Apr 172014

If you have been keeping an eye on British Politics over the last couple of years, since the financial crash of 2008, you might be mistaken for thinking that the political parties, Conservative, Labour, Liberal, Green, and Nationalist, are all adhering to and promoting economic policies that are core to their ideological beliefs.

The coalition government is thought to be promoting a conservative form of austerity in order to move the economy back to laissez-faire liberal doctrine and remove the state as an inhibitor of free-market rationalism.

Labour, on the other hand, is generally perceived to be advocates of Keynesian demand management principles – i.e. the slump is the wrong point for austerity, it’s the boom when we will pay off our debts.

Nationalists want increased local control over the economic conditions of their local populations and see this happening either through independence or through border controls. With the Scottish Nationalists it would be an approximation of autonomy from Westminster, and for UKIP, it is through a combination of border controls and an abandonment of the rules-based transnational market of the EU that fuels their aspirations for economic independence.

The other group offering a distinctive economic ideology is the Greens, who want to shift consumerism from it’s present position as the engine of the driver of growth, to sustainability and environmental protection as the key drivers of economic action.

All this seems straightforward and predictable, but what if I said to you that it is a misplaced presumption and that what you are seeing in UK politics is not what you are getting? Indeed, the level of ideological cross-dressing and the double-speak of politicians has reduced our understanding of the options in front of us to a burnt-out husk that is profoundly anti-democratic and actually bad for the economy.

An excellent article in The Guardian by Simon Jenkins points out the absurdity of our present economic and political choices. Jenkins argues that:

“On coming to office, Osborne did indeed cut the “planned rate of increase” in public spending, as Darling had pledged to do. In 2009 total spending was £634bn. By next year it will be £732bn, higher even in real terms. The only big item truly butchered has been local government, and the coalition cares not a fig for that. Osborne has missed all his budget balancing targets and is way off course on borrowing, which still hovers around £100bn. He would be savaging Balls if the latter had been in office. Compared with Greeks or Spaniards, Britons do not know the meaning of austerity.”

Meanwhile, Ed Balls has agreed with Osborne that the state of the public finances is such that the amount the UK spends on welfare has to be capped, regardless of the evidence or the need of the country during the financial period the government deems this appropriate, which is after all entirely arbitrary. You might think that this policy would cause outrage on the Labour benches, but only thirteen MPs rebelled against the Labour leadership and voted against the cap.

If you follow mainstream political reporting in the UK it will tell you that the Conservative Party is riven with division over Europe, and while this might be true of it’s MPs and it’s members, there is another story emerging from the leadership of the party. This story is one in which Cameron, Osborne and Clegg, rather than being the children of Thatcher, are actually and secretly the children of the arch conservative interventionist Michael Heseltine, and that they want Britain’s economic model to be more closely aligned to the German model. Fraser Nelson, writing in The Spectator calls this Cameron’s ‘Northern Alliance’, in which the UK, or what is left of it after Scottish independence, is part of a reconfiguration of the EU along more integrated and state-structured lines. Osborne’s recent charm offensive for the UK to be more German is no accident. He wants to shift the UK economy from a consumption-based dynamic, to a producer and an expert-based dynamic, and the only way to do that is to form an alliance that is able to ‘guarantees fairness’ – or as Mark Blyth calls it German ‘ordoliberalism’.

I know this might sound bonkers, but if the Conservatives win the next general election they will take Britain into a closer alliance with the EU and will even adopt the Euro, despite the offers and talk of referendums and opt-outs. The conservative-nationalist rump will find a home in UKIP, the Europhile Liberal Democrats will form a permanent alliance with Cameron and Osborne, who will then be joined by the New Labour Tendency who will see the compromise offer of a market-driven welfare state along German lines as too irresistible to miss.

So, where does this leave the USA and Britain’s supposed historic ties with the entrepreneurial and dynamic liberal economy that it represents? Well President Obama is more to the left on the economic argument than the Germany dominated Europeans. Insisting on a Keynesian stimulus package while reforming and restructuring the private debt accrued in the crisis, through interventionist state action doesn’t seem very neoliberal or laissez fair, but then the US economy has been growing at a steady rate since 2009 and has recovered much of it’s reversals that it incurred from the crash of 2008. The fundamental alternative that the USA will offer will be the ability to inflate or deflate it’s economy in comparison to others through it’s exchange rate, and not as Europe is doing at present – through internal deflation.

If you are worried about the democratic implications of this, look at Greece and Italy who have seen their democracies overturned and replaced by technocratic committees in the name of competition and sound finances. How long can Spain, Portugal, Greece and Ireland sustain unemployment rates of twenty-five percent without significant social unrest or a shift to right-wing and fascist parties? This is the massive gamble that is being played out here.

This leaves us with an interesting dilemma, who should we listen to and what should we expect out of an economic growth model for the UK in the next five years and beyond as we try to come to terms with the collapse of the Thatcher/Regan coup? Should we listen to Cameron and Osborne, who are expert at saying one thing but doing another, or should we listen to Miliband and Balls who… well here’s the problem… they don’t seem to be saying very much at all, and this is what is worrying. Do Miliband and Balls want to follow Merkel and turn the UK into a duplicate of the German model, or will they follow the US and maintain a stance that looks to liberal entrepreneurialism and demand led markets that offer a limited social underpinning?

It’s not like these issues are being discussed openly, and I’d like to know more about the choices that are on offer. In a perverse way everything is up for grabs. The Conservatives have formed a permanent alliance with the Orange Book liberals and are rediscovering by stealth that Europe is a potential guarantor of economic growth, as long as it is governed by rules and structure. Will we see Labour rejecting the paternalism of ‘ordoliberalism’ and seeking an alliance with American liberals and social progressives along a liberal-Keynesian model of aggregate demand management in the context of global markets? Or, we could all resort to nationalism and fight with Russia as a way of distracting ourselves from thinking and analysing how these things might work out.

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