Great letter.

@Writeon: You're absolutely right. The "crisis" has become the pretext for a massive global power-grab on the part of international finance which will basically wipe out the status quo of the last 70 years in Europe and North America. We're going to learn what the "developing world" has known for generations. Quick and effective radicalisation and action is needed NOW. The UK needs a credible socialist party, and those that already exist in Europe need to up their game immediately.

DK & Ona

We get the parties and then the government we deserve. If we want to change that we need to do more than talking about what we need and start to deliver it. If we need a credible socialist party then we must either start again or get involved in those that already exist locally to make our views known.

Medhi, I saw you this morning on the telly talking about the cuts.
I must say I was a little disappointed. I thought you should have emphasised the points that are made in the letter you quote and challenge the whole concept of the cuts.
You should have challenged the notion of "we are all in it together".
NO WE ARE NOT!!
The cuts are going to affect poor people and ordinary people, those who did not cause the crisis.What do the rich care about the NHS or the State schools?? They have their own private hospitals and their own private schools.
Raising taxes however would affect "the haves" and taxes are a much fairer way to reduce the deficit than cuts in the public sector. Also cuts mean thousands of people are going to loose their jobs , which is going to stop the economy from recovering as well as being unfair to those people and to those who receive their services.
Finally asking people what they prefer to have cut is like asking turkeys at Xmas how they prefer to be killed.
Worse it is making people make selfish choices as I am sure people will choose cuts which won't affect them personally.It is a ridiculous survey especially as those in greatest needs are in a minority and therefore the majority is bound to want their benefits cut.
It is a gimmick as you said but I wish you had been a little more aggressive about inequality and the consequences of the cuts on ordinary people while the rich carry on as usual.
Close to where I live are the most expensive properties in the UK. I can assure you, these people are not worried. In a few months time, they will still live in their grotesque mansions and they will still drive their Ferraris and their Mercedes Benz.NO worries!

A few months ago, my brother, who works in the City, received an enormous, absolutely enormous, bonus. More than most ordinary people earn in an entire lifetiem.

He, having been given some very valuable information by a friend in Whitehall, did a few hours trading and earned his firm a staggering 100 million by the close. He's already fabulously wealthy and lives like a prince. To his credit he does give substantial ammounts to charity, and this functions as a salve for his concience, which sometimes troubles him. But mostly he thinks he taking part in a kind of game in the City, a mixture of poker, roulette and chess.

This may come as a surprise, but the game is rigged to a large extent. It isn't really what it seems to be. It isn't really a 'free market' anymore, because most of the players are so big and so powerful, if they were allowed to 'loose' the entire house of credit cards would collapse and along with it the rest of society.

This is an extremely unfair state of affairs for ordinary people who have to pick up the tab for the 'market's' excesses, whether they like it or not. They don't have a choice, and the markets don't intend to give them one, not any more.

My brother's o.k. actually, but some of his friends are scary bastards, especially some of the Americans I've bumped into at dinner parties. Only a few weeks ago, when they were bragging and gloating about how well they were doing and complaining that Obama was anti-business, anti-profit, and a socialist; one druken swine insisted on sharing his political philosophy with me. According to him and he swore 'everybody' thinks just like him, 'freedom and democracy are no longer compatible'! The people and their numbers, their demands and entitlements, are bankrupting America,and they are a threat to freedom and the creation of wealth, which is what he was put on this good earth by God to create. Amazing stuff. One couldn't make this stuff up. The thing is, when powerful people, people who count, people who have enormous influence due to their vast wealth, begin to think like this, that democracy and freedom are no longer compatible, where are we headed?

The point is, ordinary people are going to be shafted, big time, and unfortunately there is bugger all they can do about it.

How about questioning why we should even pay interest on money at all? The interest of the debt is never put in question. Why should we give our earnings to the bankers, who have done nothing?
This is without even going into the fact that the so called 'money' which the banks lent in the first place was created from nothing, has no intrinsic value or reality to it whatsoever.

