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Sen is being disingenuous when he compares the ratio of debt to GDP in 1948 (200%) and 1957 (120%), with 2010 (70%). The reason that, as he puts it, "the scare

Sen is being disingenuous when he compares the ratio of debt to GDP in 1948 (200%) and 1957 (120%), with 2010 (70%). The reason that, as he puts it, "the scare was not there from the late 1940s through the 1960s" is because the UK's debt level at that time was a legacy of WWII. The UK's national debt ballooned during WWII, peaking at 237% in 1946-47, then declined rapidly to less than 50% in 1973.[1] He also fails to distinguish between the degree of austerity imposed in the UK and Europe. In the UK, the Conservative government has taken steps to balance the budget by reigning in public spending (benefits in particular) in order to cut the deficit. It is a world apart from the extreme measures that were imposed on countries like Ireland[2] and Greece[3]. For context: The New Statesman is a left-wing publication. The left-wing in Britain are deeply opposed to the (right wing) Conservative government's austerity policies. 1: http://www.ukpublicspending.co.uk/uk_national_debt_chart.html http://www.ukpublicspending.co.uk/uk_national_debt_chart.htm... 2: http://www.independent.ie/business/personal-finance/the-10-worst-budget-blows-since-austerity-hit-30656061.html http://www.independent.ie/business/personal-finance/the-10-w... 3: http://www.newyorker.com/business/currency/what-austerity-looks-like-inside-greece http://www.newyorker.com/business/currency/what-austerity-lo...

toyg 11y ago
> the Conservative government has taken steps to balance the budget by reigning in public spending Steps that pretty much failed spectacularly, considering current levels of debt. However, the markets trust this government will keep cutting ad infinitum in order to pay back their debt, so they trust them enough to lend them more money at decent rates. It's like a lender trusting a borrower willing to prostitute or sell his children above an unwilling one. "Market trust" is a big joke, and also what underpins the whole economic structure of our times. It's insane.
- jackgavigan 11y ago
  > Steps that pretty much failed spectacularly, considering current levels of debt. People often confuse the national debt and the budget deficit. The national debt is like a credit card bill. To pay off that debt, you need to spend less (including the interest on the money you owe) than you get paid, so you can give the surplus to the credit card company, thereby reducing the amount you owe them. If you spend more than you get paid, your credit card debt goes up (i.e. you're running a budget deficit). In other words, the budget deficit must be eliminated (i.e. turned into a budget surplus) before the government can begin to reduce the national debt. In 2008, the UK government spent ~£150bn more than it earnt, so the national debt grew by that amount. Last year, it spent about £90bn more than it earnt, so the national debt is still rising. The good news is that the deficit is falling. The government aims to eliminate it by 2020, at which point they will be in a position to start reducing the size of the national debt.
  - andyjohnson0 11y ago
    "at which point they will be in a position to start reducing the size of the national debt" Just to give some context to this, the UK national debt is currently £1.56 trillion [1]. Reducing this by anything other than a token amount is an enormous undertaking. [1] https://en.wikipedia.org/wiki/United_Kingdom_national_debt https://en.wikipedia.org/wiki/United_Kingdom_national_debt
    - Ntrails 11y ago
      If I'm reading the numbers right, we currently spend ~1bn a week on interest payments, out of a total budget of ~14bn a week? So ~7% of our spending each year is just to pay for debt already accrued.
  - calibraxis 11y ago
    > "The national debt is like a credit card bill." Where you have the power to pay it off at will because you create the money. Assuming sovereign currency. (http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity http://www.theguardian.com/commentisfree/2014/mar/18/truth-m...) It's really funny-money. Bureaucratic number-shuffling to make debt peons. To force people to chase numbers all their lives. Ever wondered what money is to an entity which creates it by changing numbers on a computer?
  - ohashi 11y ago
    You can also make more money. If your tax base grows faster than budget deficit, you would eventually reach a balanced budget and could start reducing debt afterwards.
MaysonL 11y ago
There is no correlation between austerity and debt reduction: http://equitablegrowth.org/2015/06/28/must-read-christian-odendahl-no-correlation/ http://equitablegrowth.org/2015/06/28/must-read-christian-od... https://news.ycombinator.com/item?id=9796611 https://news.ycombinator.com/item?id=9796611 In other words, austerity doesn't work.
- jackgavigan 11y ago
  Ironically, that graph is taken from an IMF paper[1], which outlines a model for the effect of fiscal tightening on the Debt:GDP ratio, under which said ratio generally (depending on the country's fiscal multiplier) increases in the first year after a fiscal tightening, then declines after year 2 (see figures 2, 3 and 4). In other words, that graph supports the idea that austerity helps reduce debt. 1: http://www.imf.org/external/pubs/ft/wp/2013/wp1367.pdf http://www.imf.org/external/pubs/ft/wp/2013/wp1367.pdf
  - MaysonL 11y ago
    The paper is about a model, not any actual data: the data don't support the thesis. Anyway, austerity at the zero lower bound is arguably insane, and imposing it on countries in recession is also arguably insane.
- tiatia 11y ago
  I give you one counter-example: "As the IMF recommended, imports were reduced and exports were increased. The effect of the cuts in imports in Romania, a net importer of food from the West, was however not correctly estimated by the foreign analysts and it led to food shortages.[5] By 1986, it paid half its debt[3] and it finished paying its whole debt early in 1989, ahead of schedule. Nevertheless, the austerity policy continued even after all the debts had been paid." https://en.wikipedia.org/wiki/1980s_austerity_policy_in_Romania https://en.wikipedia.org/wiki/1980s_austerity_policy_in_Roma...
- pdkl95 11y ago
  Oh, there is a correlation between austerity and debt... just not the direction the pro-austerity people assume. Austerity not only doesn't work,it makes debts larger by reducing the underlying GDP. Austerity is really just the latest trick used by bankers to shift their debts on to lower classes. If you want more details, I highly recommend Mark Blyth's explanation ( https://www.youtube.com/watch?v=B6vV8_uQmxs#t=674 https://www.youtube.com/watch?v=B6vV8_uQmxs#t=674 )

