Britain’s Trillion Pound Horror Story

I am genuinely appalled by this show.

It is the opposite of fact free, it is full of facts.

However, like that Morecambe and Wise sketch it has all the right facts but in the wrong order.

For example, the industry of the UK didn’t decline because of high taxes, as is claimed. It was a combination of a changing international division of labour and the fixed investment in out of date machinery of British Industrialists. To expensive to junk, not profitable enough to keep up with the Germans and Americans. A cursory glance at the literature would have shown that.

Hong Kong is not where the Asian economic miracle began, that would be late 19th Century Japan (or 13th century China). It is not much of an economic model either because it takes up a few square miles and houses a few million people and is served by a diaspora of millions of Chinese. It is also placed at crux of one of the most important trading and financial zones in the world.

The British state apparently controls more of the UK economy than the Chinese state controls the Chinese. That is nonsense, as is explained here http://bit.ly/aOTkdO Much of the money discussed is not consumed by the state but transferred, to pensioners, to the ill and to the unemployed and of course to run entirely essential things like the police and fire service.

(Were this argument to be correct it would also hilariously completely contradicts the main argument of the documentary, if the state controls that much of the economy and we are 10 times richer than the Chinese then it must be doing something right, no?)

Public spending will allegedly be higher in 2015 than in 2009. Of course this is only true if you use nominal spending, i.e. if you ignore inflation. Something completely ridiculous, as I am sure he would admit.

In short, there is an honest argument to be made for a smaller state, this is not that honest argument.

___

Left as a comment on Channel 4’s website.

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25 thoughts on “Britain’s Trillion Pound Horror Story

  1. This programme was by the same guy who did The Great Global Warming Swindle, which argued that the whole of climate science is a huge scam! Scientist Dr Carl Wunsch said that film was “masquerading as a science documentary when it should be regarded as a political polemic” and was “as close to pure propaganda as anything since world war two”. Ofcom upheld complaints against that one.

    Contributors to last night’s film included Philip Booth and James Bartholomew, both of the Institute of Economic Affairs (a free market think tank), Eamonn Butler of the Adam Smith Institute (a free market think tank), some guy from the Taxpayer’s Alliance (a free market think tank) and some guy from Goldman Sachs (the bank which schooled the Greeks on how to keep their debts off balance sheet!). Impartial and fair? Erm, no.

    Little or no mention of the fact that much of our debt is due to a string of bank bail-outs after the financial crisis (that’s taxpayers being held to ransom by a failing *private* sector!) and much of the rest comes from the collapse in revenue which occurs during any recession.

    Durkin prescribes deregulation as a cure-all for our economic ills, but doesn’t mention that most experts believe that light-touch regulation was partly what got us into this mess! No airing given to the views of award-festooned economists like Paul Krugman, who have argued that austerity measures may be self-defeating (i.e. the government WILL NOT save by slashing spending) and may even bring on a third Depression.

    Did Labour spend too much? Undoubtedly. But this shrill anti-State polemic does nothing to advance the debate on what to do about it.

  2. So are you saying because he was wrong about one argument he has to be wrong about everything else? I personally would leave global warming for the scientists to argue over as they no more about it than any of us lay people I’m sure and I assume that includes the both of us! Regards bank bailouts you obviously were not listening as this was mentioned and he even listed the amount, but it is nothing compared to the amount of national debt this country owes. you say it is the private sector to blame for the debt – what crap! Tell your local plumber that he’s responsible for the banks failing, I’m sure he’d have something to say or a firm who exports goods (part of the productive economy) who does nothing but contribute to the wealth of this nation.
    No, with regards the banks the true blame lies at the very beginning of the last government tenure where they altered the whole financial system which made it easier to hide what was really going on. In a way what Gordon and Tony did is not far short of what Nick Leeson did to Bearings bank but he paid for his crime!

    1. “So are you saying because he was wrong about one argument he has to be wrong about everything else?”

      There is too much wrong to point out everything withotu being incredibly dull, this was just a taster.

  3. OK so what do we do about it?

    We have to start making creating things again – that’s for sure. It doesnt have to be all steel plants, it can also be software or technology.
    We do not have a large land mass in the UK but we have a large population density compared to many of our neighbours.
    This would suggest that we are going to find it harder to export land dependent goods such as food, coal etc
    We do not have the same problem with goods that have a higher technology element and our strengths may lie in that area.
    How can we encourage private enterprise to take advantage of the resources we DO have? We have man power it seems, we just need the right opportunities.
    Does anyone know to whom the UK owes its national debt?

