I was listening to news reports this morning about Sadiq Khan saying that Conservative cuts to policing mean that the task in London will shortly become seriously impaired.

Now, I can well imagine that this is true, as I can see in the education sector (at all levels) the terrible effects of chronic underfunding.

That said, when you consider all that government must pay for, and that there has always got to be a balance between revenue generation (taxes) and spending, is it realistic to expect that every sector should get what it needs and deserves?

And in light of that question, do you think Western economies, which tend to run on colossal deficits for precisely this reason, are actually sustainable? Or are they somewhat artificial and doomed to eventual collapse?

That said, when you consider all that government must pay for, and that there has always got to be a balance between revenue generation (taxes) and spending, is it realistic to expect that every sector should get what it needs and deserves?

Many other countries have higher tax rates to support their services. you get what you pay for. After that it is priorities – what is the most important thing to spend money on?

Pasties?

Or are they somewhat artificial and doomed to eventual collapse?

Not all ‘Western’ economies are identical, but the trend/goal is and has not been ‘sustainable’. Rather ‘endless growth’. Boom and bust, in other words.

Sustainability is a difficult term. Our entire world’s economy is based on continuous growth, driven from natural resource exploitation, and is hence very obviously not sustainable without some pretty big changes. There is a very big shitstorm waiting to roll over all of us in 50-100 years I reckon unless something difficult is done. And I doubt that difficult thing is neoliberal, put it that way.

That said, when you consider all that government must pay for, and that there has always got to be a balance between revenue generation (taxes) and spending, is it realistic to expect that every sector should get what it needs and deserves?

Other countries live with higher taxation and better public services. And far from being a burden, it seems to correlate with happiness and high standards of living. I suspect though that it’s not causal. I suspect that people arne’t happy because taxation is high and public services are good; rather that people allow high taxation and are happy for the money to be spent on public services because they appreciate the importance of a happy society. Something a bit more fundamental.

Are western economies sustainable?
No.
Resource based economies tick the boxes as far as i’m concerned

No western economy is sustainable at current levels, the redistribution of wealth to a smaller and smaller percentage is probably the biggest issue as this “wealth” for the most part is locked away and taken out of circulation – it’s like trying to bail out the Titanic with a bucket. Add in automation and you have the perfect storm. At some point it will snap but not in the way that most people think (riots, looting, social breakdown) this is due to the “boiling a frog principle. The snap is likely the West deciding to take over certain parts of the world’s resources to maintain its status – WW3 if you like? Trump and Brexit make small steps towards this. The only real question is how long? Automation will be dominant within 25 years so that will provide a potential flashpoint, the depletion of mineral reserves to create automation may also increase the need for the West to expand. Lebersraum will probably be around 2050 to 2075

It all depends on the balance between technological advancement and greed.

Technological advancement drives greed historically, in the current world how much money have Apple and Microsoft got locked up $400 billion – and they are only a tiny part of the global money stack

Technology has the potential to release humans from labour. That was postulated way back in the 1930s. However this didn’t happen because people were prepared to work for more, rather than not work for the same.

That may have to change. We will have to be released from the cycle of chasing more and more economic growth based on more work.

Trouble with Utopian objectives is the need for greed.

In France at the moment and a couple of years ago I was talking to a French business man and I asked why does France not have the entrepreneurial culture of the UK as this may help their unemployment woes (let’s not mention Auto entrepreneur which is self employed minimum wage) and he said family bluntly that most French people don’t like to see other people doing better than them so the whole system is designed to reduce your ability to earn more than an average salary (greed suppresion) so you have to legislate against greed to meet the futures economic constraints.

Let’s replace ‘greed’ with ‘ambition’.. does that change the tone a little?

An ambition to earn more and more money that you can’t feasibly use? Sounds a bit like greed to me 😉

However this didn’t happen because people were prepared to work for more, rather than not work for the same.

I’d say that people are more readily motivated by independence, shiny stuff and individuality rather more readily than by an identikit life of state-approved leisure and cultural indolence? A measure of self-reliance for the able-bodied (even if partially subsidised/somewhat illusory) is still better than being a perma-baby sucking on the Gov tit for life?

We humans seem to wrestle/lurch towards idealogically polarised extremes, and miss the middle-ground or dynamically-balanced options that are potentially available. All within the inescapable framework of thermodynamics – ie entropy, of course!

That communist model I think has been discredited. There are other possibilities being explored – mainly UBI. This idea has legs, I reckon.

No, its not sustainable.
I’ve said it elsewhere, but we are conditioned that our standard of living can only possibly get better. Its expected we have the best of everything, best NHS, best Education, best Police and if any of those don’t get the best funding, there is outrage.
But we don’t like taxes to pay for it, because we also like to have the best flat screen TV’s, best SUV’s and best mountain bikes.

