Tuesday, 7 June 2011

Public Spending & GDP

I was just looking at writing a new post on the need for a Plan B. I was looking for data in relation to statements on the TV, that just as now we have a lot of Economists calling for a change of policy, similar demands, in 1981, came just before a large rise in GDP. To be honest, having lived through the 1980's, this period of economic prosperity after 1981, seems to have completely alluded me. My main recollection of the 1980's is continued mass unemployment as reflected in the repeated People's Marches for Jobs, along with other individual demonstrations around the country, inner city riots springing up from urban decay and deprivation, and so on.

So I thought that before writing this new blog, I'd have a look at the facts about this supposed boom that followed the austerity measures of Geoffrey Howe. The figures below are graphed from data I have obtained from UKPublicspending. Its interesting to see the way in which increases in nominal Public Spending precede rises in GDP, and how prolonged periods of lower percentages of spending growth precede lower periods of growth. The figures are based on nominal rather than inflation adjusted prices.

The chart below provides the same data, from the same source, but at 2005 constant prices.


Jacob Richter said...

In the very short term, we should be for that real-term level of public spending in proportion to GDP than maximizes labour's share of national income.

Boffy said...

The point is that workers have no control over that proportion, and we should not suggest they do. The level of State spending is not a negotiation between Capital and Labour, but between Capital and its State mediated in part by Government.

The level of State spending is regulated by the needs of Capital Accumulation at the particular time, and this means a negotiation within the different fractions of Capital as to what that should be. This in part is refrcted through the lens of the Government, which reflects the range of bourgeois interests.

The only means by which workers can have control over the level of State spending is by themselves having control over the State itself, and that means repalcing the existing Capitalist State with a Workers State.