2010 July 04 Sunday
British Accept Need For Austerity

An essay by David Kynaston in the left-leaning UK Guardian about the need for austerity in Britain and how the new Conservative government of David Cameron are set implement austerity illustrates a recognition on both sides of the political spectrum in Britain that the country has been living well beyond its means and an extended period of austerity is necessary. This contrasts sharply with the mood in America where the political class has not yet accepted a need for austerity.

Like Charles Ryder at Brideshead or Bob Dylan on Highway 61, we've been here before. "No sooner did we awake from the six years nightmare of war and feel free to enjoy life once more than the means to do so immediately became even scantier than they had been during the war," lamented Anthony Heap, a local government official living in St Pancras, in his diary at the end of 1945. "Housing, food, clothing, fuel, beer, tobacco all the ordinary comforts of life that we'd taken for granted before the war, and naturally expected to become more plentiful again when it ended, became instead more and more scarce and difficult to come by." In fact peacetime austerity had only just got going, and it was not until July 1954, more than eight dreary, make-do-and-mend years later, that rationing finally ended.

Of course, the Brits could have bounced back more rapidly if they had let prices rise and ended rationing sooner after WWII ended. But leave that aside. There was a willingness then and a willing now for government to spend less and pay down debt. There is an acceptance that government can't make the economy right again, that an extended period of pain is unavoidable. America is nowhere near that realization.

Why this difference? I see a few reasons. In spite of a lot of immigration in recent years Britain is still a much more racially homogeneous society. Therefore, whether they are consciously aware of this or not the British people feel genetically closer to each other. They feel a greater sense of common identity. Also, Britain is a smaller society. This means two things. First off, consensus needs to be achieved over a much smaller number of people who have more in common in terms of culture and occupations and interests. Second, as a smaller society it is more vulnerable to economic pressures originating outside its borders and they are aware of this.

The US government acts as if no external forces, economic or military, can constrain it. The American people mostly believe a myth of American triumphalism which the political class on both sides of the political spectrum finds advantageous to encourage. Whether the subject is foreign adventures or perfection of the society thru social programs the political class wants the public to believe the country is so special that it can do anything. This works against accepting the need for austerity and for scaling back how much the government does. Leaders on the Left would have us believe we can maintain plush retirement benefits for government workers and high pay-outs for Social Security and Medicare. Leaders on the Right would have us believe can maintain a huge military and do foreign adventures.

In the United States we've got a multi-racial president who wants to redistribute between the races. He does not want to find his agenda under fiscal constraints due to financial bubbles. He wants to add major new accretions to the welfare state to transfer more to his base. He wants the effects of debt bubbles, stagnant economy, lack of wage growth, and the like to be very short term. He wants a quick return to brisk economy expansion that will generate the tax revenues he needs to fund his plans. He wants a new Great Society.

The problem with Obama's agenda is that even before Peak Oil and the aftermath of the housing bubble slammed the brakes on economic growth the US government had already over-promised entitlements for old folks, promised more to veterans, made big promises to federal employees, and expanded its role in education at considerable expense. Then it added on very expensive foreign adventures, hundreds of billions of dollars worth of dubious mortgage loans funded by government agencies Fannie Mae and Freddie Mac (to help Obama's base of poor non-Asian minorities), and expanded other government programs. This all occurred under a succession of presidents of both parties.

The gap between promises and means is far bigger than it looks. Current deficits and accumulated debts and projections of debt over the next few years doesn't begin to tell the whole story. Even calculations of unfunded liabilities (e.g. projected future pay-outs for Social Security, Medicare, and government worker retirement benefits) fall short of showing the full gap between the promises and the means to fulfill the promises. Why? Mainstream economic analysis assumes an eventual return to Business As Usual for economic growth. But Business As Usual is nowhere in sight due to Peak Oil and America's deteriorating demographics.

Share |      By Randall Parker at 2010 July 04 01:45 PM  Culture Compared

dearieme said at July 4, 2010 3:49 PM:

"In spite of a lot of immigration in recent years Britain is still a much more racially homogeneous society."
Have you been to London lately?

Stephen said at July 4, 2010 6:35 PM:

"Of course, the Brits could have bounced back more rapidly if they had let prices rise and ended rationing sooner after WWII."

Sorry, stopped dead at this sentence...

Randall Parker said at July 4, 2010 7:07 PM:

dearieme, Yet Britain is still way more racially homogeneous than the US. Been to SoCal lately?

Stephen, Yes, rationing slowed the recovery. Much of the rationing was not about basic sustenance. Rationing of beer or cigarettes did not ensure anyone's survival.

British socialism made Britain much poorer than it had to be.

James Bowery said at July 4, 2010 10:12 PM:

All this talk of "austerity" in the name of "fiscal responsibility" is merely a way of turning the government into a collection agency for loan sharks -- a collection agency that took loans out in your name from the loan sharks.

It will not stand and it will get _very_ ugly for those who got rich during this period.

A.Prole said at July 5, 2010 12:29 AM:

James Bowery is right.

All the British government did was to transfer private debt (accumulated by profiteers), into public debt - liable to people who had absolutely nothing whatsoever to do with accumulating that debt.
This is socialism olf the very worst sort, in effect the poor forcibly socialising the debts of the rich speculators, all this from a regime that worshipped at the shrine of Friedman for 30 years.
The modern Labour Party is NOT Socialist - it's Thatcherite.

Engineer Dad said at July 5, 2010 7:50 PM:

I closed our family's Citibank checking and saving accounts in 2006 when I learned Citibank granted mortgages to customers with no employment history or credit rating. I thought the banks executives must be insane to pursue such financially irresponsible behavior. "Whew!" I thought, "We've escaped their insanity." Unfortunately, our corrupt federal government subsequently guaranteed Citibank risky mortgage assets for $306 billion and, as a result, has increased our taxes to pay to subsidize Citibank.

The willingness to privatize profits while socializing costs has left me at the mercy of the powerful.

anon said at July 7, 2010 2:32 PM:

"Leaders on the Right would have us believe can maintain a huge military and do foreign adventures"

The Republicans haven't been on "the Right" in living memory, they start wars precisely because they are fundamentally socially liberal, to take their followers minds off the fact that they are in basic agreement with their liberal masters over cultural (read: primarily racial) issues. (In fact, the wars they start all fall under the heading of what is known as Liberal Imperialism - wars started not to advance national interests, but for fuzzy, feel-good social goals, like bringing democracy to the Middle East.) This shared Political Correctness is simply a code phrase for a racist hatred of whites, and since virtually all the Republican's voters are white it makes discussion of domestic politics with those voters a little, shall we say, awkward. No wonder they want an overseas diversion. Endless wars for endless elections didn't work out too good for the Republicans, it worked out great for George W. Bush, though, kept his voters from thinking about his complete domestic ineptness, his betrayal of his base, for two terms. "Compassionate Conservatism" needed a miltary smoke screen.

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