Tories Wreck The Economy Yet Again

Whenever there are Tory governments, they wreck the economy. They do so, because they always pursue policies in the interests of a small, reactionary section of the population – the financial and landed oligarchy. Tory governments in the 19th century wrecked the economy with things like the Corn Laws introduced to protect the monopoly and high food prices and rents enjoyed by the big landowners. They wrecked it with the 1844 Bank Act designed in the interests of the financial oligarchy. In the 19th century, it was Liberal governments that had to undo the damage done by Tories; in the 20th century, it has been Labour governments that have had to fulfil that task. In the 1920's, and 30's, the Tories again wrecked the economy, and it was left to the 1945 Labour government to repair it. The Tories again wrecked the economy during the 1950's, despite it being a period of long wave upswing. It was left to the Wilson governments to repair it. Thatcher totally wrecked the economy in the 1980's, followed by Major in the 1990's, which it was left to Blair and Brown to repair. And, after 2010, Cameron again wrecked the economy. But, the current devastation caused to the economy by the Tory lockdown puts all those others in the shade. 

The Tories Have Always Run Up Large Amounts
of Debt and Deficits.  Debt under the Tories doubled
Compared to What It Inherited From Labour in 2010.

The UK economy is now in official recession, having fallen by a staggering 20% in the second quarter, as a direct result of the Tories decision to shut the economy down, as part of their insane lockdown. This is not just any old recession. It is the worst ever. But, the real damage to the economy is still only in the foothills. The real damage comes from the astronomical amounts of debt that the Tories have also imposed on the economy as a consequence of their decision to introduce a lockdown and lock-out of workers. Its not that there have not been similar amounts of debt in the past, there have, but it is the nature of the debt that this time makes it so unsustainable and dangerous.

As the Industrial Revolution got under way the debt to GDP ratio expanded significantly, but the reason for that was that a large amount of fixed capital investment was taking place. Debt to GDP levels rose sharply to finance wars, which is a closer approximation to what is occurring now, because the borrowing did not go to any productive use, though some of the technologies developed during those wars was then used in future industrial production. Again, after WWII, debt to GDP rose significantly, but that was to finance the development of the welfare state, required by British capital to provide the healthy educated workers it required, as well as to finance the recapitalisation of the newly nationalised core industries that had been starved of investment by their private owners over decades. 

Today, the debt has been undertaken for the insane reason of bribing workers not to produce commodities, whilst giving them money tokens so as to consume what they have not produced! Its not rocket science to understand what the consequence of that must be. It is that inflation must rise sharply, and in conditions of rising costs, that will be inflation whether or not the economy stagnates, i.e. the kind of stagflation seen in the 1970's, and early 80's.

Its also hilarious how proponents of the market, now fall over themselves to become proponents of the power of central planning, as they delude themselves into a belief that central bank governors can dictate prices irrespective of economic laws and material realities. They seem to think that the price of capital (rate of interest) can simply be dictated by the Governor of the Bank of England stating that its rate of interest will be X. The fact that the rate of interest is determined by the demand and supply for money-capital is for them an inconvenient truth best left unsaid. The reality is that the main source of increased supply of money-capital is profits, and as a result of the Tory lockdown, profits have been crushed, and even turned into losses, meaning the supply of loanable capital has been severely curtailed. At the same time, the demand for money-capital has increased massively as a result of the Tory government's uncontrolled borrowing to finance unproductive consumption, and as a result of businesses needing to borrow on a huge scale to compensate for their lack of sales to cover their bills. As businesses start up, they will need to borrow even more to pay wages and other bills, especially as the government furlough scheme comes to an end. And, millions of workers paid their wages by the government, as part of that scheme, will find that their employers discard them, as has already happened to around 750,000 of them. To try to sustain their consumption, these too will have to resort to borrowing, often from usurers. 

And, government borrowing has only just begun too. As unemployment rises, the money it borrowed to cover the furlough scheme will be transformed into money it must borrow to cover the payment of unemployment and other benefits. On top of that, as large core industries have essentially been bankrupted, the government will have to borrow trillions of pounds so as to bail-them out. As interest rates rise, and asset prices crash, the banks will also be seen to be bankrupt their balance sheets a fiction based upon wildly inflated asset prices.

As unemployment rises, and interest rates rise, millions of people, lured into buying astronomically overpriced property, will find they have to become forced sellers of property they can no longer afford, in conditions where the price of the house is falling way below the amount of their mortgage.

That is what happened in 1990, when house prices fell by 40% in a matter of months. But, current conditions are way more extreme than in 1990, and prices are likely to drop by much more, sending many more people into destitution, but also, as with 2008, leaving banks and finance houses with large amounts of worthless property on their hands, as people simply walk away from them, declaring bankruptcy, as they cannot make the mortgage payments. That will simply accelerate and add to the collapse of the banks. This is a problem that the government and Bank of England cannot fix by printing more money tokens, because all of the money printing is already leading to inflation, and as inflation rises that too will lead to higher interest rates, at the same time as leading to higher levels of borrowing to cover these higher prices, which, in turn, leads to higher interest rates. These are conditions similar to those faced by the Weimar Republic in the 1920's. 

In the 1980's Thatcher wrecked the UK economy, as large swathes of industry simply disappeared. She built a low wage, low value, low productivity economy based upon a bubble of rising asset prices, and its concomitant rising debt. The reality was manifest in repeated bursting of the bubbles, as a similar strategy was developed by Reagan in the US. There was the crash of 1987, followed in Britain by the property crash of 1990; then there was the bond market crash of 1994, as central banks tried to raise official interest rates; it was followed by the crash of 2000, when the NASDAQ crashed by 75%, and its was followed by the crash of 2008. At no point has the real cause of those crashes been addressed, i.e. the fact that they were the result of inflated bubbles in asset prices. Instead, more and more money tokens have been thrown at asset prices to reflate them, meaning that at each stage the bursting of the bubble just gets bigger than the last, and now the bursting of this bubble will be the biggest of them all. 

At least, Blair and Brown did something to repair the damage done by Thatcher and Major, but they were aided by the fact that after 1999, the global economy entered a new long wave upswing. As the economy grew more rapidly, Blair/Brown were able to reduce the debts the Tories had built up, and even to have four years of budget surplus, when debt was paid down. At the same time they were able to repair some of the damage the Tories had done to the economies infrastructure of roads, schools, hospitals and so on.

Despite the global financial crisis, which was the result of the policies of Thatcher and Reagan in the 1980's, and the damage it did to the real economy, by the time Labour left office in 2010, the UK economy was growing by 1% quarter on quarter, or the equivalent of around 4% per year. The Tories, as soon as they took over, sent the economy into recession. The economy has performed poorly ever since, and now the insane Tory lockdown has sent it into the worst economic slowdown in 300 years, and current  recession is the worst it has ever faced. 

The Tories have to be held to account for the economic carnage they have once again created. They should never be trusted with the economy or with government ever again.