I think we should be explicit… George Osborne is using neoclassical economic theory as a ‘blind’, in order to push through an ideological agenda. It has nothing to do with creating an economic recovery. Osborne wants to lock-in irreversible changes to the social and employment fabric of the UK. He and his ilk, are not Conservatives in the classic sense of desiring to preserve the connections between the past and the present. They are deliberately wrecking the UK economy (any new government will be faced with a shortfall in output of approximately 20% of GDP or £250+bn) but of course, any crisis is a money-making opportunity for the financial speculators, the corporations and the super-rich 0.003%.
If you want to know where, and what model, Osborne, Letwin, Maude et al are following.. look across the Atlantic at the US. Osborne is known to be obsessed with American politics. The Independent’s Steve Richards agrees that Osborne’s ‘philosophical’ position is to the right of the Republicans.
‘The Wrecking Crew’ is the description Thomas Frank gives to the economic/political strategy of the Republicans (in his 2008 book) but the same features have become all too familiar in the UK:
“Fantastic misgovernment of the kind we have seen is not an accident, nor is it the work of a few bad individuals. It is the consequence of triumph by a particular philosophy of government, by a movement that understands the liberal state as a perversion and considers the market the ideal nexus of human society. This movement is friendly to industry not just by force of campaign contributions but by conviction.”
The goal of the Republicans (Osborne et al) was/is to actually erase liberalism (social democracy, democratic socialism, the left)… an ‘end of history’ in which taxes and onerous regulation will never again be allowed to threaten the fortunes that private individuals make for themselves. This is what Karl Rove meant by creating a ‘permanent majority’, and by Margaret Thatcher who said “Economics are the method, the object is to change the soul’.
‘Casting back to the early days of the conservative revolution, Frank describes the rise of a ruling coalition dedicated to dismantling government. But rather than cutting down the big government they claim to hate, conservatives have simply sold it off, turning public policy into a private sector bidding war …
It is no coincidence.. that the same politicians who guffaw at the idea of effective government have installed a regime in which incompetence is the rule. Nor will the country easily shake off the consequences of deliberate misgovernment through the usual democratic remedies. Obsessed with achieving a lasting victory, conservatives have taken pains to enshrine the free market as the permanent creed of state.’
This ‘economic’ strategy is described in more detail by Thom Hartmann. Essentially, the Republicans deliberately aim to run up huge deficits by cutting taxes for the rich (whilst keeping on spending).. a deficit which is then inherited by the Democrats. As Frank explains.. ‘the main reason conservative administrations run up as large a deficit as possible – is that deficits defund the left’ and prevent them from implementing their social programmes when they return to government.
Robert Reich, former labor secretary to Clinton, commented on the Republican approach:
‘If the public thinks government is wasteful [useless], that’s fine. That reduces public faith in government, which is precisely what the Republicans [Osborne] want.’
A major factor in the success of this strategy is that the right can play dirty (very dirty) but intrinsically, the left cannot. Furthermore, the mainstream political commentators constantly give the right’s lies and spurious rationales an undeserved credence, often in the name of impartiality. The narrative… regardless of the facts… is all.
So what is to be done?
The current Labour leadership seems to be falling into the trap of accepting the ‘lack of funding’ caused by Osborne’s mismanagement of the economy. Crazily, Ed Balls has even suggested adopting Osborne’s spending limits for the first year if they form the government in 2015. However, his economic approach, Neo-Keynesianism, is a horrible, contradictory synthesis of Keynesianism and Neoclassical economics, which makes no sense to the post-keynesians (Modern Monetary Theorists) and Steve Keen.
These heterodox economists are the natural inheritors of Minsky and Kalecki’s work which pinpoints the significance of private debt levels, and the need for full employment. Professor Bill Mitchell writes of Osborne’s economic deception in the UK:
None of this austerity is remotely justifiable. The state budgets collapsed largely because of the automatic stabilisers which are like canaries in the mind – they tell you that the real economy is in trouble. The fiscal aggregates (budget deficit etc) are just like thermometers – they send signals about how the economy is going.
You do not cure a failing real economy by cutting spending. That is like curing a cut leg with amputation and then leaving the wound open. It is madness.
There are workers ready and willing to work. People are pessimistic. They need to feel secure and confident. Keynes knew that well. You don’t give people hope by worsening their circumstances. Desperation does not lead to positive responses.
The people are rebelling in the Middle East as an expression of their recognition that their governments have failed to represent their best interests.
It is clear to me that the British government and the US governments (and many state governments in the US) are no longer serving public interest. They are punishing innocent and disadvantaged citizens to satisfy the ideological (religious) beliefs of a monied elite.
I think people don’t tolerate that forever.
Ed Balls should step out of the Tory trap and align the Labour Party with a commitment to full employment, a job’s guarantee for all who want, and are able to work. By offering the alternative of a job or benefits, a Labour government could raise the wages of the private sector worker because employers would have to at least match the ‘government’ jobs in order to get staff.
Increased employment and increasing wages and benefits, would automatically create the demand… the lack of which is the real problem beseting the UK economy.
What sort of government jobs?
Quite apart from replacing those removed by this government from nursing, the police and social care etc, we need a mass building programme of new affordable ‘council’ (democratically-owned) housing, and retrofitting of the existing housing stock with insulation and energy-conservation measures. The UK has an abundance of renewable energy opportunities and could be a net exporter of energy. Developing those resources could create the new manufacturing and apprenticeships in the non-South-East UK. Scotland is leading the way but is still suffering from a lack of political will from Westminster. Under this government, ‘Green’ capitalism has been shown comprehensively to have failed.
We need a New Green Deal. If government can create £350bn of Quantitative Easing for the banks, they could easily do the same for the real economy and real people. But do not expect to get such a solution from Osborne and the Tory/LD coalition.