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The austerity consensus has collapsed

May 26, 2012 2:20 pm

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There is no alternative: the only way out of Britain’s current economic plight is massive cuts to public spending. Taxes on the wealthiest must be slashed: they are blocks on aspiration and economically counterproductive. Austerity is the only game in town.

Or so we have been told ever since the Coalition was formed in the rose gardens of Number 10 Downing Street. The overwhelming majority of the media has gladly reinforced the Government line, and those voices calling for an alternative have been marginalised and ignored.

That is what makes the findings of this week’s YouGov poll by the new trade union-backed Class think-tank all the more striking. The austerity consensus has collapsed – at least among the British public. Class tested the popularity of a number of policies championed by victorious French Socialist Presidential candidate François Hollande: the results surprised even an optimistic lefty like myself. 56% supported a new 75% top rate of income tax on those earning over £1 million: even more than four in ten Conservative voters backed the idea.

Seven out of ten believed that ‘redistributing wealth from the richest in society’ was an important aim in ‘setting economic policy’. While bringing the deficit down was considered ‘very important’ or ‘fairly important’ by 85%, the British public were near-unanimous (with 95% support) about the Government’s role in creating jobs and reducing unemployment, as well as encouraging economic growth.

In another departure from neo-liberal economics, 74% were behind proposals to establish a publicly-owned bank to lend to small and medium businesses. It is a demand that once languished on the fringes of British politics – but it is now firmly in the mainstream.

With house-building at the lowest levels for nearly a century, the British people are willing to back radical action. 64% support a national programme of building half a million new homes a year, including 150,000 new council homes. Most alive today will not remember that – in the 1950s – the Conservatives and Labour competed over who could build more council housing.

What is particularly striking about these findings is that the Government has been highly effective at hiding the failures of its austerity agenda. Most respondents were not aware that the Coalition has had to push its target for eradicating the deficit back to 2017, meaning at least two more years of cuts. Indeed, nearly seven out of ten did not know that 90% of the Government’s cuts are yet to take place.

When Lehman Brothers came crashing down nearly four years ago, there was some rather naïve hope (as it turns out) that neo-liberalism was a dead ideology walking. But the crisis has turned out to be one of the biggest opportunities neo-liberalism has ever had: across Europe, the frontiers of the state are being forced back, taxes on the rich slashed, services privatised, and jobs and wages cut.

But this poll is yet more compelling evidence that the mood is definitely changing. The forces of austerity have had a kicking in France and Greece; in the Netherlands, for example, the anti cuts Socialist Party is doing well in the polls. The backlash against austerity has arrived in Britain, too. Space has opened for a radical departure from the consensus: it now needs to be tapped into.

Today, Class hosted its first public seminar in Canary Wharf – the heart of British finance – bringing together a range of economists, academics and experts. There isn’t a lack of alternative policies on offer, but so far there has been a failure to link them together in a coherent narrative. If we are to genuinely defeat the neo-liberal consensus, that is the task ahead. Class will undoubtedly play an absolutely key role in doing just that here in Britain.

Related posts:

  1. Gordon Brown slams Greek bailout – and warns Europe over austerity
  2. Unemployment figures show austerity isn’t working
  3. We need more growth from the EU, Mr. Cameron, not more austerity
  4. Exploding myths on austerity
  5. Austerity or prosperity
  • treborc1

    The problem for me of course was labour agreeing with the Tories about cuts, you had Labour ministers falling over them selves to tell us how labour would cut  and cut as hard as labour, Darling was plain we will cut and cut as hard as the Tories, this to be seen as if they Tories were right and labour knew this.

    Funny how labour are now a changed party even welfare is now seen as being OK in part

  • http://www.themoronmormon.com/ TheMoronMormon

     Austerity – Growth = Economic Stagnation.

  • Chilbaldi

    trots write on labourlist? whatever next…

    • Dave Postles

      It’s the turn of the Althusserians next, I believe – they seem to have the present situation pretty much pat.  Trots are so passés.  Next you’ll be referring to prison diaries and Gramsci.  You really must get up to date.

