(it’s a real word, I looked it up)

Britain’s Conservative economic minister just announced plans to lay off 490,000 public workers over the next four years – his solution to the UK’s current economic difficulties. His proposal will make 25% cuts in several government ministries – with an across the board average of 19%.

This is great news for New Zealand, as this is a preferred destination for skilled workers during Britain’s periodic downturns. However I can’t help but feel sad for what was once a grand and glorious nation.

Lessons from History (and Eastern Europe)

It’s such a pity Britain’s Conservative government can’t learn from history or more recently from Eastern Europe – where similar “austerity” packages have virtually destroyed several national economies. The most important lesson from the Great Depression is that no amount of stimulus or monetary (adjusting interest rates or monetary supply) tinkering “cures” a recession. The only definitive solution to Britain’s economic woes would be to retake control of the money they use to run their economy (instead of borrowing it from Goldman Sachs) – and of their trade deficit, by becoming more self-sufficient in energy and food production.

The second most important lesson from the Great Depression is that severe budget tightening, along the lines of what Prime Minister David Cameron proposes, always makes a recession much, much worse and can cause the total collapse of a national economy and infrastructure. You see, when you lay off 490,000 people, they stop buying things. This makes retail sales drop off drastically (especially when you increase sales tax to 20%, as the Brits are doing) and ultimately profits and growth.

The Essence of Third-Worldization

I find it quite interesting that the conservatives seem fully aware of the “third-worldization” that will result from their economic package. As they make specific mention of converting the UK economy from a consumer driven economy to an export driven one.  Because this is the essence of a third world economy. You force your own citizens to go without while they slave away in sweatshops to produce exports.

Based on the experience of other countries (past and present) who have tried to cure a recession with austerity measures, I think it is safe to make the following predictions:

1. Mass migration of British workers to Poland, Turkey, India and Pakistan (poised to be a major energy player thanks to substantial Chinese and Iranian investment – see Balochistan – The Place to Watch http://stuartbramhall.aegauthorblogs.com/2010/09/29/balochistan-the-place-to-watch/) to find work (I really hope the Poles, Turks, Indians and Pakistanis treat them better than these economic migrants have been treated in Britain.).
2. Massive increase in the black market economy, including narcotics and human trafficking, prostitution, and organized theft and extortion.
3. Massive deterioration in quality of life with increased violent crime, child abuse and domestic violence.
4. British children with flies on them in World Vision ads, instead of African ones.

 

A Few Bright Spots

Amazingly there are a few bright spots in Cameron’s economic package, including a 0.04% levy on banks (rising to 0.07% in 2014). British Conservatives also target sacred cows” for cuts (defense and law enforcement) that are sacrosanct in US deficit reduction – though not as drastically as welfare and social services. Moreover health, education and foreign aid are (allegedly) protected from cuts. (New Zealand’s conservative government promised to protect health and education but, in the end, imposed substantial cuts.)

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