Sunday, 24 October 2010

Cuts and Heuristics

Before I start I have a question for the reader which I shall come back to later. If you are British, what do you think of the cuts currently being undertaken by the Coalition government, and do you think they will work? Think of your answer, and hold on to it.

When across the country people get together in pubs and living rooms to discuss the various topics affecting them, such as for example the subject of a new Tesco superstore opening nearby and the affects it will have on their village, is it likely or even expected that when discussing this topic, general members of the public will have read Rousseau's 'The Social Contract' to consider the relationship between the individual and the state, before studying Adam Smith's work on 'The Wealth of Nations' to understand the rise and nature of free market capitalism and the concept of the invisble hand as a backdrop to inform their conclusions on the tender balance between state intervention and the rampant free market? Probably not. It is understood that public opinion is at no time fully informed, fair or carefully considered on any topic, but on the topic of fiscal expenditure against a backdop of international financial markets, coupled with the dilemma of understanding the Banking Crisis and how it specifically affects Britain all common sense and hesistation is thrown completely out of the window.

A suitable comparison I've always thought of is as follows; a Physics student is sitting in a library trying to comprehend an article by Stephen Hawking on black holes, when a friend comes up and asks what he is doing. The student explains brielfy to his friend who is not a student of any kind, who in response raises his eyebrow at the complicated nature of the question the student is trying to solve and says he cannot help as he doesn't know a thing about it. On a table adjacent to this boy however, is a Politics student who has spent hours and hours going over complicated articles on the intricacies of welfare reform both those rooted in the theory and the ideology of welfare, and those based on pragmatism and what works best. The same friend goes up to him and asks what he is doing, upon hearing that it is on the topic of welfare, the boy goes into a pre-programmed diatribe about how the scroungers of Britain are bankrupting the country, or alternatively that the ghost of Thatcher is back and the Conservatives are trying to cleanse all of the poor from society depending on his particular bias. On any topic at all people talk a lot of nonsense but nowhere is this worse than on the topic of politics, where an ignorance of the topic discussed isn't so much a handicap but a prequisite for day to day discourse.

There are many things that strike me about the current debate on the cuts currently taking place. Most  people seem to be caught between a fairly extreme dichotomy where the Labour party are either the saints that selflessly took from the rich and gave to the poor or those that took us to the brink of annihilation, and simlarly the Conservatives are either looking forward to winter when many of those affected by their cuts will freeze to death or are saving the country from the black hole of the past government's debt. Has it not occurred to people that they might both be well intentioned, or both equally reckless?

Whatever one's political affiliations, all policies have a limit. While I support some form of a welfare state, welfare that is spent on borrowing is unsustainable. Firstly, because welfare based on borrowing isn't welfare at all, it is theft, from those later generations that will have to pay it back, and the fact that it has to be paid back means that it is short-lived and can't go on forever. Even if one considers the Labour party as the lesser of two (or more) evils, there is no question that it was outrageously irresponsible in regards to its spending (well before the Banking Crisis) which would have had to have been stopped at some point regardless of mitigating factors. At the same time just because it is agreed that cuts have to be made, many more disagreements can arise over where those cuts come from and how much should be taken, and hence it is still possible to believe cuts are necessary and dislike the specifics of the coalition's current policy. It is perfectly reasonable to be suspicious over which areas the Conservatives have decided to cut, but that is no excuse to jump back into the pockets over those who put us in this mess. There needs to be a middle ground. The Labour party has had the luxury of benefiting politically from all of its spending while at the same time shifting the political capital to the Conservatives for the consequences of that borrowing. What's more as they are now in opposition they are able to oppose the cuts without actually articulating any of their own alternatives.

Yes this woman is actually using Greece to suppot spending through borrowing.

This brings me to my point on how we as members of the public should judge the cuts. I refer back to the question I asked on the cuts previously. Did you give a positive answer, or a negative? In other words did you give any answer other than I really have no idea. If you didn't say that, do you know what PPF stands for, or what the Modern Portfolio Theory is? What do you think of Friedman's reinterpretation of the Keynesian consumption function in the 1950s? If you don't know the answer to these questions then I am impressed that you could address such a complicated topic, while knowing so little about it. Especially because those people who do know what those terms mean and are educated in these topics can't agree on a damn thing themselves either. Of course we all have our own opinion on the role of state intervention and how much people should rely on themselves or the state and through these we have our own inclinations, but on the hard-line topics of one fiscal policy against another I'm going to present an alternative to the mainstream partisan voices we hear from the Question Time audiences:

We don't know. It isn't as sexy, and won't get you as much loud and vociferous applause as a boneheaded laconic statement treating the issue as if it was obviously black and white, but at least it's intellectually honest. I leave the reader here with the best critique of the Coalition's economic policy I've seen yet, from Niall Ferguson. Niall is an Empire excusing, Free-Market lover who should be inclined you would think to slavishly support the Coalition's cuts. Instead he gives some cautionary indicators and concludes that no-one can know and the best thing to do is wait and see.

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