Yes, and what's worse the public were gullible to believe that Cameron is safe with the NHS: he is not. Expect NHS hospitals to be wholly or partly private in three or four years time, and a second term Tory government will introduce health insurance.

Even if that analysis were accurate (and knowing very little economics I must assume it is) what's the alternative?

Fair or not, the country has a massive deficit and a worse debt. Surely, the budget can't stay in deficit forever? What has to be done? Tax rises (a la Geoff Howe, circa 1981), which would choke off recovery, or spending cuts.

There was a view in the 80s, that Margaret Thatcher was a Maoist and was wanting to precipitate the revolution... Cameron and Osbourne may in fact be attempting to politicise by confrontation with the contradictions of capitalism! Frankly it doesn't seem a more absurd explanation than the one that ordinary people are being offered across Europe to justify mass cuts and privatisation of public services.

People don't realise yet that cutting public services will 'choke off recovery' much quicker than a small tax on the banks (and other measures) would.

If people have less to spend, or no income, there will be no growth in the economy. Tax revenue will also fall. Expenditure - in the form of benefits will increase. The deficit will grow and there'll be less income to pay it off.

Cutting public services is not a recipe for economic growth.

@Buck: for the banks that the government owns (ie Lloyds, RBS, Northern Rock), it *does* get the profits.

Eh? The deficit doesn't even include the bank bailout! Talk about a red herring, Medhi. Get your facts right, son.

John B - whilst your last statement may be true is it not also the case that there is a cause and effect tale too? That is the the effect that, once revealed to be a lie, the banks behaviour "pretending" that they were making money, had on businesses, individuals and markets confidence on the economy. The knock on effect of this massive loss of confidence was for people and businesses to try and realise their assets - either by taking their money back or by private sector investers trying to protect themselves and their shareholders profit margin by putting the screws on the employees. Some companies did go bust, but others have remained afloat and some even in large profit.
Setting aside the idea that whilst running the biggest business of all in the UK, Gordon Brown should have examined the books of all of the banks too (surely they are required to audit for themselves?), I find it hard to see how a lie that started with bankers is now seen by a lie by Gordon Brown. And, oddly, how spending, or even borrowing to improve the standards of the most vital services a developed country can provide for all of its people, can be deemed profligate.
Even stranger is that people cannot see the relationship between public spending (not just on staff) but on goods and services it consumes. For example, imagine the cost of keeping all of the phones in the public sector, the numbers you call to make your hospital appointments, the ones you call to enquire about your court case or tribunal hearing. BT - hugely in profit, paying its chief executive huge bonuses and salary, its shareholders dividends and trying to hold its staff to below inflation pay increases. Remembering that until the 80s we all owned a share in the British telecomms industry, until the dawn of popular capitalism, where we were all encouraged to invest a small amount in a privatised company,in return for a few miserable pounds a year in dividends. Do any of us know who these shareholders are? We can probably find their names - but they no longer live next door to us as once they did.
Is it any surprise then, that when asked recently during PMQs when Cameron was asked when he would sell the part state owned banks to his mates in the city, he said, he preferred popular capitalism. I say this in the hope that people may, during the firesale of our public services which could be provided within the private sector, remember that they are already shareholders in the health service and the education system. We have invested heavily in that service now and at the moment the value of that investment is weighing heavily on our shoulders. But we should not sell that valuable legacy to the nearest profit seeking millionaire any more than we would sell our children.

Would that be this Keynes?

In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that; "His radical idea that governments should spend money they don't have may have saved capitalism".

Craig,

I understand why you feel so angry and frustrated. I just feel rather sad and powerless that so much time has been wasted following economic policies, over at least thirty years, by successive governments, which have been completely barmy.

It isn't just the fault of Gordon Brown or New Labour, they followed a course that was basically mapped out decades ago. An economic policy based on an elaborate illusion, but which was hidden by sleight of hand and massive revenues from the North Sea. The oil and gas, diverted attention from how badly the rest of the economy was realing doing. Also an ideological decission was made to run down the manufacturing sector in favour of the financial sector where far higher profits, compared to investment, could be made, far quicker.