Since the reality is that there is a limited money supply, that means the standard of living we are used to is built on a massive pile of both national and consumer debt.

The way I see it (which may or may not be right), is that we can take some minor short term reduction in living standards and start living within our means now. Or we can carry on as we have been and wait for the whole system to collapse in ~10-20yrs and relegate us to 3rd world living standards.

And far from being a burden, it seems to correlate with happiness and high standards of living

This is a really good point – it isn’t a burden, it’s simply paying for things that make your life better. Do we describe paying for bikes as a burden? Is paying for your holiday in the sun a burden?

But we don’t like taxes to pay for it, because we also like to have the best flat screen TV’s, best SUV’s and best mountain bikes.

There’s an alternative – state run industry. It would need to be done a lot better than it was in the past, but other countries do run highly profitable industries. Thinking Norway and Gulf states..?

In the context of the recent terror attacks I struggle to see how more police would have prevented the attack or reduced the time for the terrorists to be tackled. In the context of ‘bobbies on the beat’ well as the crime rate has been on a steady decline until recently it is completely normal and responsible to flex the size of the police force to suit the task they face, so a decline in Police over recent years is justified. Of course the Mayor of London is going to say he needs more resources. It makes his job easier, he’ll never say “You know what…I’ve got everything I need”. He needs an excuse to fall on for when he fails.

Whoever is in power can’t win. Put more police on the streets and people complain about being spied on by the fuzz, take them away and they complain there are not enough police around.

This notion that ‘we are a rich nation’ like JC likes to claim is not true. We’re not as rich as we think. We’re £1.5 trillion in the red and growing as we’re spending more than we earn. So actually we’re on the way to becoming bankrupt. The answer cannot be tax people more – the top 5% of wage earners already pay 50% of the tax bill. It is actually the 95% of earners who are the spongers (and I’m in that group). We need more rich people not less in our society. We’re a consumer economy, our GDP can only really grow by people spending more and consuming more. We need to let go of any notion or pipedreams of a return to our industrial past. Our industrial future is in high tech industry, so more lab coats rather than overalls and steel-toe capped boots.

But Western economies are sustainable while there is a source of cheap labour to manufacture our consumer goods and a secure source of oil until such time we can wean ourselves off the black stuff. And until we tackle our defecit a source of near-interest free credit.

Debt based economies are never going to be sustainable. I do agree that we are reaching the point where UBI will be the way for people and society to develop themselves on many levels.

The problems comes when the people at the top are in a position where they become detached from society as a whole and have no empathy for those who suffer at the bottom as they have no comprehension of what it means to suffer at the bottom.

[video]https://youtu.be/8TTVPgQ0fTE[/video]

Coldcut – Walk a mile in my shoes

I’ve said it elsewhere, but we are conditioned that our standard of living can only possibly get better. Its expected we have the best of everything, best NHS, best Education, best Police and if any of those don’t get the best funding, there is outrage.
But we don’t like taxes to pay for it, because we also like to have the best flat screen TV’s, best SUV’s and best mountain bikes.

So you take away the “Money” element.
http://futurewewant.org/portfolio/resource-based-economy/

we can take some minor short term reduction in living standards and start living within our means now. Or we can carry on as we have been and wait for the whole system to collapse in ~10-20yrs and relegate us to 3rd world living standards.

Isn’t this an inevitable consequence of globalisation? That in time living standards globally will converge? Some will go up, ours will go down. How best to manage this? I suspect we’ll just ignore the inevitable and wait for the collapse!

We need to let go of any notion or pipedreams of a return to our industrial past. Our industrial future is in high tech industry, so more lab coats rather than overalls and steel-toe capped boots.

Only problem with that is that places like India and China see that as their future too.

There’s only a finite supply of resource. I don’t think that there are many modern economies which are sustainable.

Turning the question towards the UK though, it’s clear that the current system of low tax, low skill and low productivity has almost run its course. The money has been extracted and fed upwards, but the myth endures that a multi-millionaire who tips an zero-hour employee at Starbucks a fiver counts as “trickle down” economics in action. There’s genuine bafflement in some political circles that poor people simply can’t find money to feed themselves.

Yes, absolutely – but not this version, you should never assume that what goes on today will be how things will be tomorrow.

The Western Economy has existed since we invented/discovered money, but it’s constantly evolving thing. We have educated / skilled people and enough resources to ensure it will continue, but will change as it always has.

I think thing seem pretty stable if flat at the moment, but that only because we’ve been stagnating for 10 years, I think if we go back 20 years, 30 years, 40 years you’d notice massive changes in the way the Western Economies ran and 10 years from now things will be different again.

