And you want MORE spending?

This is an appropriate question for many themes in current economic life, however this sheds light on only one of them. Among the Lefties' ranks, among Keynesians and among British Public, calling for increased NHS spending, pensions and minimum wages, there's a purring claim for increased living standards and great State Involvement in essentially anything.

To all kinds of such claims I have three simple responses. 1 quote and 2 charts.

Chart #1:

This shows the labour cost of producing an average economic unit in some major OECD countries. That is, the labour cost of producing an amount of shoes in Germany in 2012 was only about 5% higher than at the start of the new millenium. Likewise, labour costs of producing the same amount of shoes in Britain had soared to around +35%. Point = reduced relative competitiveness

Chart #2:

A trade deficit means that a country is importing more stuff than it exports. Essentially, people in those countries are buying more things/services from abroad than what the rest of the world wants to buy from you. Point = productivity issue; you're running down assets to pay for your consumption, because you're not producing enough good stuff that they'd want to buy. 

Quote: 

Angela Merkel on relationships between Europe and the rest of the world

"Europe has 7% of the world's population, 25% of its GDP and 50% of its social spending."

Reasonable, ye. And you guys still want more to spend on the "poor", infrastructure or <insert whatever>?

The AUSTERITY myth

This is the 6th part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here are links to the other posts: Feminist Economics, Inequality, Financial Crisis, Layoffs vs. Bonuses, Defending the 1%

Austerity in Britain. If you open a newspaper, watch the news or talk to people you'll regularly find one statement; The UK Government is imposing austerity measures on the economy, and all kinds of notions of what effect these cuts have to the lives of regular people. Since 2010, the Government's explicit target has been to reduce Public Deficit, impose cuts to public spending and, essentially, lead an austerity-based revolution in the UK. Sure enough.

Regardless of whether you approve of austerity as a measure or not, we have to find out if that is actually the case. After all, austerity doesn't happen because the Government SAYS so, or explicitly wants it to occur. It also has to act accordingly, and the desired effect can't be offset by other factors, in order for us to actually talk about austerity. That is: if you cut £10bn from one department and increase the spending of another department by £20bn you are not imposing austerity, regardless of your rhetoric. You're simply re-arranging funds.

For instance, my constant opponent these days, Lefties and organisations such as People & Planet, makes three claims which I intend to look into:

1) The welfare State is under attack
2) Inequality is on the rise
3) Worker's rights are being eroded

As for #2, I've shown several times how the idea is misleading and that the statement in itself is incorrect. I won't deal with worker's rights just yet, but will focus on the alleged attacks on the Welfare State. Is the Welfare State under attack? Is Austerity being imposed in the UK?

Austerity, the argument goes, means the government is slashing Public Spending, removing benefits for the poor, increase taxes and reduce funds for health care. Sounds scary and quite bad. Now, let's see if that's the case.

PUBLIC SPENDING

This chart shows total Public Spending in the UK from 2001 until 2012. Beyond that (the red staples) are figures for projected spending (what they hope to achieve). Government spending has been continuously increasing.

= No sign of austerity here.

But that doesn't take Inflation into account, so let's go with real terms:

In real terms, Government Spending in the UK has virtually doubled since the late 80s. Almost regardless of government, the trend is undeniable; increased government spending. If we focus on the last few years and the accusation of austerity, there's a slight downturn in 2011, itself smaller than the increase after 2008 financial crisis. Generally, during recessions government spending hikes because of increased benefit payments/redistributions when more people are unemployed etc. That is, should the UK government have changed nothing, the curve over the last few years would look something like that above; an initial big hike in response to recession, than slowly reduced as more people get back into work and unemployment comes down. If austerity would have been imposed, the drop would have been significantly larger than what the chart tells us.

= No sign of austerity here. 

But, if we take the economy as a whole into account. What happens? How large a part of the UK economy is represented by the Government Spending?

Yet again we have a projection made by the Treasury (the last 5 staples). Let's ignore that, and have a look at actual reported numbers. Last accessible; 2011-2012, which shows a little over 45% of GDP consisted of Government Spending. As in the previous section, we see a hike during the recession (2008-2010), and a gradual reduction. Also, the current level is substantially above the levels for the last 15 years. 

(Note: a "reduction" here is not necessarily a reduction; if the economy grows and spending stays the same, the percentage would be falling and the chart would look something like above.)

All of this is consistent with the news that the UK Economy is growing again, which means Government Spending as a % of GDP is gradually decreasing. 

= No sign of austerity here

WELFARE STATE UNDER ATTACK?

Ok, so what about the Welfare State? What about the alleged cuts to the NHS?