  • wg

    Could we have a link to the poll please?

  • Quiet_Sceptic

    “nearly seven out of ten did not know that 90% of the Government’s cuts are yet to take place.”

    And that is a problem for both the pro and anti-austerity camps. We’re not in ‘austerity’ at the moment as the cuts are still in the pipeline, the state is largely fulfilling its Keynesian role as the back-stop for aggregate demand and yet we still have lack-lustre growth.

    It doesn’t look like reversing the austerity programme will be sufficient to restore growth, it looks like further increases in spending and hence the deficit would be required and that raises the tricky issue of whether it would be sustainable.

    • Brumanuensis

      No, we are in austerity. The government always provides a ‘backstop’ for aggregate demand; the point is that the current backstop is inadequate and this has played a significant part in our economic stagnation. 

      If we rephrase the second part of your question: is it sustainable to continue to tolerate the waste and economic under-perfomance that mindless austerity has wrought? Of course, the individual effects of a UK growth plan might be overwhelmed by austerity elsewhere, which does create problems, but the alternative of collective inaction isn’t much better.

    • Dave Postles

      ”Austerity’ is a climate and a perception, one which has been perpetrated by this government, inculcating fear and insecurity.  It is compounded by the failure of the institutions of central governance: the BoE; the ONS; and the Treasury.  They have been ineffectual in their forecasting, with the result that their every failure becomes more depressing of the spirit.  The erosion of purchasing power by cpi inflation is enough on its own to dampen aggregate demand (and the recent fall from 3.5% to 3.0% is likely to be an aberration, not least as svm rates increase and the recent fall in fuel prices will not persist). 

  • http://twitter.com/anthonypainter Anthony Painter

    Hi Owen,

    So we should listen to people when they agree with us but ignore them when they don’t? What your poll seems to say to me is that Labour has to be credible on the deficit *and* show that it has a future economic vision.

    Personally, I don’t look to polls for guidance on economic policy but if I did, I’d look to get a credible message on the deficit and on growth/employment combined. Or we can just cherry-pick bits of the poll but then the poll is just an interesting piece of data but largely superfluous.

    And let’s not go for the stimulus=growth=no deficit argument as a means of ducking the issue- unless you can show me that we can generate growth at Chinese levels.

    By the way, I like the very sensible arguments you’ve been making about housing benefit, tax credits, JSA, etc recently. Eminently sensible – and very ‘In the black Labour’.

    • trotters1957

      But it’s not just the public that have cottoned on is it.
      The IMF, EU, the CBI and all the broadsheet newspapers are realising that mindless austerity without growth is self defeating.
      All parts of the global establishment, apart from Cameron and Merkel, are starting to realise that not only is the policy boneheaded but that ropes and guillotines are being made ready.

    • Brother Number One

      More technocratic Blairism from Painter. Yawn.

      • Anthony Painter

        Let’s just use labels to prevent ourselves having to argue a case. Yawn.

        • John Dore

          Anthony why do you bother with a prat who fires jibes hiding behind a false name?

          • Brumanuensis

            Is that your real name, John Dore?

  • http://www.facebook.com/people/Stephen-Collins/100000033820132 Stephen Collins

    By austerity you mean shifting money from one department to another right?

  • http://twitter.com/Grim_Reaper__ Grim_Reaper

    Hollande is cutting more a year as a percentage of GDP than Britain is you utter donut.

    • treborc1

       He’s only been in two seconds he hardly had any time to do  anything, Donut

      • M Cannon

        He’s had time to say that he will be cutting faster than the UK government which has a very gentle programme of cuts.

        • treborc1

          My ass.

        • Brumanuensis

          Tell that to the disabled. Or people using legal aid. 

  • https://mikestallard.virtualgallery.com/ Mike Stallard

    Owen, you have not done your homework have you.
    This government’s expenditure is now a lot higher than expenditure was under Gordon Brown. The deficit is going to end up a lot higher than it was under Gordon Brown at the end of this parliament. The debt has passed a trillion pounds which it certainly never did under Gordon Brown.

