May 102015
 May 10, 2015  Posted by at 7:30 pm Finance Tagged with: , , , , , , ,

Jack Delano Worker inspecting locomotive, Proviso Yard 1942

From where we’re sitting, the biggest victory in the May 7 British election will turn out to be not that of the Conservatives, but of the SNP, the Scottish nationalists. The party took 56 out of 59 Scottish seats in the United Kingdom’s Westminster parliament in London (with just half of the total votes..). Perhaps even more significant is the increased divide between Scotland and ‘the rest of the UK’.

While Cameron’s ‘unexpected’ victory marks a sharp turn to the right, the SNP’s landslide win sets the Scots on a course that’s close to a 180º opposite, even sharper turn to the left. Or in other words: while Britain voted for more of the same, Scotland voted for change. And never the twain shall ever see eye to eye again?! The left side of the spectrum was represented by the SNP, not by Labour, who Tony Blair now claims should run even more to the right – which he calls center.

Perhaps it’s nice to start off with a more philosophical angle about the future viability and/or inevitable fate of the United Kingdom. Just to set the overarching and underlying tone. Ian Jack had this for the Guardian yesterday:

Did The End Of The British Empire Make The Death Of The Union Inevitable?

.. what some of us were in Denmark to consider is the now almost-conventional wisdom about British identity: that it rose and fell with the empire, and with the empire’s going the United Kingdom will almost inevitably break up. Stuart Ward, professor of global and imperial history at Copenhagen University, reminded us of this theory’s several advocates, from Tom Nairn, writing presciently in 1977, to Linda Colley in her book Britons, published in 1992.

David Marquand took the idea to the extreme when he announced in 1995 that shorn of empire, Britain had “no meaning” and it was therefore impossible “for Britain as such to be post-imperial”. In a what-goes-up-must-come-down way, it looks a plausible argument. The logic is, as Ward said, that if you can demonstrate that the empire forged an idea of Britain, then Britain’s vanishing two centuries later “is merely a question of the laws of physics – remove the load-bearing pillar, and the structure falls”.

Is Britain destined to fall to pieces? Are all empires? How long can the center hold?

There are more interesting angles besides these, not least of which is the similarities between Greece vs Eurozone and Scotland vs United Kingdom. The keyword in this is ‘austerity’. The Greek people voted en masse to end it, and so did the Scots. Here’s what SNP leader Nicola Sturgeon had to say post-election:

Nicola Sturgeon Tells Westminster: ‘Scotland Will No Longer Be Sidelined Or Ignored”

“Scotland has given the SNP a mandate on a scale unprecedented for any political party, not just in Scotland but right across the UK. “We will use that mandate to speak up for and protect the interests of Scotland. “Let us be very clear, the people of Scotland on Thursday voted for an SNP manifesto which had ending austerity as its number one priority, and that is the priority that these men and women will now take to the very heart of the Westminster agenda.” Ms Sturgeon said: “After Thursday, and as I told the Prime Minister when I spoke to him yesterday, it simply cannot be and it will not be business as usual when it comes to Westminster’s dealing with Scotland.”

Sturgeon has hinted that she aims to end austerity across the UK, not just in Scotland. That may be a bit much to ask given that her mandate is limited, but at the same time it’s hard to see how ending austerity only in some parts of a union would work out in practice. The EU certainly doesn’t seem eager to grant Greece an austerity-free status, and how Cameron would tackle this mandate issue is unclear. Can he abandon austerity in Scotland and continue it in the rest of the UK? And if he can’t do it in Scotland, then how can he in Wales?

Cameron thinks he’s riding a major victory, and he will now be called upon to deliver on his election promises, which just so happen to include a deepening and acceleration of austerity measures. At a time when we can see even such sworn antagonists as Steve Keen and Paul Krugman agree on the failure of austerity as a financial/fiscal policy measure, David Cameron insists on inflicting more of it on Britain in the exact same way that the Troika insists on more of the same for Greece. And he’s not kidding.

Here are two British pieces on the topic; first the Mirror:

100 Days Of Tory Cuts Carnage As George Osborne Plans To Fast-Track £12 Billion In Savings

George Osborne is preparing to drastically speed up the pace of £12 billion in brutal spending cuts. Before the election, Tories feared proposals to slash cash from the welfare bill would have to be watered down under any coalition deal. But now the party has a majority, the Chancellor plans to race ahead with his austerity cuts to meet his pledge of eliminating the deficit by 2018. Senior Tories revealed how ministers would try to push through the majority of the welfare cuts within two years instead of the original three-year timescale.