Financing the NHS has been a great political discussion since it was created. And guess what? Throughout these 65 years (time for retirement anytime soon?) the claims have been consistently the same; NHS lacks funds; NHS needs more money!

As seen, UK has never spent as much money on the NHS as it currently does. Also, the percentage of national income that we allocate to the NHS is way above previous levels.

Here's a more detailed view for actual spending over the last decade or so:

Clearly, rapidly increasing spending for Health care or NHS. 

= No sign of Austerity here.

________________________________

Bottom Line: Austerity has not been imposed in the UK, despite the explicit target and attempts by the Government. 

That means the entire discussion about austerity occurs in a theoretical framework, that is, for economists, philosophers or historians to argue about whether it can work or whether it has worked in the past. 

What we see today is not austerity. It's a government that wants to impose austerity measures, but is unable/fails to do so.

Next time someone refers to the "Austerity in the UK", you know they have no clue. Let's stop rely entirely on what people say about something and more about what they actually do - or what's actually going on.

Austerity in the UK is a myth.

Public vs. Private

Yesterday I had two particular interactions with certain institutions. The first, a publicly run and funded health care service, the second a privately owned and operated retailer of pharmaceutical products.

At the first, I was making an appointment. The receptionist was bitter, somewhat angry and seemed genuinly unhappy with being there. I asked for an appointment, and she firmly answered me that 15.00 would do. I politely asked if she could make it later (or even earlier, perhaps?) as 15 was not a very good time for me.

- 15.00 or nothing, now leave. 

Thank you, oh humle Party Representative, for rationing according to what you see fit, and distributing the available resources regardless of my wishes. I am thee eternally thankful.

____

The second interaction was with the pharmacy retailer, who looked up when I entered, greeted me politly, had a look on my prescription and excused himself for a moment in order to look for that particular drug. A minute later he returned, apologizing heavily - perhaps three times - explaining that it won't arrive until the day after at 11 o'clock, if I would be ok with that. He asked if I was in a lot of pain, and I answered that I was, though not worse than the days before. He apologized on behalf of the firm again, and promised to have it readily available and waiting for me at 11 the next day. I thanked the nice man, left, and felt somewhat happy anyway.

___


Now, this is not an attempt to prove that private is better than public, although I firmly believe that is the case. Besides, this is probably more of a personal issue than anything else; if the awful women in the reception would have been in the pharmacy I suppose she'd still be awful, bitter and unkind whereas the nice man placed in a public situation would still be nice. And again, the women was probably held back by silly regulations saying that appointments had to be allocated in the exact order people came in etc.

But, I still can't get that feeling out of my head; in private organisations/companies there tends to be a lot nicer people, they treat their costumers with dignity and respect, whereas the opposite tends to be the case in public organisations. There certainly is something weird about that, and I am inclined to believe that it's due to the format public-private.

Responses? Experiences?

Thoughts on Welfare Spending

Hey!

Apologies for not posting in a while - exam periods with somewhat swapped focus.

Today I have two charts for you on the development of the British Government spending. Not actually government spending, but only spending that includes 'benefits' (i.e., transfers, child benefit, jobseeker's allowance, state pensions, sick/unemployed/disability benefits etc).

First, in real terms, how the 'Benefit Spending' has increased over the last 60 years in real terms (that is, cleared for inflation).



So, the UK government spends a whole lot more money on benefits than they've ever done - essentially a constant development seen as far back as this chart goes.

Well, that's a good thing, right? Nay, not necessarily - and from a libertarian perspective, probably not.
What we have to remember here is that every £ the government spends, is a £ taken from all of us through taxation. Arguably, every pound taken up in taxation reduces the private spending by another pound, other things equal.

But the GDP has grown, we're a lot more productive than 60 years ago, thus it makes sense we spend more money?

Sure, let's have a look on the next one.





This shows benefit spending as a percentage of GDP, that is including the economic growth seen since the late 1940s*. Of all the resources we produce, the government has never used such a large portion of those to spend on benefits across the board.

Bottom Line and Question of the Day!
Leftists and Statists always call for higher benefits/tax levels and more equal distribution of means and government expenditure. As these charts show, the levels of benefit spending has never been this high before.  And throughout this period, the left flank, the labour Unions, the socialdemocratic parties have all called for increased redistribution of funds.
Question: What is a decent level? Where is "good enough" for you?

My answer: 0. Remove. Reduce. Abolish.

Have a great Christmas, you all!


_____
* Sidenote: As GDP being the nominator here, a recession/economic downturn produces a spike in the chart, as seen in late 70s/early 80s, early 90s and recently from 2008 and onward. 2 reasons: GDP drops; and spending in the UK system increases.

