The nice thing about Keynesian economics is that it makes intuitive sense. The Government intervenes to smooth out business cycles. In good times, raise taxes to control inflation. In bad times, lower taxes and, if necessary, directly prime the pump to encourage spending by Government projects, like building playgrounds and schools. (Things like the Hoover Dam are a neat byproduct.)

It's important to notice here that RAISING taxes is part of the bundle. In the good times, raise taxes, pay off the debts incurred during the bad times. Gordon Brown, a rather late convert to Keynes, increased the deficit by spending but prevented greater unemployment. So did the US, with Obama, Germany and France.

Marx said that the basic contradiction in a capitalist system involved the tricky relationship between consuming and producing: every capitalist wants to pay his workers as little as possible while he wants his competitors to pay as high a wage as possible. Thus his goods can be sold cheaper and his rivals' workers can afford to buy them.

We have the Con-Dems in Government in the UK. They blame Gordon Brown for all economic problems; his profligate spending. The Deficit must be controlled. There is no option. They've cancelled a number of projects and demanded 25% cuts in all departments but the NHS and Development AID.

They've also raised taxes - indirect taxes, not income tax. They've cut benefits. Those in work, in low paying jobs  - raises in VAT, payroll tax, and cuts in benefits leave them 40% worse off. It is getting worse. They are limiting the number of weeks someone out of work can draw unemployment benefits. (This is a benefit they've paid for, in their payroll taxes. It's like a pension - you earn it, it's not a gift.) They are raising the age of retiring.

An analysis of the 2010 Budget, looking at cuts to services plus taxation policy, says that the poorest 10% of households will be 21.7% worse off. The richest 10% of households will be 3.6% worse off. (see http://www.unison.org.uk/acrobat/B5131.pdf for discussion.)

The tax rises are not related to amount earned (like income taxes) but to across the board taxes, like VAT on utility bills, dog food, petrol. The higher up the income scale you go, the less the Government's policies affect you.

The cuts in services are going to result in an increase in unemployment. More people out of work, even more people afraid they are going to be out of work, and people buy less. People buy less, manufacturers lay off more people, more unemployment...

Unemployment is the major immediate problem; not the deficit. As Keynes and Marx pointed out, people are consumers. The economy relies on consumers. When consumer confidence is affected, and when the number of consumers is drastically reduced, the economy as a whole suffers.

Oh the Banks they are rosey

And the Market's doing fine...

Nice song. The banks, are indeed doing fine. The Market's not so splendid, though. It is all deeply depressing. The Middle Class is disappearing; we're approaching a bipolar society - those with a great deal of money and those with very little.

We were in Pakistan when Reagan was elected. We came back in 1983. We came back to an Austin where men congregated at 5 AM around a camp fire, looking for work. Other men in pick ups would drive up, hire people to do hard day labour, like digging fence post holes, for less than minimum wage. By noon, the men left would work for food and a pack of cigarettes.

A friend of mine, Lynn Goodman-Straus, was part of a Catholic charity, the Dorothy Day group. Lynn took boiled eggs and day old bread contributed by local supermarkets at 5 AM every morning to distribute around the camp fire.

In a civilized society, private charity does not replace public benefits.

Thatcher got away with what she did because she had North Sea oil money to fund people without jobs. She bribed the working class by letting them buy council houses. She privatized everything possible. She and Reagan stopped regulation of the financial markets and banks. Let's look at some of the results:

1. Deregulation of financial markets is the immediate cause of the current recession.

2. She almost destroyed manufacturing in this country, and the jobs that went with it.

3. She paid for current government expenditures by flogging the family silver, including all the benefits that could have come from North Sea Oil, to lower taxes. Blair and, later Brown, were converts to privatization.

4. She won the Falklands war. (That got her second term in office.)

One of the things she did that most annoyed me was getting rid of hospital cleaning staff. She insisted cleaning be hired in, thus getting rid of benefits to people working there. So, long term employees that know, and care, about cleaning a hospital, were replaced by short term temps working for minimum wage. Thatcher was told by every epidemiologist and hospital administrator in the country that hospital infections would increase. They did. MSRA, like the bank crashs, are Thatcher's legacy. So are the semi-feral teenagers in some of our city centers; no work, parents who had no work. When you decide an underclass is rubbish, why be surprised when they trash your stuff and threaten your person?

Thatcher notoriously declared there was no such thing as society. She was at least consistent and did everything she could to destroy it.

Back to our leaders, the Con Dems.

We're already involved in non-winnable wars. They can't play the patriotism card. There's nothing left to privatize. Their policies are going to result in greater unemployment. They don't have a mandate for the policies they're implementing - it's a coalition government, and part of the coalition is not very comfortable with policies that directly contradict their party manifest. They think if they can stay in power the full five years the economy will turn around and they'll win the next election. I doubt the economy will turn around, and I doubt they will last the five years.

There is one thing for sure: no Labour voter will every again vote for the Liberal Democrats to keep the Tory out. I suspect that a lot of LibDems will, next election, vote Green, Labour or stay at home. Clegg may have single-handedly destroyed his Party; too bad it’s combined with destroying the country.