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.

Apr 152014
 

Aug 122013
 

Only in the topsy-turvy world of Neo-Liberal economics can the further decline in Greek Gross Domestic Output (GDP) be called a triumph. And yet, that is what economically conservative newspapers like the Daily Telegraph are saying about the latest batch of figures that show that Greece is in recession for the twentieth consecutive quarter.

According to the Daily Telegraph “Excluding the borrowing costs on its massive debt burden, the Greek government is now raising more money than it spends.” What the Telegraph isn’t reporting is that this has been achieved by massive lay-offs of civil servants, a relaxation of the minimum wage and a punitive property tax that will only be exempt for those living below 6000 euros a year.

Obviously, the most simple economics lesson from history has not been heeded. When in a slump, the only way out is to stimulate demand in the economy. As Simon Jenkins in The Guardian has rightly pointed out for some years now, the best way to do this is to give the money directly to people to spend, rather than to bankers in the form of Quantitate Easing and the purchase of bonds. How much QE money has been salted away in tax havens and used to keep share prices high?

Instead of the stimulus money going into the Greek economy to ensure that it can grow it’s way out of debt, the austerity nutters are continuing to bleed the Greek economy dry while expecting a miracle. No wonder the politics of fear and uncertainty are taking hold in Greece.

The Greek unemployment rate is now at a staggering twenty-seven per cent, with no sign that it is coming down. All those people out of work, dependent on squeezed state benefits and charity hand-outs. Before long we have to start asking what will be left of the Greek economy, because at this rate there is going to be very little to work with afterwards to restore growth.

As Zygmunt Bauman points out “The fraudulence of the promised ‘trickle-down’ effect of opulence at the top has now been laid bare – for everybody to watch helplessly and bewail – but the ‘collateral casualties’ of the grand deception are here to stay for a long time to come. The foundations of social solidarity and communal responsibility have been sapped, the idea of social justice compromised, the shame and social condemnation attached to greed, rapacity and ostentatious consumption have been wiped away and they have been recycled into objects of public admiration and celebrity cult”.

It is not the ordinary people of Greece who brought this about, but the international financiers in London and around the world who have inflicted this burden on the Greek people. I can only utter my indignation – twenty quarters of recession! Surely someone might have got the idea by now that this isn’t working? Imagine how much it is going to cost to repair the damage and sort out the cost to Greek society once this wicked experiment is over?

Aug 042013
 

There’s a very good book by David Stuckler & Sanjay Basu ‘The Body Economic – Why Austerity Kills‘. Rather than attacking the problems of the Great Recession from a business or a moral point of view, the authors instead drawn on their expertise as healthcare statistical analysis experts. They provide examples of different recessions at different points in recent economic history and compare the impact of austerity policies on the health of the people who are affected by them. Russia as a post-Soviet experiment when it attempted to ‘Shock’ capitalism into the former state controlled economic system. Thailand following the Asian Economic Crisis of the 1990s, and America, Europe and Iceland following the great crash of 2008.

They come to a pretty stark conclusion, that “Ultimately austerity has failed because it is unsupported by sound logic or data. It is an economic ideology. It stems from the belief that small government and free markets are always better than state intervention. It is a socially constructed myth – a convenient belief among politicians taken advantage of by those who have a vested interest in shrinking the role of the state, in privitising social welfare systems for personal gain. It does great harm – punishing the most vulnerable, rather than those who caused recession”.

Read this book and then ask yourself how social democrats in the United Kingdom can better challenge the austerity-nutters who are running the British economy and ripping-up our social provision, and leaving more people to fend for themselves.

Jul 192012
 
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Osborne Out of His Depth?

With each announcement of financial news it is becoming clear that the austerity plan irrationally beloved by the coalition is failing. Now the IMF is calling on George Osborne to go to Plan B to save the British economy from it’s present stall. According to the Daily Telegraph “The IMF said that the British economy may not be able to cope with the scale of austerity planned for 2013-14. It argued in its latest staff report on the UK that the Government has room to relax its deficit cutting programme with targeted tax cuts and increased infrastructure spending should it prove necessary.”

According to The Guardian the IMF report makes clear that “the coalition’s austerity has exacerbated the weakness, wiping 2.5% off GDP since 2010.” But as the Daily Mail points out “Ministers rejected calls for a plan B to revive the economy in June, after leading economists warned the Chancellor was not doing enough to promote growth.” The Mail points out that “Forty-seven economists wrote a letter to the Observer newspaper demanding changes to the Coalition’s economic policy, claiming the UK’s finances are too unstable to withstand the spending cuts.” But that “The Treasury and senior Cabinet ministers said at the time that there was no need for a change of course and put the blame squarely on Labour’s shoulders for leaving the country with a record deficit.”

How much longer can the coalition go on blaming anyone and everyone other than their own failed policies. Remember in May 2010 the British economy, according to The Guardian, was bounding back from recession with growth in the first quarter of 2010 rising at 0.3% – more than the UK economy has grown for the last twelve months. It’s time that Osborne got a new job – but based on this record, would you employ him?

Jul 192012
 
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Clueless Cameron?

David Cameron is reported in The Telegraph saying that he believes that austerity in Britain is going to last until 2020. According to the report “Asked whether the austerity programme would now last a decade until 2020, the Prime Minister replies: ‘I think it’s going to be…this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.'”

If the Prime Minister can’t imagine a way of getting the British and European economy working again sooner, then he really should think about standing aside and let those people who do have some ideas have a go at jump-starting the economy. Paul Krugman in his book End This Depression Now offers some simple solutions. Krugman describes the economies problems as like a car with faulty electrics. There is nothing wrong with the structure of the car, it just needs a jump-start.

Cameron, Osborne and Clegg are so blinded by their ideological convictions that they are incapable of seeing any other practical alternatives. Along with Mervyn King it’s time that they moved aside and let other people, who have got some ideas have a go.