Friday, October 22, 2010

The management of a household

Tories seem particularly keen on making comparisons between the economy as a whole and how a family might run their household - hence Thatcher's remark about how the British economy couldn't survive by 'taking each other's washing in', or Cameron's criticism that the previous Labour administration should have 'fixed the roof while the sun was shining', or more general stuff about 'belt-tightening' and most recently Gideon's remark about how this present administration would live within its means.

Now, every economist - or even anyone interested in economics - would immediately recognise the fallacy of composition that is being made here - the understanding of which lay behind the paradox of thrift, an idea popularised, but not invented, by Keynes.

But the word 'economy' has in its Greek roots the idea of the management of a household, after all - and it occurred to me that perhaps Labour needs to find some homey analogies of its own. Here the present make-up of this government could serve as a guide. On this, Johann Hari is in good form:
"It can't be coincidental that this is being done to us by three men – Cameron, Osborne, and Nick Clegg – who have never worried about a bill in their lives. On a basic level, they do not understand the effects of these decisions on real people."
I don't think it can be a coincidence either. Only people completely removed from the reality of life as it is lived by ordinary people could possibly imagine that borrowing per se is indicative of irresponsibility.

Here's an example from my own experience, which I'm frankly embarrassed about and wouldn't normally share with you, but it rather illustrates the point. I found myself a bit short recently so I had to borrow some money to put petrol in my car so I could go to work. It seemed a prudent thing to do since it has maximised my income in the long-run.

What would Gideon and the rest of these rich fuckers have me do instead? 'Living within my means' here would have involved not going to work, sitting in the house with no heating on and foregoing the income I have now earned. I understand Alan Johnson also has experience of how the shoe pinches - so perhaps he would do better to work some of this into his rhetoric, rather than stuff about 'ideological cuts', which while true doesn't necessarily resonate with people who were skint before these cuts.
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