Time to adopt Keynesian economics – like Mrs Thatcher in the 1980s

Monday 5 December 2011

Like the Bourbons, lefties, whether Labour or SNP, public sector or not, learn nothing and forget nothing (Letters, December 1 and 2).

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For them, it's the bankers and capitalism that have caused the current mess and the forthcoming slump when the euro collapses, probably before Christmas. Granted, some bankers (but not those in Australia, Canada, Switzerland, the Far East, Scandinavia, nor, indeed, the majority in the UK) have behaved in a deplorable fashion with their financial conjuring tricks. But without (nationalised!) easy money and credit, low interest rates and confused public regulation, particularly in the UK, US and euroland, their capacity recklessly to pursue short-term profit would have been severely curtailed.

The fundamental cause of our problems is the left-liberal consensus, to which too many voters and all western governments (including our own Coalition) subscribe. In thrall to socialistic nostrums of the benign state and collectivised caring, for a decade they have contrived cheap borrowing to fund excessive public spending. In their blind pursuit of what they sanctimoniously call a "civilised society", the left have flouted one of Keynes's essential precepts of public finance. In peace-time no government should ever tax excessively (more than 35% of national income) nor run a structural budget deficit to pay for public services. Indeed, a surplus to pay down the national debt, incurred to fund unavoidable war, should be usual. Public borrowing should occur only to fund remunerative investment, and to offset the revenue and expenditure effects of an economic downturn. In her policies, Mrs Thatcher in the 1980s strived to be a true Keynesian. Without Gordon Brown's £200 billions-plus of borrowing during the 2001-2008 boom, Alistair Darling and George Osborne would have had little difficulty in dealing with a downturn, whether originating at home or abroad. Indeed, without Mr Brown's profligacy, the boom would have been constrained, and the state sector smaller and leaner. The adjustment of public pension schemes from fleecing taxpayers to full member subscription would have been unproblematic. Increasingly I come to the view that the crisis requires a General Election to settle these matters. Should we continue with the failed post-1945 collectivist consensus, or not? That question is no more pressing than here in Scotland with its "entitlement" polity.Richard Mowbray,14 Ancaster Drive,GlasgowAll workers have a right to withdraw their labour if they feel that the employer is taking advantage. Many in the public sector, like their fellows in the private sector, will have to live on small incomes in their retirement. But that is not the case with everyone in the public sector. Union negotiators are perfectly entitled to argue for the betterment of their lowest paid members. But it is not honest to argue for an award which will then be applied across the spectrum. In the hands of a cleaner on £15,000 a year, £1000 is of more benefit to that person's family than the same amount applied to a classroom teacher on perhaps £30,000. Yet the total sums of money required to give that cleaner an increase of £1000 are unlikely to be forthcoming for an across-the-board increase.The same logic must apply when negotiating pension increases and pension contributions: the needs of the least well off must be prioritised, not bundled with the desires of their bosses.It is high time union bosses acknowledged that, by negotiating blanket settlements over decades, they have contributed to the widening of the gap between rich and poor, and to the deficit in the public finances. By negotiating as they do, the inevitable consequence for all pensioners is that there will either be less money to keep the state pension at a reasonable level, or inflation which will wipe out any savings the least well off may have put aside. Ian HC Stein,8 Ochlochy Park, Dunblane. Jim Gallagher (Letters, December 2) highlights the difference between some of the teachers and many of the low-paid workers seeking to protect their pensions. The irony is that for many of the low-paid the pensions they wish to preserve are not the most suitable, whereas those who can afford to hit the pubs, restaurants and shops are the ones who have most to lose from pension reforms. For many low-paid workers a pension at 60 is insufficient to allow them to retire at that age, whereas some teachers can retire at 60 and survive on savings and income from supply teaching.Sandy Gemmill,40 Warriston Gardens, Edinburgh.Over the millenia oppression of the many by the over-powerful few has provoked reaction. The medieval Church is as good an example as any of what happens when a self-serving elite puts its own interests first. Eventually in the 15th and 16th centuries, thinkers and leaders such as Erasmus and Luther challenged the orthodoxy and won, leading to the Reformation. Many of the Reformation leaders came from what we could now call the eurozone. I think we need a capitalist Reformation.John Jamieson,7 Monument Road, Ayr.The new £2 piece (commemorating Dickens) is to carry the inscription "Something will turn up". Are we to take this as the economic policy of the Coalition Government?Kenneth Fraser,4 Winram Place, St Andrews.

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Time to adopt Keynesian economics – like Mrs Thatcher in the 1980s

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