What is Matthew d’Ancona on about (George Osborne’s coup: converting Labour to fiscal conservatism, 21 June)? I borrow a fiver so I can travel to the next village for a day’s work picking fruit. At the end of the day I pay back the fiver, and buy you a pint, and we’re all better off than if I’d stayed at home. Borrow, invest, repay, profit.
Even if the bus broke down on the way home and I had to pay for a share of a taxi, we’re all still better off. The problem wasn’t the borrowing, it was the corrupt bus company shaving costs on maintenance. Don’t confuse two separate issues. If I hadn’t borrowed the money, I wouldn’t have done the work, and couldn’t have dealt with the crisis caused by private sector irresponsibility.
Sure, problems arise if I borrow money and don’t invest it in productive activity (like Greece, many might say); and it is, in this case, the same for governments, except they can borrow money cheaper than you or me. The problem is not the debt in itself, but in the kind of debt. Was it squandered, or invested in some profitable enterprise like health, education and social solidarity?
For an example of squandering, try paying a private company to build you a power station, including the financing. They pay higher interest rates and charge a facility fee, so the whole operation is more costly. In the long term, the punter has to pay more for their electricity, but you’ve achieved two aims: the funding doesn’t appear on the books as government debt, and your buddies in the City get an extra 6% interest on the loans.
So what d’Ancona is celebrating is Osborne’s success in selling tissue-paper umbrellas in a thunderstorm. Fair enough, borrowing to pour money down the drain (such as subsidising corrupt banks) doesn’t do a lot of good. But if you borrow, invest, repay and make a profit, it works for governments just as much as individuals, and can be repeated ad lib.
The crisis was a crisis of the financial markets. There was never a problem of government liquidity, so why offer support for Osborne’s trashy and fatuous narrative?
Dr Tony Brauer
Jordans, Buckinghamshire
