Repressionomics: Get ready for the brand new permanent austerity

Credit;PA

No prizes for proclaiming that the economy is within crisis. By late-June, government debt was lb1.9 trillion, a lot more than the whole national GDP; a debt not seen since 1963, following six years of Tory mismanagement under Chancellor and later PM, Harold Macmillan. Within the second quarter (April to June), GDP dropped by a lot more than 20 %. Another record was broken when government borrowing exceeded lb127 billion. Economists predict that the deficit–i.e., expenses exceeding revenue–could top lb370bn.

Analyst Nick Hubble calls the Tory solution a potentially “limitless stimulus” (paraphrasing). Others state that this approach amounts to a kind of management called financial repression. And guess who covers the cost the price- again?

AUSTERITY AND COVID: “A MATCH Produced in HELL”

Britain was the hardest hit from the G7 nations. The ex-hedge fund managing millionaire Chancellor, Rishi Sunak, claims that the UK tanked badly because: “Social activities, like eating at restaurants, going to the cinema, shopping – comprise a significantly larger a part of our economy than they do for most of our European comparative countries.”

But is that this true? After July, France's GDP had fallen under 14 % and Germany's approximately 10. France's household consumption expenditure is between $1.3 and $1.5 trillion, Germany's is $2 trillion. Britain's isn't radically different ($1.7 and $1.8 trillion.)
Although Germany's services sector comprises just over 60 % of their GDP when compared to UK's 70+ percent, the sector in France likewise constitutes over 70 % of GDP.

So, by these measures Sunak's claim is fake. The BBC parroted the assertion regardless. A more plausible explanation would be that the deep cuts imposed by the Tory-Liberal regime (2010-15) following the Economic crisis (2007-09) weakened the UK's resilience. Articles by the Oxford Research Group calls COVID off the back of austerity “a match produced in hell.”

After the worldwide Economic crisis (2007-09), austerity was imposed across the Eu, however the UK's measures were particularly harsh. The French government continued to fund its health system, introducing new taxes to cover the budget. It “took steps to safeguard people with low incomes,” says the World Health Organization, for instance by enhancing the national insurance contributions of wealthy people. In Germany, according to the Centre for European Economic Research: “the rise in your debt ratio overstates the cost of banking sector stabilisation because the public sector also acquired significant assets,” thereby preventing long-term austerity.

In the united kingdom, Chancellor Osborne (who had been probably a millionaire at that time) cut the very best rate of income tax, reduced the National Health Service budget, and decimated social security. When COVID struck, two-thirds of the so-called job recovery market made up of exactly what the Resolution Foundation calls “atypical work”: precarious small business ownership or unstable gig economy-type jobs.

“REPRESSIONOMICS”?

So, the way the government-which is composed of millionaires and funded by billionaires-manage the unfolding COVID crisis? Barclays notes that policymakers “will have to choose from overt credit card debt reduction policies, such as austerity and taxation, to covert ones, for example financial repression and inflation.”

“Repressionomics” sees funds borrowed in the private sector to lessen government debt. Buying of private funds facilitates the continuation of low-interest rates for government spending. The measures are “repressive” for the reason that savers earn under in the rate of inflation. Ideologues already are pushing with this because the least-worst option. The Telegraph, for example, finds reasons to not re-nationalise the financial institution of England or invest in a massive, post-WWII-type infrastructure project, backed by government-secured jobs and housing. “That leaves the final option: financial repression.”

Contrary to the impression provided by Barclays, financial repression and austerity aren't mutually exclusive. Ad van Riet of the European Central Bank (ECB) confirmed that European technocrats “applied the various tools of financial repression to restore stability after the euro area crisis,” following the Crisis of '07-09. But that didn't steer clear of the ECB from imposing austerity by means of public spending cuts.

Corporations are not in the industry of having their profits repressed. They will likely still defer the cost of lost profits to lower-level employees and pension holders. With embedded public spending cutbacks caused by policies undertaken during the last decade, social security will still be meagre for the recently-redundant and retired. Nearly nine in ten pension funds saw a drop of as much as 15 % within the first quarter.

Harvard economist, Professor Lance Taylor, predicts that “profits from job losses will finance government borrowing for COVID-19 bailouts.” The former Chief Economist at Citi, Willem Buiter, states that even without protectionism, “the organisation of production and trade will emphasise planned redundancy.” Buiter cites only “painful methods to restore fiscal sustainability.” The rich and powerful have methods to offset the “pain” of lower-than-expected returns. “That leaves the familiar tools of public spending cuts and higher taxes,” says Buiter. However, corporations and wealthy individuals already produce a “tax gap” of lb35 billion.

PUSHING For any NEW AUSTERITY

In late-2021, the Institute for Fiscal Studies reported that “an awful lot” of austerity was “baked in” to the Tories' supposedly generous manifesto. In April this year, millionaire Boris Johnson said: “I think this government may wish to encourage that bounce back in all kinds of ways, but I've never particularly liked the term [austerity] and it's definitely not a part of our approach.” Observe that Johnson said he didn't like the “term,” not the practice. Media read this like a pledge to not continue the trends set by millionaire PM David Cameron in 2010. But in reality, Chancellor Sunak has already confirmed that “tough times are here,” though not for people like him and Tory donors.

Talking towards the Confederation of British Industry, former Chancellor and millionaire, Philip Hammond, says: “My personal view is that this government will be extremely unwilling to either increase taxes or reduce public spending.” Hammond concludes that this will push austerity further down the road: “I expect that the bulk from the burden of the crisis is going to be absorbed through increased borrowing and left on the table for generations to come.”

THE USUAL SUSPECTS ARE LOBBYING FOR BELT-TIGHTENING

Matthew Lesh, head of research at the Adam Smith Institute, claims that government expenses are too generous: “The Tories are caring much less about fiscal responsibility. They're instead searching for a magic money forest.” Sajid Javid, the millionaire ex-banker and former Chancellor, recently published a report for the Tory-backing Centre for Policy Studies, recommending VAT and national insurance relief for employers, and “[n]ew fiscal rules to gradually get rid of the current budget deficit following the economy recovers.” Javid concludes: “When everything has returned to some type of normality, fiscal conservatives may have to win the argument all over again.”

To prevent another decade of austerity, the grassroots need to ensure the Labour Party remains dedicated to socialist policies, otherwise it'll repeat the mistakes of the austerity-lite leader Ed Miliband in 2021 and fail to obtain a significant number of seats whenever the following General Election comes.