What you call 'basic economics' is, dare I say this? mostly, totally wrong about almost everything. Basic economics, if one goes back and looks at what most economists were writing, don't take my word for it, take a look yourself; most establishment economists thought that the economic policies pursued over the last thirty years, were the right ones, only a handful of critics tried to sound the alarm, and they were simply ignored and called pessimists, or worst still, socialists, which made it easy not to listen.

What one can blame New Labour for is that they didn't have the will and courage to break radically with the nonsense that passed for Thacherite economic policies, and instead kept right on with them to the bitter end and disaster.

Finally, it's not just Greece that's in trouble. Virtually all the countries who follwed the Chicago School/Thactherite economic model, are in deep trouble, as is the United States. All the banks are bust too, only they are desparately trying to hide their trillions of losses. This depression isn't confined to the UK alone, but is a depression affecting the entire Western World, where thirty years of economic madness is finally falling apart.

We have a form of state capitalist system, without massive state subsidies and help in myriad ways, the system would grind to a halt even quicker. Keynes understood this and without his policies to 'save capitalism from itself' we'd arguably still be stuck in a 1930's style depression.

In Britain the creation of debt was a form of massive subsidy from the taxpayer, without the creation of debt, as wages were kept low, how on earth were people supposed to buy anything, and without sufficient demand what happens to consumption and growth? And without growth what happens to employment?

Finally, who and what exactly is the market? I mean we hear a lot about it, but what is it really? Does anybody know? Why, in a democracy, do we give so much power, in effect a form of veto over government policy, to the markets? Do we even need the markets or the banks?

What's happening now, (after we empty the treasury to save the financial sector, which gambled, and lost, and if we live in anything close to a 'free market system' should have been allowed to fail and fall) is a ghastly re-run of the 1930's Great Depression, only this time it's arguably worse.

We are not at the end of a mere recession, with recovery on the way, or even in the middle. We are only at the beginning, and the worst is yet to come, so hold on to your hats!

With a treasury that's empty, or is apparently empty, we now resort to massive cuts, just like in the second phase to the Great Depression, before most of us were even born. 20% cuts at this time will blow the bottom out of the country and drastically reduce demand, leading to a fall in production and taxes, leading to more cuts, leading to a dreadful downward spiral and more depression.

This new government's policies are precisely the wrong type of medicine that won't lead to recovery but make things worse. It's almost medievil economics, bleeding a sick patient dry, weakening him, and then one's surprised when he expires. It's like Keynes never existed.

What's really happening is something else completely. We are seeing the creation of a new type of society, where there will only be two 'classes' the very, very, rich; and the rest, who will be poor. Think... Jane Austin's England and you'll get the picture. Everyone will be poorer in the new age of austerity, everything will be at lower level of economic activity, except for the elite at the top, who arguably will be even richer and certainly more powerful than we've seen for a couple of centuries.

This is why people have to resist now, while they still have the strength to resist, before they've been squeezed and crushed and are on their knees begging for crumbs from the masters table, by then it may be too late and we'll have entered a new,, old-style, world for good.

Neither Mehdi Hasan nor the letter's writer understand what's being done.

The government cuts are not to repay the debt, but to reduce the deficit (our income/expenditure differential). Further, the whole economy was over-burdened with debt before the banking crisis, encouraged by brown and his virtually compulsive spending. He also couldn't deregulate fast enough! For those who argue the Tories would have done more, that's neither here nor there. "It was Labour wot done it!"

Caroline - It is not good enough to say people must "stop reading the Sun".

New Labour carried on with the Thatcherite economic consensus that we had pre 1997. From 1980 to 2010, we have overall seen a huge increase in personal debt, and acorresponding increase in the public Deficit.
Gordon Brown carried on the work of Deregulating Financial Services, and was praiosed by all (including Vince Cable) for his "light touch" when it came to the City.

As a Labour member, I believe we need to learn from this, and not duck the truth because it is inconvenient.