Britain’s One-Day Strike

November 30th, 2011 at 10:39 am David Frum | 24 Comments |

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British public-sector workers engaged in a one-day strike today to protest government plans to reduce the generosity of public-sector pensions. I witnessed the big protest march down Whitehall toward Parliament. The crowd was thick, but generally orderly–although past such protests have seen outbursts of violence from the radical fringe, and the day here is not over yet.

But here’s what got me thinking: How did we convince ourselves that the US, the Britain, and the Eurozone just happened by coincidence to be struggling with almost exactly the same problem at almost exactly the same time? We have one global debt crisis, the aftermath of a global debt boom.

Now we face choices that could potentially make the crisis lighter or (very conceivably) much, much worse. Today, the locus of those choices is Europe, not the UK or the US. If Europe gets it wrong, pension-squeezes will really be the least of anybody’s problems.

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24 Comments so far ↓

  • overshoot

    If Europe gets it wrong, pension-squeezes will really be the least of anybody’s problems.

    And what’s one of the leading candidates for getting it wrong? Betting that cutting government spending will cause the economy to grow. So maybe this strike isn’t so far off-base after all.

  • lilmanny

    Europe is not going to get it wrong as much as they are going to be forced to do the wrong things. There are clear policy choices to be made, the most obvious of which are for the Germans to step forward and shore up the Eurozone and at the same time reform the Southern European economies to be more, well, the opposite of what they are today. Unfortunately the domestic and internal pressures in each of these separate countries is going to force the forfeit. It will take a generation before the Greeks cease being kleptocrats and the Italians become as productive as a Polish worker, and for a politician to suggest so would be political suicide, even though this is clearly (Clearly!) what the solution is.

    • overshoot

      The only thing wrong in Italy is that the bond vigilantes are about to hold a lynching. Bear in mind that if Italy could roll their debt at the same rates that Germany got (at least until this week) Italy would have a net budget surplus.

      Crank up German bond rates to Greek levels and Germany will be in serious trouble, too.

      Crank up US bond rates to Greek levels and … the Fed prints more money.

      • lilmanny

        I won’t disagree with our ability to print more money to deal with our debts, but doesn’t the rate at which the Greeks and Italians (and the Irish too, for that matter) have to pay interest to borrow money reflect the lenders’ opinion of their ability not to default?

        That is to say, the bond vigilantes are aware of the weak Italian economy, but they didn’t make it weak and less productive. That would be the Italians (and the Greeks, and the Irish, and I guess the Icelanders too.)

        • overshoot

          I won’t disagree with our ability to print more money to deal with our debts, but doesn’t the rate at which the Greeks and Italians (and the Irish too, for that matter) have to pay interest to borrow money reflect the lenders’ opinion of their ability not to default?

          Their ability to avoid default is a strong function of the price they pay for bonds, since Italy at least is running a primary budget surplus — just not enough of one to keep up with 8% bond yields.

    • beowulf

      “even though this is clearly (Clearly!) what the solution is.”

      Kudos for not putting in the word “final” towards the end of that sentence.

  • Emma

    Once again, David’s aversion to facts reveals itself. The Brits public sector pensions are self-sustaining — i.e., most years, including last year, the employees pay into the fund more than is paid out in benefits. The general fund takes up the surplus.

    What, then, is going on with the strike? Answer: Conservatives are using the debt crisis to crush the labor unions and the middle class. And, yes, the same tactic is being employed over much of Europe and the U.S.

    • overshoot

      ++

    • Holmes

      Facts are not David’s style. He’s like the judge who knows the outcome he wants (typically to indulge his prejudices or to help his friends and party) and then instructs his law clerk to cook something up that sounds plausible to the uninformed. And, like the judge, David has no insight into this horrific failing.

      • overshoot

        Holmes, are you by any chance a pseudonym for Charles Dodgson instead of another Victorian?

      • CautiousProgressive

        While David is not immune to bias, he is widely recognized as being one of DC’s thinkers most devoted to reality and fact.

        So, I see very little basis for your accusation.

        • ottovbvs

          “he is widely recognized as being one of DC’s thinkers most devoted to reality and fact.”

          Well less than a 100% record I’d say.

        • overshoot

          While David is not immune to bias, he is widely recognized as being one of DC’s thinkers most devoted to reality and fact.

          That’s a very low bar.

        • Cyberax

          “Devoted to parallel reality”

          To be fair, Frum is like a genius compared to other conservative ‘thinkers’.

    • Bill

      “most years, including last year, the employees pay into the fund more than is paid out in benefits”

      The fact that the current years contributions exceed current year withdrawals is does not give a defined benefit pension plan a clean bill of health and is really an irrelevant measure. What counts is how much the entitlement or future demands on the fund grew in the current year compared to contributions and investment earnings and is there sufficient funds today to pay for the promised benefit tomorrow. A “pay as you go” plan, which is effectively what you are advocating, is a recipe for future disaster in an aging demographic environment.

  • beowulf

    “How did we convince ourselves that the US, the Britain, and the Eurozone just happened by coincidence to be struggling with almost exactly the same problem at almost exactly the same time? We have one global debt crisis, the aftermath of a global debt boom.”

