Wednesday, November 11, 2009

A history of Britain without Thatcher

David Cameron's retelling of the history of state action to reduce poverty, from his speech yesterday, is worth a quick look:

"What was the effect of this state expansion? It is difficult to be completely certain because for much of the twentieth century, research on poverty levels used inconsistent measures. But from the evidence we have, we can say with some confidence that that up until the 1930s poverty fell compared to the years before.

Understandably, in the immediate aftermath of the Great Depression, poverty did begin to rise. But during the 1940s there was a fall in poverty of between ten and twenty percent compared to the 1930s. By the 1960s we are on firmer ground, as consistent statistics on household income began to be produced for the first time. And this data shows that between 1961 and 1968, the number of people living in severe poverty fell by 900,000 and the gap between the richest and poorest fell.

So the evidence suggests that up until the late 1960s, the expansion of the state to advance social justice was not only well-intentioned and compassionate, but generally successful. However, even in this period, it's important to look at the complete picture. Some state extensions helped tackle poverty, others were less effective. Some did so while encouraging responsibility and local pride at the same time others undermined these virtues.

But since the immediate post-war period, the most significant extension of the state has taken place under the current Labour government. In 1997, government spending as a proportion of GDP was 38.2 percent. Next year, it is forecast to rise above fifty percent....quite apart from the fact that it turns out much of this has been paid for on account, creating debts that will have to be paid back by future generations; a more complete assessment of the evidence shows something different - that as the state continued to expand under Labour, our society became more, not less unfair. "

Cameron reviewed the history of state action from the nineteenth century up until the late 1960s. He then skipped forward to 1997 before resuming the story. So why the gap?

It turns out, if you look at the evidence, that poverty and inequality continued to fall after the late 1960s. Inequality fell to its lowest ever level in 1977 and 1978. And then from 1979 it rose every year bar one until 1991, and reached its highest level in 2000, before falling again between 2000 and 2003, and then rising again.

In Cameron's history, state action used to be effective in reducing poverty and inequality, but stopped being effective in the late 1960s. Let's look at what actually happened.

In the 1970s, rises in the pension and incomes policies reduced inequality. In the 1980s and 1990s, the state actively pursued policies designed to increase inequality. Between 2000 and 2004, tax credits and other anti-poverty policies reduced inequality, and since 2004 the failure to increase redistribution has seen inequality rise again.

In other words, levels of inequality are highly responsive to state action - whether those actions aim to increase inequality or reduce it. That is as true now as in the 1960s or 1970s.

Cameron has a first class degree in History from Oxford, so he'll have been able to find this out for himself. In some ways, it is good to see a Tory leader simply airbrushing the entire period from 1970 to 1997 (when they were in power for 22 of the 27 years) out of history.

But the reason that he has to leave out two entire decades worth of evidence (and use dodgy stats for the past decade rather than the internationally recognised comparisons) is because the full facts don't support the conclusions that he has drawn about what needs to be done in the future. Public relations waffle about social entrepreneurs and community activists is not an actual anti-poverty strategy.


At 7:20 pm , Blogger Chris Brooke said...

(Cameron's degree was in PPE, not History; Osborne's was in History.)

At 8:55 pm , Blogger Al Widdershins said...

And that wasn't the worst of what he said either. I keep meaning to write something on it, but it's just too depressing - that moron will be running things in a few months.

At 4:30 am , Blogger tapestry said...

This provides a one dimensional analysis.

Thatcher's economy increased the size of the middle class. Lifting out of poverty (defined by reference to average earnings) will never end - relative poverty.

Moving more people to the middle is a more significant achievement. The economy grew. Unemployment fell. Employment rose. Government finances were in good order. People looked forward to good pensions.

As interest rates and inflation fell, there was at last the chance to carry out structural investment by 1997 (long term interest rates fell to 4%). But the opportunity was wasted on social programmes, in effect the creation of a vast client state.

Yes tax credits made people wealthier, for a while. But take my brother and his wife. They had good jobs but found it was not worth working so hard due to tax credits both went on to three day weeks.

Very nice too, but now the country is bankrupt. People who don't work have lived a very good life too, having children, being granted housing - but it can't go on for ever - as the country is borrowing 15% of GDP this year, and who knows maybe 25% next - an all time record for developed countries.

The economy has been based on a giant financial fraud for years. That is another story, which is only just starting to be understood.

The age of lying is giving way to the age of debt.


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