Funtime! UK Government Budget for 2013

Oh, the glory of Public Policy! They provide you with sweet charts, straight down your University Email!

Budget Deficit for 2013:                £108 bn

National Debt:                              £1,23 trillion (that is: £1 230 000 000 000)

National Debt/GDP 2013               90%

Today we're going to have some fun. If you're allergic to numbers - don't worry, I'll explain core issues as well as I can. I know that £108 billion, for example seems like a VERY large number to most people, but we're talking about a country with some 64 million inhabitants; numbers add up quickly. 

My best tip: treat it as any other amount you're used to spend; £1,50 on bread at Waitrose, a can of milk at tesco for £0,49 - or your Mobile Phone Pay Plan for £25/month. It's like your own economy, just a whole lot bigger and with some pecularities.

Budget
A budget is a plan for the future. That is, the exact numbers for the year are not available, because 2013 isn't over yet. That is why I'm using the Government Plan, i.e the budget.
Government Budgets are normally made on yearly basis; the chart above refers to the UK budget for 2013. It includes all the spending the UK Government is responsible for during a year; police, health care systems, schools, military etc. 

Essentially, they're like any other budget; large international companies, households, the small conveniece store down the road. Money coming in, Money going out. 

The above chart is ONLY money going out (Government Revenue will be addressed later). For now, it'd suffice saying that the Money coming in is £612 billion. The attentive reader notices that the numbers don't add up: That leads us to Deficit.

Deficit

What is it? More money going out than money coming in. Typically, those numbers never do add up for governments. Either there's a surplus or there's a deficit - it's a hard work hitting the exact equilibrium. In itself, this is not a problem as long as it is balanced with surplus other years, or if they're generally small. Whenever there's a deficit, the Government sell UK Bonds (that is: taking up loans) to investors, pension funds etc to finance that deficit; likewise, when there's a surplus the Government pays off parts of the national debt.

National Debt

The National Debt is the total sum of all surplus and deficits had going back in time. Every year with a deficit adds to the debt; every year with a surplus reduces it. The UK national debt is currently about £1,23 trillion, or about £20 000 for every citizen. Here's an illustration for you. 

National debt is normally compared to GDP levels, resulting in a % of GDP. In Britain's case the debt of GDP is something around 90%. US, whose debt crisis is appearant is around the same levels, as are the European counterparts France and Spain. Greece, Portugal or Italy are even worse with numbers of 110-130% of GDP. On the other end of the spectra we have Estonia with an astonishing 9% of GDP and more normalized levels in Scandinavia with 38-45%. The Economist has a nice tool to look at. 

Pretty straight forward. Just like a normal guy's economy, but with a whole lot larger numbers.

A lot of numbers. SO WHAT?

Interesting stuff happens when you start comparing such numbers. The discussions you might hear about in media revolves around the question of just how large the debt can become before it actually is a problem. Some, like the infamous Paul Krugman and other post-Keynesian says that there is no such problem. It is customary for countries to take on debts in recessions, with following surplus in good times, all in according with the almighty Keynesian economics.

But let's take a good look at other posts in this budget. A good half of it goes straight to health, care for the elderly, disabled, low income etc. That is, every 2nd £ you pay in taxes is either put into health care or redistributed to the poor/elderly/disabled. I strongly oppose such measures, but that's beside this post. Interest rate pays for having the national debt, equals that of police, courts and housing, or more than half of all money spent on education. Or, interest payed for this gigantic loan equals roughly £800 per citizen each year. And every year, this gigantic deficit produces a higher debt, that's passed on to the future. Meanwhile, those £800 is growing exponentially. What will happen once interest-rates are normalised, you reckon?

Have a look around, compare numbers and see what's going on in other countries. You can learn a whole lot about what the government is doing with the tax money it steals from you each month. Here you've got a brief overview. 

A reassessment of Public Policy

I have run up the somewhat exhausting habit of expecting the worst from every single encounter with the Public Policy course. Up until today, all of my lectures and most of conversations had in tutorial sessions have been greatly biased towards socialism, as seen in earlier posts. 

The current unbeatable record of time before blaming Thatcher and/or NeoLiberalism for most evils in the modern history of UK stays at 4 minutes. A standard has emerged for how those lectures took place - until today!

The first series of lectures in any particular field is always interesting, because it says something about the topics and an introduction to how the lecturer approach them. Today, as any other day, I didn't expect a record but no more than 15-20 minute before Thatcher ruined the show. To my surprise the entire 50 minute lecture elapsed without any charge against neither the former president nor her political convictions.

