The tories like to tell us they're the ones to trust when it comes to looking after the economy; how realistic is that claim? Let's take a look, shall we?

24 October 2016

It can't have escaped your notice that the Conservatives held their party conference in Birmingham the other week.

T May at the tory conference

 

 

 

 

 

 

 

 

 

watch that arm gesture Theresa, old fruit

They had the cheek to come to Birmingham and pretend that everything in the garden is rosy.

Of course, it isn't a 'proper' conference where members and delgates dicuss policy and make policy,
it's just a series of glossy, set-piece speeches designed to put the minds of the party faithful at rest
and gather some useful headlines in the media. And it gives the pundits something else to talk about for a few days
.

Another side-effect is that it gives other parties an opportunity to have their say - like we're doing here, for example.

One subject that keeps cropping up with the tories is how they like to think they're the only party to be trusted with ther economy
currency depicting the UK economy

money, money money/must be funny, in a rich man's world

Labour is the party for working people, tories for the economy, Greens for the environment, UKIP for, well, for what? having a ruck in public,
and pretending it's nothing, at the moment. And electing leaders who don't want to be leader, as it turns out... 

Anyway, that's all a bit binary, really. There is much more to all of the parties than just one issue (except UKIP - what's the point of UKIP now?) because, as you know, there is so much more to the Green Party than just the 'environment', for example.

But we're not here to talk about us, we're here today to talk about the tories and money.

The tories have been telling us for years that they are the only party to be trusted to handle the economy. 
Maggie spent a lot of her time telling us that we should balance the books; demonstrating that she really had very little understanding of 
how global economics works, she said in a speech in 1988 to the Conservative Women's Conference
"...I can't help reflecting that it's taken a Government headed by a housewife with experience of running a family to balance the books for the first time in twenty years"

She went on to say, in the same speech "Rather than piling up deficits for future generations to pay. We are repaying debts. Our budget is in surplus. We are lifting the burden off the shoulders of our children."

The way she  'balanced the books' and repaid the debts was to sell off council houses and public utilities and so on that previous generations had paid for out of their taxes.
The Thatcher government claimed credit for a windfall, little realising they were storing up problems for future generations - the origins of today's housing shortage are in her policies of selling off council housing and pocketing the proceeds, for instance.

private council house
only one careful previous owner

 

But Maggie had a big majority, so there wasn't a lot the opposition could do about it.
People rushed to buy their council houses at big discounts because they had been told that owning property was the key to prosperity and, to be fair, a lot of people did make quite a bit of money out of buying their council houses, and their parents' council houses, and quite a few other council houses. (We're thinking here of Charles Gow, son of Thatcher-era minister Ian Gow. Ian Gow was instrumental in writing the sell-off policy. Charles Gow hit the headlines in 2013 because he owned about 40 ex-council flats on one south London estate alone. Work the rest out for yourselves)

The sales fuelled a small boom in the economy because people bought valuable houses at big discounts and re-mortgaged.
You could buy a house worth £100,000 for about £70,000, take out a mortgage for £85,000 and everybody's happy - the government has a sale and valuable propaganda, the bank has a new mortgage customer (you pay back much more than £85,000, so the difference is profit for the bank), the new home owner has a valuable property which is only going to increase in value plus £15,000 to spend.
Let's not get into the whole thing about 'buying votes' here, although it has to be said a lot of new home-owners were inclined to vote tory because they had undoubtedly done rather well under the tories, thank you very much.
Anyway, spend is what people did - new cars, holidays, conservatories, double-glazing, new kitchens, new bathrooms 

conservatory

a valuable addition to any home

A lot of money changed hands and a lot of people were very happy; there's no denying that there was a genuine feel-good atmosphere, especially among sellers of conservatories, double-glazing, home imporovments and so forth. The government was especially happy - this was the Thatcher boom - a minor economic miracle that 'made evrybody richer.' (It didn't, but that's by-the-by for the moment)

The 'boom', incidentally, was mostly smoke and mirrors - growth under Thatcher in the 80s was pretty much the same as it had been in the 70s, around 2.2%, so despite all the shouting and cheering, popping chamapgne and trebles all round, it wasn't really any different.