  4. “However, like that Morecambe and Wise sketch it has all the right facts but in the wrong order.”

    It didn’t have “all the right facts”. In fact the programme, like much of the mainstream discussion, displayed such ignorance of all the fundamental issues as to dismay an informed rational observer. The entire mainstream discussion is riddled with fallacies.

    Best start here:

    http://neweconomicperspectives.blogspot.com/2010/04/what-is-responsible-fiscal-policy.html

  5. Frolix22 suggests the program “displayed such ignorance of all the fundamental issues as to dismay an informed rational observer”

    As your average informed rational observer I am curious as to which fundamental issue he (she) refers.

    Is it the one that states the Government doesn’t have any money of it’s own? Or is it the one that says that we are spending our children’s money?

    My guess is that Frolix22 is a public sector worker with an agenda. Or is on benefits. Which is it?

    1. I am quite busy at the mo, and really don’t have time to respond in anything like the detail I’d like to.

      But the “money” is all the government’s, it has a monopoly on the production of legal tender.

      The wealth/capital/value etc however you want to call it is of course not the government’s. However, a great deal of wealth/capital/value etc is not being used at the moment, offices sit empty, workers are unemployed, and the logic of keynesianism is to put those resources to work. You don’t have to take wealth/capital/value etc from anyone to do this, the wealth/capital/value etc is sitting unused.

      “My guess is that Frolix22 is a public sector worker with an agenda. Or is on benefits. Which is it?”

      Oooo-oo, your powers of ad hominem astound me!

      1. “But the “money” is all the government’s, it has a monopoly on the production of legal tender”

        This statement is a load of tosh. The production of legal tender is a statement that it is simply custodian of the reserves. Actually not even our reserves, but HM the Queen’s, to whom we each give the right to every penny of.

        The government is only a bank for HM’s money. It does not have an automatic right to spend it and more importantly,should not assume the right to borrow far into the future ahead of any democratic decision as to our future. We’ve got the situation now where governments tell us they are forced into certain measures – where’s the choice, where is democracy?

        As to comments on industrialists buying the wrong machinary. Complete and utter rubbish. Through both wars we demonstrated the ability to manufacture to the highest standards. The Two World wars reduced the reserves and forced higher taxes – we became unable to compete due to huge domestic spend and the expectation of a generation to improve their lot after the wars. Can’t criticize that, they deserved it.

        1. LeftOutside Whatever you’re busy at, I think you should make time to study some basic economics.

          “But the “money” is all the government’s, it has a monopoly on the production of legal tender”

          This is worthy of the Robert Mugabe school of lefty economics.

          He confiscated all the white-owned farms and gave them to his mates – thats called nationalisation. Production- that’s what the private sector does- collapsed. The government increased its “production of legal tender” to pay it’s bills.

          Last I heard a loaf of bread in Harare cost a trillion Zimbabwe Dollars.

          Need any more examples?

          1. What?! I don’t even know what argument you think I’m making.

            The Government prints money all the time, the central banks prints a load of money to move the base rate when it wants to, this isn’t some evil plot, it is how capitalism works now.

            What I am saying is that MONEY is just a means of payment, accounting unit and store of value. WEALTH and value and capital etc is often denominated in money but it is not the same as money.

            There is lots of excess capacity in our economy at the moment so the government doesn’t have to make some people poorer to make others wealthier.

            Do you understand?

        2. Which industrial decline are you refereing to?

          I was talking about the one at the end of the 19th Century. Britain has beemn declining for over a hundred years, to say “big state” caused it is nonsense.

          The industrialists didn’t buy the “wrong” machinery. They bought the right machinery at the time but technology changed faster than they could updates their capital stock.

          See below for a discussion on money.

          1. The govenment can print money, but only as money is distroyed, by printing “new” money will devalue it. if you ignore the show that this guy put on, then take it down to its most simple point, we the people are to blame, we cant have something for nothing, the govenment does have too many fingers in too many pies, we are one of the mos overworked countries in europe and yet also one of the most over taxed. There is a problem.

            We are screwed!

            I do have an intresting question though, I am all up for keeping scotland in the UK, im am an Englishman living in scotland, but i wonder, lets say things do go dwn the tube which is quite likely it seems, if scotland were to gain independance how would the national debt situation work out?

            Dnt get me wrong, under the current system of govenment up here the country woudnt work, but lets assume they work it all out and they get independance, wouldnt they have given some of the debt?