Instead the lecturer showed us fascinating numbers on British Public Expenditure - astonishing numbers that I'll go into at some future point. And I only percieved one tiny violation of math, and I even suspect it was unconciously done in passing. That is, my post on Social Scientists to learn math was uncalled for.

Thatcher-relating topics was mainly reduced to displaying the following quote, as a bridge to tomorrow's topics. As true back then as it is today. Enjoy!

"The Problem with Socialism is that you eventually run out of other people's money" - Margaret Thatcher

Maybe I judged the entire staff of Public Policy lecturers at Glasgow a bit too severe. After all, some of them need to justify their salaries! We'll see about that tomorrow.

Disabled people in a libertarian society

In some earlier post I promised to write about disabled people in a libertarian society.

To begin with, the historical background would be useful.

It all started with a change of idea of government's responsibilities in society. In other countries, similar events took place, transferring the responsibility for certain tasks from the individuals to the State. In the UK this happened through the Factory Acts of 1833, where the first step towards state intervention in the workplace took place. Through these series of acts, the amount of hours children were allowed to work in factories was gradually reduced. Although such changes might not have had large effects on overall life, it is widely regarded as a watershed; the first time a UK Government took responsibility for the "well-being" of its citizens. From that on, through countless of acts in different areas such as the school reforms, liberal reforms in late 19th century, old age pensions, national insurance, the modern post-war Welfare State emerged, with features of redistributions and NHS recognizable to most UK citizens of today.

A fascinating development in many aspects. Simultaneously, the idea of freedom, self-reliance, providing for oneself, one's family and those one cares about became less recognized as a task for the individual. We more or less forgot values of the past and relied to a larger extent on the state (that is, other people's money) for a bunch of crucial services.

What we need now is another revolution, another watershed like the one in early 19th century. We need to grasp the idea that WE are in charge of our lives. WE are responsible for the our well-being and the well-being of those we care about. And the means to which we could accomplish this is naturally different; some might chose to hire someone to look after their children, other might want to spend time with their parents in the latter stages of life, some might dedicate their entire careers at taking care of other people, starting voluntary organisation that provide such care or businesses in a marketplace. Financed through voluntary interaction, donations or market-based solution. Non-coercive, voluntary, consistent with the libertarian ideas.

I actually wanted to tell you the story when I first realized that such a way was plausible, even desirable. My mother and I had been visiting my 95-year-old great-grandmother. An amazing woman, whose lifestory I have wanted to write an extensive piece about for quite some time. Her eyes have given up long ago. She is severely limited in her communication, she is very depressed, cries a lot and calls for the Lord to take her away. She stays at a home for elderly people where she is been treated fairly well, I suppose - and has so been for the last 10-15 years.

Visiting her is often not a joyful experience, but it always brings me fascination over her life - and raises questions about our relation to our elderly. Why do we put them away like that, visit them once a month to talk about nothing for half an hour and then leave, feeling that we upheld some social duty?

So I asked my mother about it, and she told me that she'd much rather take care of granny herself. Much, much rather would she have her live in our house, mum being able to take care of her, support her and actually spend time with her in our own home.

- Why don't you?, I asked, curiously. What's stopping you?
- I can't afford it, she said, the household needs two incomes.

Essentially, if our household had an even larger income, or if tax levels would come down sufficiantly, her desire of spending time with granny at home might be a real option. In the Welfare State of today, taxes naturally fund a lot of different things, from elderly care to schools and road constructions. But what if those areas wouldn't be the responsibility of the State? And that we'd be accustumed to pay for the services we use, rather than arbitrarily pay for all services somebody else deem crucial for a State to perform?

In a society where the responsible of taking care of the elderly isn't alienated, recognised as somebody else's task and payed for by a tax-funded government, individuals can actually make that kind of decision themselves. Now the financial incentives distort such options. It would come down to money and percieved value - just like any other market transaction. At some point I suppose my mum would quit her job, rely on 1 income only and take care of her elderly relative. It could also be done through hiring somebody for those hours when my mother is at work, or through a voluntary society, a church association or helpful neighbours. The possibilities are endless - but it seems we've all forgot about them.

Ok, so I was gonna answer the topic of disabled people and ended up telling you a story of my great-grandmother. Not heads on, but the same ideas applies for disabled people. We don't need a tax-funded government to take care of our loved one. We can do that ourselves.

Swedish Union presents its demands; Citizen fee & increase ALL taxes!