However, all the feel-goddery was based on debt. Remeber that bit earlier about 'repaying debt'?
 

Right, fast-forward a few years to the end of Maggies' reign.
Maggie's firm belief in 'monetarism' and the control of the money supply caused a severe and brutal recession that caused unemployment to shoot up - the highest post-war recorded unemployment level was under Mrs T, going over 3 million in 1982 and staying over 1.5 million until about 1989 - and lots of people lost the houses they'd bought with money borrowed from the banks at very attractive rates. Money that had generated very generous bonuses for bankers, too, incidentally, thank you very much. Again.


infographic to illustrate bankers bonuses

(this graphic is from 2013, intended to illustrate the value of bankers' bonuses, however note the box on the right that asks "If the UK was to exit the EU, do you think it would strengthen or weaken the city's standing as a leading financial centre?")

So we've got a few themes going on here: 'paying off debts and balancing the books',  selling off publicly-owned assets to fuel false economic booms, boom-and-bust economic roller-coasters, recessions and shifting public debt into private hands.

OK, time to challenge a few assumptions here.

Let's begin with the idea that governments and countries should 'balance their books' like households.

This is a bit a daft idea really, because its fairly obvious that countries are nothing like households - countries are able to raise money in taxes, print money and create debt (raise money) by issuing bonds.
Can your household do any of those things? No? thought not. 

Also, countries/governments/nation states don't (very often) cease to exist like households can and do; households tend to have a finite life and their assets and debts likewise, countries tend to have 'endless life' (no, I know they don't, not always, but Belgium isn't going to move to a nicer area with better schools, Italy isn't going to downsize to a smaller, more managable property, and Spain isn't going to sell the garden for a developer to build on, and retire to the Carribean on the proceeds; only the UK is about to do something quite monumentally stupid along the lines of a divorce, but that's another rant for another day, also the break up of the Soviet Union isn't going to happen again)

So, government debt isn't like private debt. Government debt can be rolled over - as bonds fall due, the government can just iussue new ones, households can't do that.
Households can and do go banckrupt, countries can't. The only time this has ever happened was Japan, after WW2. It was the only way the international community could think of to wipe the slate clean and start rebuilding.
The refinacing and restructuring of Greece's debt was different; Greece is still fundamentally relatively prosperous and secure compared to post-WW2 Japan.


post-WW2 image of Tokyo

post-WW2 Tokyo

If you've ever come across the economist John Maynard Keynes you'll know he formulated the idea that in good times the government should tax incomes at a relatively high rate, and in a downturn the government should cut taxes and borrow money to spend on infrastructure and the like in order to stimulate the economy. They should use the tax income from the good years to repay the borrowing of the lean years. This seemed to work quite well - it was how the USA got out of the Great Depression of the 1930s, by building massive projects like the Hoover Dam. He isn't popular among tories because he thought austerity was a bad idea and he was an interventionist and those two ideas are anathema to small-state tories...

The idea of 'balancing the books' has nevertheless remained a tory mantra from Maggie's time to June 22nd of this year.

The new Chancellor, Phillip Hammond, has hinted that he'll have to do a bit of juggling and abandon some of the old policies, we'll have to wait and see how that goes.

Now then, let's have a look at recessions shall we?

The technical definition of a recession is "..a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."

There is a lot of arguing about how you calculate GDP (Gross Domestic Product) but it is usually taken as  "the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDPis usually calculated on an annual basis, it can be calculated on a quarterly basis as well."

Bearing in mind the time it takes to gather all the data to calculate these figures and the time it takes to add everything togeteher and check and double check, you can see there's a bit of leeway. This leeway was very important for George Osborne in 2012/13, for example, when a politically embarrasing double-dip recession was 'revised away' - the original story was that the economy had contracted as per the definition above, but some scrabbling down the back of the government sofa found enough small change to show positive growth and save the Chancellor's blushes.

massaging the figures, surely not

 

This recession is only the tories' most recent...

Let's look at their greatest hits, shall we?