  6. I think one point that wasn’t covered in the programme but I think is valid is ‘patriotism’! Some may laugh, but if the country as a whole recognised that we are stronger and more of a force and in the long run better off if we worked together and most importantly be proud once again of this great nation (apart from just at football matches) then maybe we would be able to turn this mess around. But while we all fight each other when there is a suggestion that a rise in tax is to hit our own pockets eg; when Conservative conference announced to party faithful the middle class would be affected as well re: family allowance, or the students rioting over increases in student fees.
    We need to take on board what an ex US President once said
    ‘ask not what your country can do for you – ask what you can do for your country.’
    Somehow it seems this type of non-selfish attitude has been lost in this greedy society of ours.

  7. The program made a few home truths and made them well.
    1. this country has an astonishing amount of debt as opposed to deficit. The MPs questioned did not even seem to understand the difference.
    2. The state cannot and does not ‘generate’ wealth. Even the most fervent interventionists must accept that at best the state can encourage others to generate wealth.
    3. The creation of jobs by the governemnt is at the cost of the destruction of jobs elsewhere.
    4. When the state takes up to and over 50% of the output of the country from it’s citizens, then it is taking from the poor and those in the middle as well as those at the top.
    5. Areas of this country in reciept of largest amounts of support in the form of tax money, still have the biggest problems.
    6. A smaller state encourages individual initiative. A large state stifles individual initiative.

    I could go on…but wont’t/

    1. “3. The creation of jobs by the governemnt is at the cost of the destruction of jobs elsewhere.”

      How does this work?

      1. If we were in a full employment situation the public and private sectors would be competing for the use of labour. In this case the hiring of public sector workers would be at the expense of private sector workers.

        Of course since we are not in a full employment situation this argument is incorrect. Much like the rest of colonel_hackney’s idiotic “home truths”.

        1. So, in our current state of not having full employment, where do you suppose the money to pay the public sector wages is coming from? It comes either through a tax increase or increased Government borrowing (a future tax increase). Fact. Both of which are ultimately paid for by the private sector.

          The point is not a literal one i.e. if the government employs Joe Bloggs on £20k a year, John Smith who earns £20k for a private firm does not have to be made redundant to enable this. But, the £20k will be taken from the private sector as a whole. Practically intangible when talking about one individual but with the public sector employing millions, a slight percentage increase in public sector jobs will, eventually, result in private sector job losses should the private economy not grow fast enough to withstand the higher taxation.

          1. No, you’re making the classic error of treating the private sector like it’s some kind of magical wellspring of money. If the government employs Joe Bloggs, the private sector economy will have an additional customer, the private sector demand will increase by the amount of Joe Bloggs salary. The question then becomes one of whether the private sector supply is able to match this demand, if not then we would see a rise in price levels.

            As another example, if the state were to privatise the NHS and give us all a gigantic tax cut there would be very little change in the overall level of wealth. If the new privatised healthcare more efficient then we might see a rise in disposable income, but only to the level of the efficiency gains (this of courese is a different debate entirely). The fact remains that people would still have to pay for healthcare so we wouldn’t be a huge amount better off.

    2. Fisking Time!

      “1. this country has an astonishing amount of debt as opposed to deficit. The MPs questioned did not even seem to understand the difference.”

      MPs are idiots, I’ll give you that one.

      World debt nets to zero, much of the UK’s debt is also on net zero, we owe money in large part to ourselves. The government’s debt is probably an asset in your pension. Its confusing. but just going £4.7 TRILLION, argh scary, isn’t a good method for policy making.

      “2. The state cannot and does not ‘generate’ wealth. Even the most fervent interventionists must accept that at best the state can encourage others to generate wealth.”

      This is only believed by people who don’t understand what wealth actually is or are ideologically opposed to reality, like Charlotte Gore and you I presume. There is a trilolgy of quite short posts here going into exactly why you are wrong. Enjoy.

      https://leftoutside.wordpress.com/2010/06/15/charlotte-gore-wrong-unsurprisingly/

      https://leftoutside.wordpress.com/2010/06/20/two-propositions-on-the-state-and-wealth-creation-for-charlotte-gore/

      https://leftoutside.wordpress.com/2010/06/22/whats-that-charlottegore-my-restraining-order-is-in-the-post-charlotte-gore-continues-to-demonstrate-that-she-doesnt-understand-economics/

      “3. The creation of jobs by the governemnt is at the cost of the destruction of jobs elsewhere.”

