The Age of Austerity

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David Clark, recently wrote an article in The Guardian, relatively recently, about the economic challenges of the future and how to best put Britain on the road to recovery. He mentions a point I found rather interesting, about how economic growth has slowed down for Britain post-1973, to be very precise, after the country surprisingly enjoyed a long period without any major recession, following the Second World War. This is surprising because it was only as recently as 2006, that Britain managed to pay off all of its Second World War loans, from the United States. The nation took out a loan of about £145mn at the 1945 exchange rates, and then again a further £930m at 1945 exchange rates.

The loan was paid off in 50 annual repayments starting in 1950, and the terms of this agreement were agreed upon, when the loan was taken out. Economic and political crises of various sorts in Britain, saw the loan being delayed for six years, but because the United States was so generous with the the fixed interest rate, a mere 2 percent, Britain managed to sort-of sail along for all these years; the loan money was primarily used for purchasing equipments and materials. It is a rather less well-known loan, but its important to mention that the American economist John Maynard Keynes was very unimpressed with his country’s attitude towards the loan, it seems. According to his biographer Lord Skidelsky, Keynes was interested in a gift to cover Britain’s post-war balance of payments, or an entirely interest-free loan; he wanted a loan that was a lot less stringent, and more politically and economically-friendly to Britain post-Second World War.

Plenty of First World War debts owed to Britain by numerous countries around the world, and debts owed by Britain in return to other nations, are still unpaid. There is always talk about Britain doling out foreign aid to third world countries but what about the debts owed by Britain to other countries? It is still difficult to determine from HM Treasury archives, which country owes Britain what, and how much Britian owes to which country, so just labelling all of the loans to be, for the most part, owed to Allied nations, would be too much generalisation. According to a meeting document by the Cabinet Office dated…January 29th 1932, I have been spending my time this afternoon poring over at the National Archives in London, there is an intensive argument in the Cabinet regarding tax duties imposed on the publishing of too much documents and papers charting all the various activities of government staff. The recession was so terrible, there was a government debate about this subject, which I have to admit is far more enlightening than most of the present day debates that goes on in Westminster.

These loans are causing a serious friction amongst relationships between the first world countries because there is a grave amount of financial loss involved here. And you can’t exactly expect to pay off any of these or any loans instantly, as Dr Tim Leunig, Economist History lecturer at LSE has been quoted as saying,

“Nobody pays off their student loan early, unless they are a nutter. Even if you’ve got the money to pay it off early, you should just put it in a bank and pocket the interest.”

Post-1945 Clement Attlee had increased taxes, and this tax hike continued under Winston Churchill, Anthony Eden and Harold Macmillan. There is good reason that living standards improved for Britain, and the economy performed so well, despite two World Wars and so many titanic loans: there was no uneducated bickering involved as modern British politics has largely been demonstrating post-1973. This was successive governments, be it Labour or the Tories, coming together in the national interest to better the economy. The 1970s saw unemployment increase, severe inflation, followed by a Winter of Discontent (1978–79), a long and continuous period of trade union strikes, which fueled Thatcher to power, who then went and weakened the trade unions and privatized portions of the economy.

From then on it has just been the “Age of Austerity” so-to-speak with one recession after another, with slight positive peaks here and there in the various data pool that is the economy of the United Kingdom, from monitoring nationwide employment levels to introducing the minimum wage. David Clark talks about capitalism – its almost as if, if this was the First World War, it would mean small businesses would start to make money again, followed by the incessant and very ridiculous desire to climb up the social ladder by some gentlemen, and profiteer from the whole collective war effort that was everywhere in the country to help Britain win the war. That is what capitalism sometimes does: imbalance the whole social order as we know it, as defined by Karl Marx.

I do not believe that capitalism, in general terms, what it’s defined to be, should be supported simply because Thatcher went and privatized portions of the economy. I am unsure though which particular capitalism Clark’s interested in advocating in the United Kingdom because there are many branches of capitalism, you know. I believe that there needs to be more mercantilism and industrial capitalism in the country. Only when you set forth and forge better relationships with other countries and discover more countries like we use to once during the Age of Discovery, when mercantilism prevailed everywhere in the state, can you successfully implement good trade and better markets, with land, labour and money all contributing to the markets. One of the fundamental thoughts of mercantilism is more export, less import, which improves industrialization and the manufacturing sector in the country, which brings me to my second point: more industrialization. Industrial capitalism would also benefit Britain, because not only would it see more industrialization, it can actually also benefit agriculture as it has done in the 18th century.


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