    However, I take you point. If you totally overlook the debt and the deficit and are prepared to pay enormous amounts of taxpayers’ money to the bankers as interest, then do it.
    And make enormous promises too with other people’s money.
    With the electoral boundaries all over the place, you stand a serious chance of being elected. Idiots will fall for the lies. And they will rue the day when Labour was re elected as their  country becomes like Greece or like Ireland and independent Scotland becomes like Iceland.

    • Dave Postles

      ”However, I take you point. If you totally overlook the debt and the
      deficit and are prepared to pay enormous amounts of taxpayers’ money to
      the bankers as interest, then do it.’
      Do you mean like unproductive QE and ECB loans – the monetarist policy of the advocates of only fiscal consolidation?

      • https://mikestallard.virtualgallery.com/ Mike Stallard

        No.
        What I mean is this. To pay for the one million staff the state employs and the further millions who receive various kinds of hand-out, you have to sell bonds. These are supported by the future taxes.
        As soon as people begin to suspect that your debts are so enormous that you will not be able to repay them, you find that nobody is going to lend you any more money (buy any more bonds).
        Then what do you do?
        You tell me.

        • Dave Postles

          Bonds/gilts: that’s what the BoE is doing – buying gilts from the banks.  At some stage, the banks will buy them back for their tier 1 capital (esp. under Basel III).  Instead, the QE could have been invested directly in shovel-ready infrastructure projects.  As to the banks making interest on loans, that’s what they are doing with the ECB loans at 1% – lending out this money at higher rates.  Stupidity.  Anyway, I’m watching the football.

          • https://mikestallard.virtualgallery.com/ Mike Stallard

            So I suppose that the local Police will accept – what? – a pat on the head? Or the vulnerable man in the wheelchair when he gets his cheque will be pleased with a lecture instead?

            The government needs to Pay People!

            My question is – with what? How?

            And all I have received is a load of waffle.

            Before the Labour Party gets into government it must answer me!

          • leslie48

            How well we live depends on our economy and under New Labour we were lucky as the City/Financial sector generated a very large amount of revenue which -helped – pay for some infrastructure and social transfers. However that was then. Now we need to improve our manufacturing/ design /human capital such as science, engineering , technology, ICT and our universities are doing well on that front as more small business are created etc., 

            Public spending will help these  developments – you do not create a  - science research graduate -privately ;  but yes I feel you are right we do need to address our social spending. This is difficult , has to be balanced and needs  social justice in mind- so we reduce teacher assistants in wealthy areas but not poor areas?? I do not know but we need policies to evolve in these areas. ( Pupil premium maybe OK)  

          • Dave Postles

            ”Before the Labour Party gets into government it must answer me!’
            What a strange comment, as if no one else matters.

            ”And all I have received is a load of waffle.’
            It’s hardly worth responding to you.  Precise policy prescriptions are offered and you denigrate them as waffle.

        • derek

          Is it all really about a paper worth? surely the printed ink tokens are the obstacles which create an undivided world. If we have the materials and the knowledge then why continue to divide? why don’t we just have  an enormous funeral pyre and watch the flame grow higher as we burn those greens backs and start being human for the goodness of all mankind. 

          • https://mikestallard.virtualgallery.com/ Mike Stallard

            You all talk as if we were debating something the Dark Side of the Planet Jupiter.
            Of course it could never happen here! We are White!We are British !We are a Rich Nation!etc.So was Greece. So was Iceland. So is Ireland, or Portugal, or Spain, or Italy.Once the money runs out, nothing is going to pay the wages for everyone who works for the State, who gets State benefits, who is on a Pension, who needs Compensation or who wants the services of the National Health Service.

            Increasing the debt means increasing the risk.
            See you at the dustbins!

          • derek

            I’m surprised you acknowledge another planet, with your caution I’d have thought you’d be proclaiming a flat earth and if we go any further will just drop off. Seriously, are you suggesting we continue to dump thousands of tons of food so people can queue to pick the scraps from the bins? transitional movements are binary huge sums of cash aren’t visible?

          • https://mikestallard.virtualgallery.com/ Mike Stallard

            I give up……..

