Tuesday, 25 May 2010

The 'free market' is the cause of our deficit

How long does it take to re-write history? I used to think it was years but in the digital age it seems like only a matter of months. Lets just recap - we are in an economic crisis caused by capitalists. The crisis reached a peak in the autumn of 2008 with the collapse of Lehman Bros. Then followed the bailing out of the banks and insurance companies by taxpayers. Now we have a sovereign debt crisis caused by that financial crisis. Here is Lord Turner quoted in the Guardian:

Lord Turner, chairman of the Financial Services Authority, told an audience of bankers in Brussels: "For most countries the cause of the rapid increase in sovereign debt has been the financial crisis itself and the tax implications for property booms and busts, which derived from financial system excess".

Yet we have just had an election in which none of this was even mentioned. If anything we were told that the Labour government was responsible for our £156 billion debt crisis. No doubt many governments have borrowed too much. The essential problem in the UK is that taxes are too low. We have been conned for years into thinking we can have excellent public services and low taxes - not so. If we want good public services we have to pay for them with higher taxes - which is exactly what it said in the Green Party manifesto. Fair taxation, in which the burden is shifted towards those best placed to pay is essential if we are to protect and provide good public services.

But I am straying from the essential point which is that the capitalist system is the cause of our current difficulties. The natural state of capitalist economies is stagnation punctuated by periods of boom and bust. My prediction is that we are in for a long period of stagnation or even economic decline, and that is before we have even been hit by climate change and peak oil. There is no way out of this unless we try to build an alternative economy. That is the historic mission of the left. The Green Party manifesto began to point us down that road - we have a very long way to go yet to get there.

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