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by Cranius_Archive
I think Labour don't want to scare Big Business too much, after all they spent an enormous amount of energy getting them onside. johnnyshape wrote:Cranius wrote:Some economists would say that a deficit is exactly what we need right now and we should in fact grow it. But no one wants to offer that point of view.This is interesting. Can you explain / link?I've read a few accounts of this. In line with general Keynesian arguments the best way to get out of a deep recession is to expand the State deficit and spend your way out of the hole. However, it is in the interest of corporations and big business that the deficit is reduced as soon as possible (hopefully, by making the working-class pay). The expansion of State debt at this point is the only thing that can counter-act the deflationary cycle. So you'd ideally act in a counter-cyclical fashion if the economy is taking a nose dive.The problem is that expanding the State deficit is counter to the ideals of neo-liberalism, so a very bitter ideological pill for any of the main parties to swallow. Labour are right in not wanting to reduce the deficit too soon, but they still want to slash budgets next year. Obviously, this is why a number of UK businesses have already come out in support of Cameron. They, along with the IMF and Central European Bank, are arguing that the electorate must bear the excessively heavy burden of the banking crisis. The LibDems on the otherhand want to please both masters. They want to keep business sweet with swingeing cuts to the public sector, whilst taxing the rich and protecting the working poor. The State in the last instance is the only entity that can create jobs out of thin air, so an expansion of the deficit would allow for huge public job creation programmes. Which is naturally an anathema to corporate interests. Yet, maybe the only solution capable of jump-starting the economy. At a certain point of the crisis every government, left or right, will come into conflict with business, as unemployment rises and unrest threatens the government. There is a danger in cutting the deficit, in that you can lose too many jobs and create the conditions of insufficient demand in the economy. I'll try and find a more rigourous account of this.