    The difference is the US and Britain have monetary sovereignty and understand how to use it (well the central bankers do, the politicians are rather lost in both countries). The Eurozone has monetary sovereignty but would rather commit Seppuku than shame the Emper– I mean– than run the risk of inflation. Curious people those Europeans.

    Right now, the best path the US, UK or Europe could follow are the sage words of Abba Lerner:
    “Lerner approached Keynes and asked: ‘Mr. Keynes, why don’t we forget all this business of fiscal policy, public debt and all those things, and have some printing presses.’ ”
    http://socialdemocracy21stcentury.blogspot.com/2010/09/would-keynes-have-endorsed-modern.html

  • ottovbvs

    The public sector unions are one of the main victims of Cameron’s and Osborne’s increasingly disastrous austerity program aimed at reviving the confidence fairy. GDP growth has averaged around 0.5% for the past year and has effectively ground to a halt and a couple of days ago the OECD forecast a double dip recession. And this despite two rounds of QE by the Bank of England. There was an estimate published yesterday that public sector job losses are going to be around 700,000 which Osborne predicted (lol) would be made up by job growth in the private sector. Of course it hasn’t been and manufacturing is slowing. They are also making adjustments to their pension plans. So whatever you may think of strikes this one was well nigh inevitable. Yesterday Osborne reaffirmed his committment to his austerity program which makes you wonder does he have any idea what he’s doing. The conservative government has already made numerous U turns on major policy issue like reorganising the NHS, phone hacking, and selling off national assets you’d think this wouldn’t be a problem but Cameron and Osborne are SO identified with these policies that if they have to admit failure it’s hard to see how one of them (probably Osborne) doesn’t have to go.

  • LauraNo

    Leave it to you to phrase it this way: “…government plans to reduce the generosity of public-sector pensions.”

    How about calling it like it is: “…government plans to steal from people’s hard earned pensions while (of course) calling for more and larger tax cuts for the uberelites of the world. No one but a addled plutocrat could be this confused about the facts on the ground. YOU conservative elites drove the world to financial ruin with your deregulating every thing in sight and encouraging greed, in fact you flaunted greed at every turn, while advocating for every policy that would stomp on the neck of the middle class and while cheering on unpaid for and unnecessary wars (among many other ‘conservative’ sins? How dare you blame the people being stolen from for objecting? And um, no. The problem is not , or was not, a global debt crisis. A global debt crisis is just another opportunity (that they generated, funny that) republicans will take to try to force ‘austerity’ on us serfs.

  • jorae

    jorae // Nov 14, 2011 at 11:50 pm

    The Bank/Stock Market crash of 2008 contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, and a significant decline in economic activity, leading to a severe global economic recession in 2008.

    When you read about Spain, Italy and Ireland…did you think it was just amazing, it all happened when our system failed? It makes me laugh when people say they had too many entitlements….No, they were connected to our Capitalism. It has always been the U.S. fault. And Capitalism policies.

    In a capitalist system the government serves the rich. It will always bail out the rich because it is their creature. Government must be big to control the various factions of the rich who seek to destroy each other, plus it must be big to keep the system from collapsing because of the surplus value problem.

    Business interests like small government because they think they can control it, the trouble is when their competitors control it. The government does what the business class tells it to do, no more, no less…hence the US banks, when allowed to work outside a safe enviroment, will produce problems in other countries.

    http://www.frumforum.com/the-euro-crisis-is-an-american-crisis =

    ” As a single economy, the EU is America’s largest trading partner. If it buys less, American exporters will suffer.” per Frum’s “Euro Crisis is an American Crisis”
    =============

    “But here’s what got me thinking: How did we convince ourselves that the US, the Britain, and the Eurozone just happened by coincidence to be struggling with almost exactly the same problem at almost exactly the same time? We have one global debt crisis, the aftermath of a global debt boom.”

    Global Debt Boom = 2008 Stock Market/Bank corruption…not entitlements…

    I repeate….When you read about Spain, Italy and Ireland…did you think it was just amazing, it all happened when our system failed? It makes me laugh when people say they had too many entitlements….No, they were connected to our Capitalism. It has always been the U.S. fault. And Capitalism policies.,.jorae

    Do you get it? Britan is moving toward solving the problems with the theory of too much money going to entitlement…when the real problem of why things are in a mess, is because of their and European ties to US.

    So…why do pensioners suffer when the shortage of funds should be from the people who actually caused the problem…the INTENTIONAL manulipation of American Markets to push capital into the hands of the 1%. Pensioners will now be buying less…

    Does this mean, Frum read my Nov 14th post? Wow.. maybe not…

  • Fart Carbuncle

    To hell with Europe. Let the socialists pay for their support of the non-taxpaying layabout states until they collapse.

    America is paying for 45+ years of socialism started by LBJ. We are due for a market correction soon.

    Let it come.

    • Bingham

      The sooner Spain, Italy and Portugal can sell wine to China and India on their own terms, the better off, and happier, the world will be!