I suspect there are big changes coming, some will be good in the long run, some will be bad and changes are usually painful – but we’ve been through worse.

This is probably a really dumb question. Who do we (uk) actually ‘owe’ all this debt to? I haven’t seen the economics of it explained in numpty language so I can understand it. It’s not like a mortgage where if you don’t pay the bank come along and repossess your house and kick you out is it?

Who do we (uk) actually ‘owe’ all this debt to?

From my limited understanding, a lot of it is borrowed from pension funds etc, so the UK is actually borrowing from itself?

This is an interesting map

DT78 – Member

This is probably a really dumb question. Who do we (uk) actually ‘owe’ all this debt to? I haven’t seen the economics of it explained in numpty language so I can understand it. It’s not like a mortgage where if you don’t pay the bank come along and repossess your house and kick you out is it?

We borrow by selling bonds, gilts and treasury bills – they’re different mechanisms but they’re basically IOUs some you just pay interest on and they’re transferrable investments, some have a fixed repayment date.

Most of the UKs Debt is owned in-country, Pension Funds, Insurance Companies even the Banks, yes we did borrow money by selling bonds to the Banks and then used that money to lend, to the banks.

If you really into how high level finance like this works it’s verging on alchemy, but they’re important because the banks, pension funds and insurance pots need a diverse investment portfolio to trade – so they buy 0% risk (or close to) Bonds with some money at a low rate of return so they can invest other money in higher rate, higher risk ways and spread the over-all risk.

If we were to default, which must have crossed everyone’s mind at some point (why don’t we just tell them to sod off) it would be a very good, very quick way to level the playing field, the rich would suffer the most – they talk about us losing our pensions, but really that would be the tip of the iceberg – the moment we default we wouldn’t be able to borrow another penny by selling bonds, because who would buy them? So we’d have to default on everything because we cannot raise tax revenue quickly enough to pay the bills so the banks would crash, taking down many large organisations with them, our currency would be worthless – think of wheelbarrows full of cash to buy bread, trillion pound notes etc, but when the dust settled (after many thousands of deaths) the man or women who can grow food, build a house, or make clothes would be richer than the man who used to own an airline.

If the 5th or 7th largest economy in the world (depending who you ask) defaulted it would cause enough of a shock wave to cause another global recession, maybe worse – look at the lengths the EU went to to keep Greece afloat.

It wouldn’t get that far though, wars have been fought for a lot less.

It’s not like a mortgage where if you don’t pay the bank come along and repossess your house and kick you out is it?

Yes that’s just how it is and if my calculations are correct we no longer really own an area of the UK approximately the size of Wales.

I guess though we couldn’t just hand over Wales in the same way as you couldn’t just say hand back your bathroom to the building society if you were struggling with the mortgage.

An element missing from P-Jay’s explanation above, in my view, is that the diverse portfolio of investments needs to take into account asset and liability matching. A pension fund, for instance, needs to be able to pay out in, say, 50 years time (liability) to a new entrant into the labour force that has joined its pension pot (asset). Long-term government borrowing provides a very important benchmark rate for this from which other assets can be priced.

our currency would be worthless

Is interesting how the bond market is tied into currency. A big part of the problem in the EU is that you have a single currency but each member state issues it’s own bonds. Didn’t they initially want an unified bond market but no one would agree to it?

We borrow by selling bonds, gilts and treasury bills – they’re different mechanisms but they’re basically IOUs some you just pay interest on and they’re transferrable investments, some have a fixed repayment date.

You create and sell debt.
That’s more or less what the American sub-prime mortgage market was about.

There’s a good book called “Whoops! Why everyone owes everyone and no-one can pay” by an economist called John Lanchester which was written just after the big financial crash of 08/09 which explains it all in relatively layman terms.

Large financial companies can basically create credit and lend it to themselves via offshore companies and credit default swaps where you sort of insure the risk away by packaging and selling small portions of the debt.

It all falls to pieces when the bank isn’t very careful about who or what it lends its money to…

Gordon Brown’s famous speech in the Commons where he repeated the mantra “no more boom and bust” and “no return to Tory boon and bust” was bollocks for precisely the reason that pretty much all natural cycles actually exist on boom and bust. It’s almost impossible to engineer out.

Whenever these discussions come up I am surprised how uneducated the populace is on basic Economic principles.

The amount of adults (other than those directly engaged in stocks and share investment) I meet who have no idea how money and bonds work is shocking. IMO Economics should be part of Mathematics, taught to our children toward the end of primary education, going into secondary as a mandatory GCSE. Not as currently, optional at secondary level at the earliest.