But Prime Minister David Cameron hopes to kick it off with a 100-day policy blitz. One senior party source admitted: “When it comes to cuts, we want the pain to be out of the way long before the next general election. Without the restraint of the Lib Dems, it means we can go further and faster when it comes to controlling the welfare bill.” The new Conservative Government is due to present its programme of legislation to Parliament through the Queen’s Speech on May 27. But officials are already drawing up worrying plans to squeeze a host of benefits.

Ministers are looking at means testing unemployment benefits like Jobseeker’s Allowance, according to a document leaked earlier this year. Other proposals to slash the £125 billion welfare bill include limiting Child Benefit payments to the first two children and taxing Disability Living Allowance and Personal Independence Payments. The Tories also want to reduce the maximum any household can receive in benefits from the current £26,000 a year to £23,000. Other cuts include a £3.8 billion raid on tax credits, which are relied on by millions of families on low wages.

The number of people who get Carer’s Allowance could also fall by 40%. Such moves are likely to pile the pressure on food banks and charities as the cost of living crisis deepens. Senior Labour MP John Mann warned: “People don’t realise what’s going to hit them. The entire benefits system is going to crumble and almost everyone will lose out apart from private landlords who will remain untouched. It will be a return to the Victorian age.” “Everyone will have to stand on their own two feet, even people with no legs.”

And second, this is from Here Is The City:

Tories Weigh Up Options For £12 Billion Welfare Cuts

Either the poorest in society or the “hard-working people” courted by the Conservatives face being targeted under the party’s commitment to £12bn of welfare cuts, experts have said. One way of achieving the £12bn goal could be by reducing the £38bn cost of out-of-work payments to working-age families, for example by cutting entitlements to a third of the recipients, according to John Hills at the London School of Economics.

“But that would mean hitting lone parents and disabled people and create pressure on food banks and hardship on a scale that would be hard to imagine,” Hills said. “Alternatively you could take it from hard-working families who rely on housing benefit and tax credits. That’s a lot of pain from a large number of people who have just voted for you.”

[..] To justify the cuts, the Tories are likely to employ a narrative of skivers v strivers, suggesting a clear division between a large, permanently welfare-dependent group and the rest of the population who pay taxes to support it. The Tories know this is a fiction, but it is a politically useful one. Welfare is mainly about taking money from those of working age – when incomes are high on average – and giving cash and services to older people, and families with children.

A DWP paper setting out options was leaked to the BBC in March. [..] if the BBC’s document is any guide, George Osborne – reappointed as chancellor – could look to strip £1bn from carers’ allowances; means-test national insurance-backed unemployment benefits, saving another £1.3bn; and tax disability benefits to raise another £1.5bn. Then there’s limiting child benefit to two children – affecting a million families to save another £1bn.

The Institute For Fiscal Studies noted: “These may well not be the decisions that a future Conservative government would make. But it is likely they would have to make changes at least as radical as this to find £12bn a year.” Not all these changes would require a new bill, but if past form is anything to go by then the Tories would want to lay a trap for their opponents with new legislation so as to paint anyone who votes against it – such as the anti-austerity Scottish Nationalists – as pro-welfare parties prepared to spend lavishly on the idle poor.

How this will not end badly and ugly is hard to see. As we quoted in an earlier article, the number of foodbanks in Britain went from 66 to 421 in the first 5 years of Cameron rule. How many more need to be added before people start setting cities on fire? Or even just: how much more needs to happen before the Scots have had enough?

Very much like the Greeks, the Scots unambiguously voted down austerity. And in very much the same fashion, they face an entity that claims to be more powerful and insists on forcing more austerity down their throats anyway. It seems inevitable that at some point these larger entities will start to crack and break down into smaller pieces. As empires always do. Now, the EU was of course never an empire, there’s just tons of bureaucrats dreaming of that, and Britain is a long-decayed empire.

Larger entities like empires are more powerful only for a limited period of time, for as long as the center can make the periphery benefit; once the center starts feeding off the periphery, the endgame starts. This can take a while, but it will happen, it’s a law of nature. When periphery regions figure out they have nothing to lose by splitting off, they will elect to stand on their own two feet and be their own boss.

And it’s not as if either Scotland or Greece lack a history of fighting for their independence. Just a reminder.

What’s next for Greece is by now anybody’s guess. And a whole other story too. What’s next for Britain and Scotland is or seems -for now- somewhat less convoluted.

Nicola Sturgeon will have conversations with Cameron. Who will offer her more ‘autonomy’ for Scotland. But the budget, also for Scotland, is decided in London, not in Edinburgh. How Cameron’s austerity 2.0 can be made to fit with the SNP’s anti-austerity message, their number 1 priority in last week’s elections, is hard to fathom. Label us curious to see what happens.