This morning, a think-tank of LO, one of Sweden's largest unions  (respected and reknown for mindless strikes and other craziness), published a report on how to reform Swedish tax system. The title in the largest newspaper:

"This is how we get a smarter and more just high-tax society"

Well, my dear union, are you familiar with the concept of Oxymoron? It has very little to do with an actual 'moron', altough you certainly are approaching that concept aswell. Oxymoron is an inherent contradiction such as 'bittersweet', 'a warm coldness' or something or the sort. Or, in this case, "just high-tax society".

First of all, taxing is ALL but just. It might actually be the most injust principle I know of. Normally taxes are directed at incomes, sales or property, crucial parts of economic transactions and as such taxes WILL inevitable have an effect on those areas. But more importantly, all of these features (income, sales, property) is created by productive, enterprising and thrifty induviduals pursuying self-interest by serving consumers. Whatever these individuals created is the fruit of their work, entirely belonging to them. Taxes enter this domain by robbing such individuals of their reward. In what universe can such an action be named just?
(Imagine the Usain Bolt situation; An insane amount of training, strict diet, discipline, and after countless hours improving that body of his, the Government steps in and redistribute half of it to less-abled contestants. A just, fair system? Not even close).

The underlying assumption of its entire report, is that high taxes are harmless to the economy, if they're made "in a good way". Such a claim requires an additional post, and I'll focus on that idea at some other point.*

The background for this report is that tax levels have come down in Sweden during the last decades, since the record of 51,5% of GDP (that is, more than every second unit the economy produces was taken in taxes) to some 45%. Appearantly, this has produced a revolution in the lines of Swedish leftists; we lost the unglamourous position of the country with the world's highest taxes. Clearly, something had to be done.

What the creative brains of leftist forefront came up with is the following;

• The Government transforms a healthy surplus in public finances (one of few in Europe) to a 3% deficit of GDP, that is approaching the Spanish deficits, leveling the French or Italian public deficits
• Flat tax reform on income as well as capital gains. Altough, the tax on income would suffer an increase of 10% to current average levels, capital gains of +16% increase of tax rates. 
• 10% increase of employer pension deposit, with accompanied increased state pensions
• Increased employment tax
• A 18 000 SEK/year (Equivalent of £1700/year) Citizen Fee with fussy intentions
• Increase all VAT levels to 25% (that is raising the VAT levels of books, food and restaurants from 6%/12% to 25%)

So, after increasing virtually every tax in the Swedish tax system, they add that corporate tax will be abolished. Woah, I thought, an actual useful thing coming out of a leftist... BUT, replaced by a 'tax on commercial property' unspecified. I assume whatever benefit an abolished corporate tax would bring is ofset by such 'commercial property' tax.

The overall effect on State Budget would be 30% Increased Government Spending, turning a healthy public surplus into deficits and fussy so-called 'improvements' in areas ranging pensions, equality and welfare.

This absolutely knocks US budget quarrels, makes the British disagreement on fiscal policies look like a harmless little poodle and surpasses anything I could even have expected from Swedish leftists. What is a mere 1-5% tax increase US taxpayers suffered from early 2013 budget drama? Swedish leftists absolutely SMASHED anything concievable by their UK or US counterparts.

Yep, that's Sweden for you!

All in all;

Conclusion from the Unions of the land of promised welfare;

it doesn't really matter WHAT you aim to do with funds from taxing population (or the consequence), as long as you raise them to world-record levels, previously unrecognizable by anyone.



___

*It seems that for every post I make, 2-3 more are required. Not too unfamiliar with how an institution such as a state works, by the way. I will probably expand this topic with a post for why every single reform they have suggested are seriously detrimental to swedish economy, to individual property and standard of living.

Socialists' Objections

Today I though I was going to assert some socialist claims I've had experienced over the last few weeks.

And I'm making this a monthly report. Every month I'll gather objections, responses, attempts of counterarguments, insults and charges that I have had pointed at me (or seen in debates/media) - predominantly in regards to libertarianism. To be honest, the amount of horrible statements people (in my experience often on the left-flank) can come up with, really fascinates me. I think my favourites in terms of insults would be the ones attacking me as a person, or perhaps the ones trying to tell me what I really, deep down, actually think. That's funny!

Ok, so the objections will be taken from different sources (facebook, real-life arguments, texts, academic discussions etc) and as far as possible within context. If the comment was made in a different language than English, they'll be translated as best as I can. In regards to anonymity I'm still undecided. Maybe I'll include the source at some point, maybe not.

We'll see. You can expect comments and ideas that'll blow your mind, make you laugh hysterically or yawn at humanity. Entertainment promised!

All 'Socialists' Objection' can be found here.