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Editorial: All in this together?

Back in June, the prime minister said that in resolving the country’s financial crisis, the coalition government would act “in a way that protects the poorest and most vulnerable in our society; in a way that unites our country rather than divides it; in a way that demonstrates that we’re all in this together.”

David Cameron said: “We are all in this together, and we will get through this together.” A noble sentiment shared no doubt by the other millionaires in the cabinet. The 18 millionaire ministers in the austerity cabinet are collectively worth about £50m.

It’s unfortunate therefore that the Institute for Fiscal Studies has established (as we report on p1) that the tax and benefit changes hit the poorest hardest.

Meanwhile, in April the Sunday Times Rich List proclaimed excitedly that the collective wealth of the 1,000 multi-millionaires in the 2010 Rich List had climbed to £335.5 billion, up £77.265 billion on 2009.

While the rest of the country settled in for recession, the richest people in Britain had experienced a 29.9% increase in their wealth, “easily the biggest annual rise in the 22 years of the Rich List”.

In contrast, the government’s austerity programme is likely to cut half a million public sector jobs, and lead to the loss of another half million private sector jobs as government and household spending declines.

The moral argument for higher taxation on the rich is unassailable. Peace News endorses wholeheartedly Greg Philo’s proposal for a one-off 20% tax on the wealthiest 10% of the population to resolve the national debt.

True, there are other issues in the current debate. Joseph Stiglitz, awarded a prize in economics by the Nobel Foundation in 2001, has been waging a one-man campaign against the austerity measures now being implemented around the world. In October, he said: “Britain, and the world, cannot afford not to have another stimulus. We cannot afford austerity.”

Stiglitz has pinpointed the central problem: “There is a shortage of aggregate demand – the demand for goods and services that generates jobs.” Cutting government spending “will mean lower output and higher unemployment, unless something else fills the gap.”

As short-term interest rates “can’t go any lower”, and “quantitative easing” is not going to boost demand, what is needed is productive spending by government in economically fruitful areas such as education, health, infrastructure and technology – “high-powered investments”.

If there are going to be cuts, Stiglitz argues they should be in areas with low returns on investment: “Investments in wars, a lot of spending on the military, weapons that don’t work against enemies that don’t exist, are not high-return investments.”

What we need is a “just transition”, a programme of conversion from military production towards socially-useful, green production.

As PN has argued time and again, this conversion process must give a central decision-making role to the workers, researchers and technicians who will implement this vitally-needed transformation.

Topics: Economics | Cuts