out Red Pepper, ‘is not that public sector workers are overpaid, but that some private sector workers are severely underpaid.’  While average wages in the public sector are a wee bit higher than the private sector, this should not be seen as ringing endorsement of the public sector, more a severe critique of the private. The slump in private sector pay, the race to the bottom, has meant that low paid private sector workers are on the whole suffering. In many cases, low paid work could be considered inside the public sector. Thanks to outsourcing, many public sector jobs have been shifted to the low pay culture of the private.

4) Austerity is the answer
As a recent article in the Daily Beast by John Quiggin on the Greek experience points out, ‘[t]he most dangerous myth of all is that governments can best contribute to economic recovery through policies of austerity, cutting government spending, and raising taxation. As well as reducing debt it is claimed, such policies will make room for the private sector to expand.’ He goes on:  ‘there is overwhelming evidence that the short-term impact of austerity measures is to reduce the rate of economic growth, thereby reducing government revenues and increasing necessary expenditure on unemployment benefits and other welfare measures. As well as worsening the recession, these effects will offset much of the improvement in the budget balance that might have been expected from austerity measures.’ In a similar vein, in an article in The Independent, Glen O’Hara argues that austerity measures ‘often cost more in the long run than simply continuing with present policies, firstly because disruption and reorganisation is often expensive, and secondly because governments are usually sloughing obvious costs off onto less visible parts of the welfare state or wider society. Cutting elderly social care in the home means landing more old people in expensive hospitals. Scrapping speed cameras means watching road traffic accidents rise. Raising the cap on student fees means leaving taxpayers to pick up the bill. Restricting legal aid means watching the courts struggle to accommodate more and more citizens defending themselves at great length and inefficiency.’

5) The U.K is too regulated.
According to the Organisation for Economic Co-operation and Development Indicators of Employment Protection, as reported by Channel Four News FactCheck, ‘the UK has the third least-regulated labour market of all 30 member states surveyed, including most of the world’s leading economies. Only in America and Canada do employers enjoy a lighter regulatory burden, according to 21 measures of how easy and expensive it is for companies to lay off their staff.’ And even with this ‘competitive advantage over their European rivals’ British business isn’t employing more people and leaving its rivals in the dust.

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