Today I was reading the latest labour force data released by the UK Office of National Statistics which shows that the British labour market is now contracting as the public sector job cuts begin. The British government continues to claim that to reduce unemployment you have to deliberately create unemployment. They believe that by reducing public involvement in the economy (which means in a macroeconomic sense – withdrawing spending which generates both public and private employment) the private sector will spontaneously erupt in a surge of growth. They are in total denial of the obvious fact that spending equals income and public servants spend in exactly the same way as private employees – by handing over dollars to shopkeepers around the land. When have anyone of you been asked by a cashier whether you are working in a government or private sector job before they accept your cash? Never! As the public jobs are scrapped in the hundreds of thousands, the loss of spending will damage the private sector who will react by reducing their demand for labour and postponing their investment plans. The only hope is that exports will save them but that is highly unlikely. When do the people rise up against these ideological zealots? But the fact that when spending is cut unemployment rises – is no surprise to me. It is a basic macroeconomic reality. The problem is the neo-liberals never let basic facts get in the road of their religious convictions (or bald-faced power grabs).