[lbo-talk] Britain's failed experiment

Doug Henwood dhenwood at panix.com
Fri Dec 9 06:38:41 PST 2011

On Dec 9, 2011, at 9:21 AM, James Heartfield wrote:

> No, after inflation it is still an increase, though only just.

How is a 1% nominal increase with 5% inflation a real increase?

> Of course you are right to say that investors anticipate some substantial cuts and that has a consequence on their future investment decisions, but investors expectations are more based on the poor state of the private economy in Britain (and Europe), with the government only reflecting that.

The government isn't reflecting, it's worsening the state of the private economy.

> On the whole, it strikes me as a Keynesian bugbear that government expenditure is the driving force, and investment levels reflecting that, rather than the other way around.

That's an odd reading of Keynes. For Keynes, private investment was the driver of the economy, and the point of policy was to maximize and stabilize it. When investors were not investing out of fear or rational calculation, it was the business of government to step in and do it for them.

As with many countries, the economy of the UK has collapsed because of a financial crisis and the crisis of the neoliberal model. To say that is not to say that gov is the driving force.

> I prefer Lenin’s line on government expenditure, in his assault on the Russian finance minister Witte, showing that the spending all went on armies, police and the Tsars. http://www.marxists.org/archive/lenin/works/1902/jan/15.htm Or when Lenin quotes Marx in State and Revolution: 'The Commune made that catchword of bourgeois revolutions, cheap government, a reality, by destroying the two greatest sources of expenditure - the standing army and State functionalism.'

Here's what the OECD has to say about the structure of British public expenditure. Note that the first four items account for over three-quarters the total.

Structure of central government expenditures by function, 2008

Social protection 32.0% Health 17.3 General public services 15.4 Education 12.1 Economic affairs 9.5 Defence 5.9 Public order and safety 4.4 Recreation, culture and religion 1.3 Housing and community amenities 1.2 Environmental protection 0.9

More information about the lbo-talk mailing list