(There's a very helpful page on Wikipedia which lists all the UK's recessions from where we draw this fascinating and frightening data)

If you look at all the recessions since WW2 - there have been 7 - one thing stands out: every recession but one in the UK since WW2 has been under a tory government.The only recession under a Labour government was when Gordon Brown was in charge.

Now, I don't know about you, but your humble correspondent finds this quite astonishing.

It starts with the 1956 recession, that one belonged to Sir Robert Anthony Eden, 1st Earl of Avon, KG, MC, PC.

Sir Anthony Eden

 but mummy, he looks like such a kind man...

 

Moving on, we got to 1961 before the 'R' word raised its head again.
This time it was Maurice Harold Macmillan, 1st Earl of Stockton, OM,PC,FRS

Harold Macmillan

pleased, but not smug

There follows a short period without recession, 1961 to 1973; there was a change of government, but it wasn't us and it wasn't the tories, so we won't mention them, but the tories got back in and there were two recessions, in 1973/4 and again in 1975. The PM in the hot seat this time was  Sir Edward Richard George "Ted" Heath, KG, MBE, PC.

Ted Heath

not an official portrait - he's smiling


Things get really serious in the 80s - in 1980-81 there were 5 quarters of  'negative growth' ie contraction and the PM was, of course Margaret Hilda Thatcher, Baroness Thatcher, LG, OM, PC, FRS, FRIC

maggie

now she does look smug, doesn't she?


This recession desverves a few extra words becuase of its length, depth and brutality. This particular economic downturn is notable for a number of things - record unemployment of over 3 million (the tories were elected on a slogan of 'Labour isn't working' when unemployment was 'only' 1 million and they used that poster - oh! the irony), high inflation and a steep fall in companies' earnings.

tory election poster

tory election campaign poster 1979 election 

 

Anyway, Maggie overstayed her welcome and was rather unceremoniously dumped in favour of Sir John Major, KG,CH, the only man known to have "...run away from the circus to becom an accountant" according to Tony Banks (I think)

john Major

a colour picture of a grey man
(Spitting Image reference for anyone old enough to remember.Go to the end of the post if you're a mere stripling and don't get it)

Anyway, there were a few years of no recession again, right up to 2008 when Gordon Brown was running things for Labour.

To be fair to Gordon, 'his' recession was triggered by the global financial crisis which, in turn, was triggered by the financial meltdown caused by the very high default rate in the subprime mortgage sector.

Briefly, hundreds of lenders gave motgages to people who had no chance of repaying them (so-called NINJA mortgages: No Income, No Job or Assets) and quickly sold the mortgage on to another bank or financial istitution; these, in turn, bundled the now toxic mortgages into other packages and products and sold them on again. And again. When people began defaulting on the loans, the knock-on effect was huge - a global catastrophe, in fact. So, in all fairness we can't really include the hapless Gordon in the Hall of Fame above, can we?

Of course, he was a bit of a closet tory, so maybe he does merit a picture - what do you think?

 

So, there you have it.

A short look at the tory record on the UK economy. At the time of writing we might, or might not be heading for yet another recession (and guess who's in power again...), we're teetering on the brink for a lot of resons you will be all too familiar with, unless you've been living under a rock or on the International Space Station, or someting.

They've been telling us for years that they're the only party to be trusted with the economic well-being of the nation, and it all turns out to not quite true but, at the risk of falling foul of Godwin's Law, as Goebbels said  "The English follow the principle that when one lies, it should be a big lie, and one should stick to it. They keep up their lies, even at the risk of looking ridiculous."

 

DISCLAIMER: Obviously, this isn't 'news', and it isn't Green Party policy. This post is the musings of one individual and is not intended to represent the views of the Green Party. It is, however, intended to give you a bit of insight into tory economic thinking and their record on managing the economy. If any of it is wrong, I'm sorry, feel free to contact the website via the comments or our Facebook page with corrections, but to the best of my knowledge it's factually accurate. In a nutshell, opions expressed here are those of the author, feel free to argue.

 

 

Finally, a bit of light relief...