          • Alexwilliamz

            The first step on the path to enlightenment…..

        • Chris Cook

          Actually, that’s a fallacy. 

          You don’t have to sell bonds.

          The government could do what it did before private banks came along in1694 and simply issue  stock.

          • http://pulse.yahoo.com/_ZPXYLRVP4XOIGGDJWAL6HUO7U4 David

            You appear to imply that the government issued stock before 1694.  Are you talking about the raising of war taxes?

          • Chris Cook

            @yahoo-ZPXYLRVP4XOIGGDJWAL6HUO7U4:disqus 

            Sovereigns raised money for public works, warfare and much else for over 5 centuries by issuing stock, initially as split tallies, and latterly as annuities.

            This inconvenient truth has been pretty much airbrushed from history since the private banking system privatised sovereign credit.The stock part of tallies was returnable to the Exchequer in payment of taxes which as far as I know were primarily levied on land.

            The gilts which comprise the ‘National Debt’ – ie ‘gilt-edged’ stock – are in reality more akin to interest-bearing Preference Shares in the UK  Corporation. ie a National Equity.

    • Brumanuensis

      If I could just leap to George Osborne’s defence, the fact that the national debt has passed £1 trillion doesn’t matter. As I have said time and time, again and again, on this website, quoting absolute figures without context is unhelpful. What matters is the percentage of economic output represented by public debt. This tells us roughly how affordable public debt is (roughly). Quoting large numbers doesn’t.

  • M Cannon

    Of course people will prefer the option of being given lots of money themselves while others pay for it.  Until it is put into practice and they see what disaster follows.  Then, when the situation is even worse, they learn their lesson and repent.

    Mr “Wolfie Smith” Jones is a committed class worker with no idea of practical realities.

    • M Cannon

      I should have added that I hope Mr Jones and his mates enjoy spending this glorious weekend indoors: dedication indeed!

    • trotters1957

      “What disaster follows”
      You mean like, increased debt, increased deficit, increased unemployment, increased balance of payments, double dip recession.

      Those corporation tax cuts and tax cuts for the 1% really are working aren’t they?
       30 years of trickledown, lies and con tricks.

      You’ve fallen for it all, hook, line and sinker.

      • M Cannon

        Debt is increasing and will continue to increase during this Parliament and beyond.  That is the splendid legacy left by Mr Brown (and his sidekicks the 2 Eds).  The present government is trying to reduce the amount we borrow and to balance the books at some time in the future.  The last government tried to bribe its way to re-election and postponed all difficult decisions.  It acted in the interests of Mr Brown and his henchmen none of whom are fit to hold office ever again.

        Unless and until Labour acknowledges the utter mess it made of our economy and finances, it does not deserve a hearing on the question of economic or fiscal policy.

        The only tax cut for the 1% is a partial reversal of a measure introduced prospectviely by Mr Brown as he faced electoral meltdown.  Companies need to retain their profits if they are to attract investors and make investment.

        • robertcp

          I agree that Labour left a mess for the coalition to sort out but a fiscal stiumulus was needed before the General Election in 2010.  Also, the Coalition’s aim to eliminate the deficit by 2015 was unrealistic.  They tried to reduce the deficit too quickly and the economy has ground to a halt.

          The big mistake that Labour made was not realising that a financial crisis was coming and not taking action to mitigate that crisis.  They must have realised that house prices were too high and banks were lending recklessly.

        • Brumanuensis

          How does a cut in income tax help companies retain their profits?

    • Alexwilliamz

      Are you referring to financiers and bank executives here??

      Oh no, you mention repentance so I must be getting confused.

  • http://twitter.com/robertsjonathan Jonathan Roberts

    Owen, I’m sure your views on austerity, which you repeat and reword in most articles you write, will continue to play well amongst those of a similar political persuasion to you.  It is, afterall, the easiest thing in the world to say ‘everything is wrong’.  But here are only so many articles like this you can write where you tell us there is an alternative but don’t actually tell us what you think it is.  And you write a lot of articles.

