Austerity is spending

It’s about three weeks since I last blogged – not through lack of enthusiasm but simple lack of opportunity. Our house renovations continue – although I think that we are now on the “run in” – but more importantly, I have been busy with other matters. My football writing has been taking a good deal of time and we escaped the coldest week of the English winter by visiting  Lanzarote for a week in the sun – and very pleasant it was too.

So, back to blogging – but where to start?

On Saturday Pat and I visited a huge shopping retail park just outside Nottingham. There is a vast IKEA store there and a large number of other glossy retail outlets. It was a pretty bad idea from the word go – and when we eventually arrived this was confirmed as we trawled endlessly around the car park looking for a car parking space.  The world and her husband were there! We weren’t looking to buy anything in particular – rather to see what there was now that our new kitchen, office and shower room are almost complete. Together with thousands of others we shambled around IKEA comparing, measuring, arguing, dismissing the items on display and in the end came away with just a few bits and pieces.

As I walked around, becoming increasingly irritated and disenchanted, it struck me that this was austerity Britain! The politicians, the TV news, the newspapers, the Eurozone, the Bank of England and every other political, financial and media agency throughout the world tells me that we are in dire financial straits and have been telling me so for the last three or four years. The proportion of unemployed  rises inexorably,  the housing market is depressed because no one can get a mortgage, more and more people allegedly are slipping into debt and below the poverty line, we are finding it increasingly difficult, it is said, to fund basic services like health and education and certain groups – the less well off, the young and the old are, we are told, hit harder than others. And so the list goes on. Politicians of every hue tell us we are all in this together and that we must tighten our belts – financial Armageddon is just around the corner.

Thousands gate crash Selfridges sale in
London to grab a bargain coat or
dress or i-pad - is this austerity?

And yet.......and yet......this is not what I saw yesterday, or indeed what I see if I go into Nottingham (or any other large city in the UK). What I saw were thousand out spending money – on what essentially was unimportant trivia – not the essentials of life. Each time I go into Nottingham I see people returning home with three or four shopping bags filled with shopping – again, not food and other essentials but clothes, household goods, CDs and the like. If I go into Nottingham (any night of the week from 6 o’clock onwards) I will see thousands of people, mostly youngsters, dressed up and partying, pubs heaving, many  drunk, restaurants full, queues of people standing at cash machines or  outside night clubs waiting to get past the bouncers on the door.  As I walk through Nottingham shopping malls I see mobile phone shops and the like filled with people purchasing and discussing the latest must have i-phone or piece of technology. Only a few weeks ago in the post Christmas sales thousands were queuing all night outside fashionable stores of our big cities to get bargains – not food or warm clothes to ward off the cold winter, but designer handbags, dresses, coats and the like often costing hundreds of pounds.  I read in my paper recently that sales of luxury cars are at their highest levels ever and this seemed to be confirmed as I trawled around the IKEA car park looking for a parking spot - I commented on the number of expensive vehicles 4 x 4s, Volvos, Mercedes and the like – no sign of austerity there!  And our Chancellor, the lovely George Osborne, tells us “we are all in this together” and in a sense he is right. I am part of this culture and  a good example of this alleged austerity – I’ve just had a week away in sunny climes in a 4 star hotel, I’m spending many thousands of pounds having my house renovated  and only a few hours before my trip to IKEA Pat and I had enjoyed a lovely meal at our favourite pub. Yes, times may be hard but in reality there are many, many thousands - indeed millions - like me who don’t really understand the meaning of austerity. In these allegedly financially straitened times millions of us are, lemming like, racing to spend money that we may or may not have on items that we don’t really need!!

Margaret Thatcher once famously commented – and received much deserved criticism for it -  that there was no real poverty in the modern UK. Of course, she was wrong  - poverty is a relative word – but in another sense she had a point which I reflected upon on Saturday. There will be many millions in the UK (and across the developed world) who are poor and who are truly suffering in the present conditions as they are thrown out of work, are forced to live in desperate conditions - but the vast majority of the population, it seems to me, are merely inconvenienced rather than in pain. Austerity for them is rather about their savings are not earning quite the level of interest they would have hoped for, it is about having to pay a few pennies more for their petrol, it is about perhaps only eating out once a week rather than  twice, it is about waiting a bit longer for that luxury. What it is not about is poverty.