toyg 11y ago

> the Conservative government has taken steps to balance the budget by reigning in public spending Steps that pretty much failed spectacularly, considering current levels of debt. However, the markets trust this government will keep cutting ad infinitum in order to pay back their debt, so they trust them enough to lend them more money at decent rates. It's like a lender trusting a borrower willing to prostitute or sell his children above an unwilling one. "Market trust" is a big joke, and also what underpins the whole economic structure of our times. It's insane.

jackgavigan 11y ago
> Steps that pretty much failed spectacularly, considering current levels of debt. People often confuse the national debt and the budget deficit. The national debt is like a credit card bill. To pay off that debt, you need to spend less (including the interest on the money you owe) than you get paid, so you can give the surplus to the credit card company, thereby reducing the amount you owe them. If you spend more than you get paid, your credit card debt goes up (i.e. you're running a budget deficit). In other words, the budget deficit must be eliminated (i.e. turned into a budget surplus) before the government can begin to reduce the national debt. In 2008, the UK government spent ~£150bn more than it earnt, so the national debt grew by that amount. Last year, it spent about £90bn more than it earnt, so the national debt is still rising. The good news is that the deficit is falling. The government aims to eliminate it by 2020, at which point they will be in a position to start reducing the size of the national debt.
- andyjohnson0 11y ago
  "at which point they will be in a position to start reducing the size of the national debt" Just to give some context to this, the UK national debt is currently £1.56 trillion [1]. Reducing this by anything other than a token amount is an enormous undertaking. [1] https://en.wikipedia.org/wiki/United_Kingdom_national_debt https://en.wikipedia.org/wiki/United_Kingdom_national_debt
  - Ntrails 11y ago
    If I'm reading the numbers right, we currently spend ~1bn a week on interest payments, out of a total budget of ~14bn a week? So ~7% of our spending each year is just to pay for debt already accrued.
- calibraxis 11y ago
  > "The national debt is like a credit card bill." Where you have the power to pay it off at will because you create the money. Assuming sovereign currency. (http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity http://www.theguardian.com/commentisfree/2014/mar/18/truth-m...) It's really funny-money. Bureaucratic number-shuffling to make debt peons. To force people to chase numbers all their lives. Ever wondered what money is to an entity which creates it by changing numbers on a computer?
- ohashi 11y ago
  You can also make more money. If your tax base grows faster than budget deficit, you would eventually reach a balanced budget and could start reducing debt afterwards.

MaysonL 11y ago

There is no correlation between austerity and debt reduction: http://equitablegrowth.org/2015/06/28/must-read-christian-odendahl-no-correlation/ http://equitablegrowth.org/2015/06/28/must-read-christian-od... https://news.ycombinator.com/item?id=9796611 https://news.ycombinator.com/item?id=9796611 In other words, austerity doesn't work.

jackgavigan 11y ago
Ironically, that graph is taken from an IMF paper[1], which outlines a model for the effect of fiscal tightening on the Debt:GDP ratio, under which said ratio generally (depending on the country's fiscal multiplier) increases in the first year after a fiscal tightening, then declines after year 2 (see figures 2, 3 and 4). In other words, that graph supports the idea that austerity helps reduce debt. 1: http://www.imf.org/external/pubs/ft/wp/2013/wp1367.pdf http://www.imf.org/external/pubs/ft/wp/2013/wp1367.pdf
- MaysonL 11y ago
  The paper is about a model, not any actual data: the data don't support the thesis. Anyway, austerity at the zero lower bound is arguably insane, and imposing it on countries in recession is also arguably insane.
tiatia 11y ago
I give you one counter-example: "As the IMF recommended, imports were reduced and exports were increased. The effect of the cuts in imports in Romania, a net importer of food from the West, was however not correctly estimated by the foreign analysts and it led to food shortages.[5] By 1986, it paid half its debt[3] and it finished paying its whole debt early in 1989, ahead of schedule. Nevertheless, the austerity policy continued even after all the debts had been paid." https://en.wikipedia.org/wiki/1980s_austerity_policy_in_Romania https://en.wikipedia.org/wiki/1980s_austerity_policy_in_Roma...
pdkl95 11y ago
Oh, there is a correlation between austerity and debt... just not the direction the pro-austerity people assume. Austerity not only doesn't work,it makes debts larger by reducing the underlying GDP. Austerity is really just the latest trick used by bankers to shift their debts on to lower classes. If you want more details, I highly recommend Mark Blyth's explanation ( https://www.youtube.com/watch?v=B6vV8_uQmxs#t=674 https://www.youtube.com/watch?v=B6vV8_uQmxs#t=674 )