    As a country we spend 47.3% of our GDP, this is huge and makes us one of the highest spending countries on Earth.   Lower spending countries like USA (39%) and Germany (43%) are rec0vering quicker than higher spending countries like the UK and France (53%).  Spending in the UK is still rising, significantly, and we spend significantly more than other countries, so this isn’t really austerity. 

    If we had real austerity I don’t think it would work.  But the era of high public spending has failed too – as shown through repeated Labour Governments leaving office without any money left in the bank.  The answer will, like most things, be found somewhere in the middle.

    I would also be very careful in using polling data to guide economic policy.  Not every respondant can be relied upon to know the first thing about the economy so polls really shouldn’t make you change your economic policy (indeed, if people changed their viewpoint simply because the public doesn’t agree with it, many socialists would look at ballot box results and conclude they needed to change their mind)  Indeed you and I probably know the same amount when it comes to details of the economy – rather little (neither of us ready economics at Uni, we’re both ex-MPs researchers, you’re now a political commentator and I work in industry – hardly a job created between us). We both have limited expertise as economists and little experience of running anything.  But if you want to build your career on writing economic articles, you’ve got to at some point let us know what your alternative is so it can be scrutinised and considered. Otherwise it’s all just bluster that plays well to activists, but won’t actually do any good.

    • AlanGiles

      Jon: Owen is as entitled to air his views just as much as you or me. You frequently rehearse your somewhat relaxed views on personal wealth (you seem to believe it is somewhat naughty for the government to take some of the unearned income that people inherit from their parents, suggesting that because somebody is dead or dying they should be allowed to do exactly what they like with their last penny, and damn the Treasury.). Fair enough, it is what you believe, and Owen, a very honest man clearly believes in what he says. I would respectfully suggest it is a little below the belt for you to imply repetition when we all do it, to some extent.

      We all tend to restate our own positions, and that is fair enough. At least Owen isn’t “at it” like so many of the political class. We all tend to believe what we have always believed in, and it seems some politicians still believe they are above the law:

      http://www.independent.co.uk/news/uk/politics/tory-chief-warsi-failed-to-declare-rent-income-from-flat-7791512.html 

      They never learn. Back to the bad old days, of the dogs returning to their own vomit!

      * Art Blakey (1919 – 1990)

      • AlanGiles

        Jon: Another point, if I may:  As you take Owen to task for saying what he believes, can we look forward to you saying something on the article Chris Williamson MP wrote yesterday?.

        If we look for honesty in LL articles, Mr Williamson has been very devious: it is all Mrs Thatcher’s fault that council housing has been decimated. That’s right the lady who left Downing Street in November 1990 – if you read CW you would never believe we were in power for 13 years between 1997-2010, that WE failed to build council housing – in the first 4 years Blair was too busy being the Mr Show Business of politics,  mincing round TV studio sofas and ageing pop singers, and in his next 6, as Squadron Leader Blair he was too engrossed in sending our country to war, in his efforts to crawl to George Bush. Mr Williamson even forgets very recent history, how when he entered Downing Street in June 2007 Brown in his very first speech said he would institute a “massive” programme of council house building. It was never even mentioned again by him. He might not have become an MP till 2010, but surely Williamson  has some recollection of the years New Labour spent in office.  He is 55 for God’s sake!.  Frankly, it is one of the most bogus articles I have ever read on LL – have you nothing to say about it?. I just looked and up to this morning apparently not.

        If you are going to attack the writers, Jon, be even handed and attack those who deliberately mislead.

        * John La Porta (1920 – 2004)

        • http://twitter.com/robertsjonathan Jonathan Roberts

           Hi Alan, it was not a personal attack.  Owen has done phenomenally well for himself, he sells a product (his political views) to consumers who want to buy it (newspapers, TV and radio shows) at a healthy profit for his personal gain.  I have no doubt he’s a good bloke too, and recently stuck up for him when he was getting some stick over a tv interview. Good on him for his personal success which was achieved not because of the state, but because of his own personal responsibility and hard work – I’d love to be paid for my political views but clearly I didn’t have the same entrepeneurial spirit! I do have to say though that he doesn’t get much scrutiny.  He is now seen by the media as an economics expert(it’s what he talks most about in media) who pay him for his views, but as I said he is about as much of an economist as I am.  And I’m really not one.  That means that in difficult times the influence he wields could be dangerous if he, like most people who aren’t economists, doesn’t really have a lot of experience in the field.  I think Owen is fair game to be scrutinised when his support base is growing.