And....austerity is spending!

Now, of course, the clever economist would say that I am missing the point. He or she would tell me that what I say might be true but the fact is that people are not spending quite so much as they previously did.  And, he or she would continue, “this is having disastrous consequences on our economy and putting people out of work”.  And I would agree. The economist would say that “we have to keep spending to keep the economy going – this is the nature of the economic system that we have”. And I would agree again – but in doing so cannot escape the feeling that this is some Orwellian nightmare rather like that it “Nineteen Eighty Four” where Big Brother’s Ministry of Truth brainwashes everyone with the slogans “war is peace, freedom is slavery, ignorance is strength”. Our modern day equivalent is “austerity is spending” – we have an obligation to spend money that we allegedly haven’t got in order to  keep the economy going. Orwellian indeed.

And  I might say to the clever economist or the politician that for me there is a flaw in their argument. As a confirmed Keynesian I believe profoundly in stimulating growth.  Unfortunately, however I do not believe that the  current practice of putting money into banks (what the government euphemistically call “quantitative easing” ) has not and will not stimulate the economy and create jobs – it simply stimulates bankers’ bonuses and makes banks more profitable. As a good Keynesian I want to see money in the pockets of people so that they can spend and create demand for the products that are manufactured. This in turn will mean that manufacturers will employ people to make these products, giving them a job, money and security and ensuring that they pay tax into government coffers to pay for all society's needs. The circle, as it where, will be squared.

But as I walked around IKEA and the other big retail outlets like NEXT at the weekend I shook my head – I realised that in modern Britain  even my  Keynesian economics, I fear, will not work. Yes, the spending of the thousands there was keeping the shop assistants in work and no doubt many back room staff at IKEA or NEXT. But as I looked at the products the overwhelming were imported from far eastern countries – this was globalization in its purest form – and very little of what was being spent would eventually generate jobs, security and long term prosperity in the UK. As a nation we have over the past decades consistently run down our manufacturing base – the chrome toilet brush we bought from NEXT was made in China, the stainless steel hot plate stand from IKEA was made in Thailand – few British workers, it seemed to me,  would benefit from our Saturday afternoon spending.

My  shopping trip seemed to impress two factors on my mind. Firstly, the reality of the present situation is that  there is still a lot of money washing about. It’s unevenly spread and many groups are being hit disproportionately hard. When I drive into Nottingham now it is not unusual to see young people standing in the cold on street corners with a placard advertising the local pizza parlour – sandwich board men and women like throw backs to the great depression of the thirties. In the town centres more and more shops are boarded up and if they do  re-open they open as pound shops. By all known indicators poverty is on the increase but despite this there are many, many more, like me for whom financial meltdown  is still largely academic, merely an inconvenience. 

Dennis Healey when he was Labour Chancellor in the 1970s   promised to “squeeze the rich till the pips squeaked”. No  politician could get away with that quote now – and perhaps that is more the pity because if the world is indeed  facing the financial meltdown  then  the millions of “haves” like me who were walking around IKEA on Saturday buying largely unneeded trivia manufactured in far off places and climbing into their 4 x 4s and Mercedes’  perhaps need to be squeezed more and reminded of financial realities. And secondly, the government needs to reverse the policy of quantitative easing (or to use my preferred term, subscribing to the banker’s benevolent fund) and pour the money instead directly into rebuilding a manufacturing  base so that the products that people buy at IKEA and Next are creating jobs and security in the UK – this latter point goes against all my instincts and beliefs  but to do otherwise, it seems to me is simply pouring good money after bad. We are currently  spending  money that we may not have but to no discernable benefit to our society - it is benefitting only multinationals like IKEA or NEXT or nebulous “entrepreneurs” like Philip Green  -  and that cannot be right.