      As Andreas says, IF we are at full employment, and I would add IF the job created is not in need. Jobs done by the government sometimes complement others in the private sector, classically the police, fire brigade, courts, army etc. Also explained in the abvoe posts.

      “4. When the state takes up to and over 50% of the output of the country from it’s citizens, then it is taking from the poor and those in the middle as well as those at the top.”

      Yes, when the state is large it must tax the poor, this is bad.

      But, the state doesn’t “take” 50% of the output, most of it is transfered from one person to another. It is explained here http://bit.ly/aOTkdO .

      “5. Areas of this country in reciept of largest amounts of support in the form of tax money, still have the biggest problems.”

      Some impressive begging of the question there. You don’t know which way the causation works, there is research on it, but you haven’t cited that and judging by your other points, I’d say you are making that argument because you like it, not because you have looked into it to see if it is correct or not.

      “6. A smaller state encourages individual initiative. A large state stifles individual initiative.”

      This is a platitude and is therefore difficult to critique. What about the role the state, and military industrial complex, played in creating the internet?

      Likewise, what about state sponsored microlending schemes in the developing world?

      Yours etc.

      LO

  8. Leftoutside :
    “World debt nets to zero, much of the UK’s debt is also on net zero, we owe money in large part to ourselves. The government’s debt is probably an asset in your pension. Its confusing. but just going £4.7 TRILLION, argh scary, isn’t a good method for policy making.”

    This misunderstanding of government debt and what “money” means is breathtaking. The government debt in our pension schemes doesn’t mean that in some way it doesn’t count. This “money” must be paid back ( redeemed ) else the government will be in default and will no longer be able to borrow. Much of this debt is held by foreign banks and governments ( the Chinese these days ) you can be sure they want to be paid and the interest rate will rocket if we start falling behind in payments. That’s what is happening in Ireland.
    However the main debt is in LIABILITIES. No matter how much lefties like to hide this it won’t go away and our children will be responsible (see post above). Waffling about net zero is so much hot air. Someone will have to pay future liabilities incurred by profligate governments otherwise Leftoutside and everyone else won’t get a pension.

    All of the money you are talking about is not just a convenient method of paying for groceries. When the Governor of the Bank of England “promises to pay the bearer” he does so because the currency is backed by assets. Real assets not economic theory. This supply of money is backed by GNP and taxation on the real economy ( the private sector ). It’s no use using pretending the public sector is supporting the currency because that’s like believing Gordon Brown when he says your cheque is in the post. I’m afraid the foreign banks holding British Government Treasury Bonds keep a sharp eye on our budget deficits, balance of payment deficits and total debt. Once they think it is out of control the game is up and no amount of economic double speak will pay the bills. The run on Northern Rock was child’s play. Ask the Greeks.

    1. Lots of UK Government debt is owed to those in the UK.

      http://news.bbc.co.uk/1/hi/business/8530150.stm

      The point remain that the UK can borrow now at very favourable terms and there is lots of excess capacity in the economy and there appears little evidence that current UK govt. borrowing is raising interest rates or crowding out other more productive investment.

      Future pension liabilities are future liabilities, they do not bode too well for my future, but that is a long term problem which will be aided by getting the economy back on track as soon as possible, short term stimulus, long term reform (probably with a shift to a land tax and a citizen’s basic income).

      The private sector isn’t the only thing that creates wealth, I cite to the above three posts linked to above explaining why.

      “I’m afraid the foreign banks holding British Government Treasury Bonds keep a sharp eye on our budget deficits, balance of payment deficits and total debt.”

      They have and the UK can currently, and also did under Labour, borrow at exceptionally good terms.

      “Once they think it is out of control the game is up and no amount of economic double speak will pay the bills.”

      Wrong, once they think there are financial problems on the horizon they will begin to price the risk of default into their prices offered. They haven’t really been doing so, although it is difficult to divine what makes up any price.

      “The run on Northern Rock was child’s play. Ask the Greeks.”

      The greeks defrauded their lenders with cooked accounts (done by Goldman’s Sachs) and have a currency they can’t devalue. Almost nothing which is true for Greece is true for the UK.

  9. I believe rightly or wrongly that our national ‘debt’ is not owed to person or person but to the banks that we paid to bail out.
    It feels very dirty when we have to pay countries like Ireland billions of £ when we are at breaking point.( and to be fair they will hate us for it)

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