The local consequences of self-defeating austerity  

Lesley Brennan

21 December 2012 

In my East End ward, unemployment in Douglas ( as measured by the claimant count) has gone up overall in the past two years , from 7.9 per cent to 8.1 per cent , comparing November 2010 with November 2012

 In the Midlin area, unemployment has risen from 8.5 to 9.9 per cent in the same period, while in Craigiebank the rate has risen from 4.3 to 4.8 per cent.

While the number of those without work in these individual areas involved may be relatively small compared with the overall number for the city, the effect of unemployment strikes just as hard.

It is these people, pensioners, and those on the lowest and middle incomes whose shoulders bear the most onerous burdens of reduced living standards, living with the fear of unemployment hovering over their lives, and the feeling of little hope in a better future.

These communities , like all others in Dundee, have been subjected to economic policies that are proving to be self-defeating.

Let us move from the East End ward to look at the larger framework of all  those employed in the public sector in Scotland

Comparing the figures for the third quarter of the 2010 and the third quarter of this year, we find that, according to the Scottish Government’s figures , the entire public sector in Scotland has lost over 20,000 jobs ( full-time equivalent )

The breakdown includes : 

NHS 3,200 jobs lost  

Further Colleges of Education 1,800 jobs lost 

Local Government 14,000 jobs lost  

Civil Service 1,100 jobs lost  

Other Public Bodies 700 

The severity of these cuts has set back the prospects for sustained recovery because they have considerably reduced the demand for the goods and services  produced.

The Austerity approach to economic recovery has claimed that as public sector jobs were cut, this would provide the stimulus for the economy to grow through the private sector, thus providing more jobs.

This approach made generous assumptions about the ability of the private sector to perform this role, which is one reason why recovery remains far off.   

Let’s move even further away from the East End ward to the International Monetary Fund in Washington DC.

The IMF revealed that the effect of the spending cuts were now thought to be  much worse than had earlier been predicted.

The independent Office of Budget Responsibility has worked on a model that for every £1 worth of spending cuts , economic output would expected to be depressed by 50p. ( a 0.5 “multiplier effect”  )

The IMF now put the effect as much higher so that for every £1 cut in public spending , economic output would be depressed between 90p and £1.70  ( a “multiplier effect” of between 0.9 and 1.7) .

In short, the austerity polices are defeating their own purpose by exacerbating the very problems that they were intended to solve.

This is evidence that demonstrates why government policy has to change course .

More demand is needed in the economy , not more cuts.

Economics was wrongly given the derogatory title of “the dismal science”.

It is not economics that has made life dismal for people in the East End ward, but the politicians who selectively chose an economic course that would significantly reduce the size of the public sector, the sector that people in the East End ward engage with, use, and rely upon every day.


   

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