It would seem that there are two referendums in Britain’s future. First, the EU in-or-out referendum Cameron promised his voters. It looks like the majority of British voters will opt to leave the EU, or at least partially; things may change if or when Cameron convinces Brussels to change the entire concept of the Union to ‘pacify’ the UK. But that majority will probably come from England only. Scotland, Wales and Northern Ireland will -almost certainly- choose to remain in the EU. And it just so happens that Sturgeon addressed the issue in the Guardian in no uncertain terms:

There are huge issues and challenges ahead – not least the looming question of the UK and Scotland’s place in Europe. A key requirement of the prime minister’s in-out referendum should be a “double-lock” requiring the assent of all four UK home nations before any withdrawal from the EU..

It doesn’t look like there will a general endorsement for the Tories’ vision for leaving the EU. So what’s your run of the mill Cameron to do? Ignore the Scottish demand for that ‘double-lock’? That wouldn’t be very democratic, and it would raise the chance of the UK falling to pieces. No easy choices, no easy pieces for David.

The other referendum, brought closer, as time passes, by Cameron’s multiple conundrums, is of course about Scottish independence. If London holds on to its position on austerity, it’s hard to see how there can not be another of these plebicites, soon.

Granted, it would depend on how much of a warrior Nicola Sturgeon is. Just like in Greece, the outcome of the Syriza vs Troika battle depends on how much chutzpah each side carries. And how much integrity. That last one should be an easy contest. London and Brussels have none, Athens and Edinburgh may yet find some.

All in all, yours truly is going for the center cannot hold.

Home Forums Will Austerity Be the Straw that Breaks the EU AND the UK?

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    Jack Delano Worker inspecting locomotive, Proviso Yard 1942 From where we’re sitting, the biggest victory in the May 7 British election will turn out
    [See the full post at: Will Austerity Be the Straw that Breaks the EU AND the UK?]

    John Day

    The EROEI for large political unions has been a losing proposition for awhile, but the realization of that has been lacking, and their credit has remained good, so…
    Every level of organization within a system has it’s costs of support.
    Costs exceed political will to pay now.


    “Welfare is mainly about taking money from those of working age – when incomes are high on average – and giving cash and services to older people, and families with children.”

    Not in the UK it’s not. Welfare in the UK is about taking money from working people and using it to subsidise low pay and high rents from businesses and landlords.

    This is a net flow of income from working people to rich people but masqueraded as “benefits to the poor”. Working credits (a.k.a. low pay subsidies) and housing benefits (a.k.a. support to landords to maintain high rents) account for a significant portion of welfare benefits. I will bet these will be protected.

    Dr. Diablo

    “The keyword in this is ‘austerity’. The Greek people voted en masse to end it, and so did the Scots.”

    They keep shifting the meaning of this non-word “austerity”. What I see generally meant in “ending austerity” is that we should keep living above our means forever. That would be nice. Unfortunately, the laws of thermodynamics do not permit this. It seemed so when the West was stealing the resources of the BRICS nations (via rigged exchange rates) and still had a lot of internal value to destroy–liquidating factories, letting electric grids and transportation decay, deferring maintenance on houses, selling off ships and industries, getting into debt–but once the tide goes out they realize they can produce nothing, and so to keep the rich from sharing the hardship, they need to make hard decisions about who lives and dies. Me and my 2nd yacht? Or you skivers whose pension we stole? Ah, but we hold these truths to be self-evident.

    At the same time, capitalism has been dead so long, there’s no one left at advocate doing actual work–aka employment–and increasing the national pie. Why would they? With the end of property rights, if you increased the pie, they would only steal it.

    12B in welfare cuts? That seems ill-advised. –Not for the inevitable riots and toppling of the existing politics, mind you–I wouldn’t presume to comment on that. No, because 12B is chump change compared to the REAL welfare skivers, insider banks and corporations. In the U.S., in one initiative alone (TARP), they issued $23 TRILLION to pals, including non-U.S. companies like Toyota, European Banks, wives of members to invest in houses on Long Island, and nationally-critical companies known to be in need of funds like McDonald’s and Harley-Davidson. Presently the hundred-trillion$ edifice of Health Care, Student Loans, and Housing rest entirely on corporate welfare. Without the sectors dependent on this merging state and corporate power, there would be no economy.

    I venture that $12 Billion is chump change compared to the $23,000 Billion saved by cutting corporate welfare. By a factor of oh, about 1,000. Put another way, you could instead increase social support by 1,000x, and/or reduce taxes proportionately. Why aren’t the fiscal conservatives going after the real budget savings? Why I ask, but why?

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