          I know my views aren’t always to the tastes of other LL readers – but by God you can’t say my views don’t get scrutinised!

          Btw I don’t read every article on LL, but I’ll read WIlliamson’s later this morning.

          • AlanGiles

            Hi Jon, Yes I can see you have responded to the hlousing thread – you will also see a “LIKE”.

            I frankly think we need more contributions from the left like Owen, because we do have to endure almost weekly (or weakly) articles from two LL writers who make up what I might call the para-military wing of New Labour (RM and PR). It is also nice that Owen is still a young man and will be there to fly the flag when us oldies are not around to do so.

            I will be enjoying thesunshine myself this afernoon after a little weeding in the garden. Weeding and reading – a good trade-off.

            * All my links this morning were that all the musicians were “East Coast” musicians, having done the West Coast yesterday

          • Dave Postles

            He has as much expertise as Osborne, so why not?

    • Loxxie

      Forgotten about the stimulus that happened in America have we? Silly boy!

      • http://twitter.com/robertsjonathan Jonathan Roberts

         No I didn’t Loxxie.  The stimulus package you refer of was the ‘American Recovery and Reinvestment Act 2009′.  The figure of 39% of spending to GDP ratio was taken from 2011.  So no I didn’t forget.

    • Mark

      As far as recovery goes isn’t the fact that America and Germany are, respectively, the BIGGEST ECONOMY IN THE WORLD and BIGGEST ECONOMY IN EUROPE more likely the reason why they’re bouncing back faster than the UK than their spending levels relative to the UK?

      • http://twitter.com/robertsjonathan Jonathan Roberts

         But why do they have bigger economies (per capita)? Both those countries have a much more deregulated jobs market for a start. Germany has also done great things around childcare for working people which we should look at too.

        • Peter Barnard

          It’s got little to do with a deregulated jobs market, JR, and a lot to do with capital investment per employee.

        • Dave Postles

          Are you sure that Germany has a ‘more deregulated jobs market’ in the sense of employee protection? 
          Would you really wish to pursue the employment prospectus of Walmart and the Koch brothers?

    • Brumanuensis

      Quoting absolute percentages is a bad way to discuss fiscal policy. The key is to consider what that sum is being spent on: for example, your figure does not take into account what proportion of that 47.3% is spent on automatic stabilisers, against what percentage is spent on services or on investment. I would wager that with a lower unemployment rate, German spending on automatic stabilisers is lower and spending on investment higher. After all, German government purchases rose by just under 2% in 2011 (so much for German austerity). UK government investment has plummeted – playing a significant role in the Q1 2012 GDP reading – and departmental budgets have shrunk overall. Of course, UK government austerity is not the only reason for the UK’s economic problems, but if we cast our minds back 2 years ago, a bright consensus had emerged that austerity would boost confidence and free the way for the private sector. And lo and behold, it didn’t. Judicious public investment at this stage would facilitate economic growth and make re-balancing the budget during the good times easier.

      Also, when you say ‘repeated Labour governments leaving office without any money in the bank’, that is incorrect. If you use the ONS’ data then for 1951 and 1970, there was a net surplus when Labour left office ( http://www.guardian.co.uk/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data ). If we consult p. 3 of the most recent statistical bulletin from HMT ( http://www.hm-treasury.gov.uk/d/psf.pdf ), we see that public debt, having increased between 2002 and 2005 from 30 to 35%, had levelled off. This is reflected in public borrowing figures, which show that pre-crisis public sector net borrowing peaked at 3.4% in fiscal year 2004/5, before falling to 2.4% in 2006/7 fiscal year – the last pre-crisis fiscal year. So the trajectory of the deficit was not upwards, but downwards.

      We are missing the real problem here. The UK’s tax system was reliant upon receipts from a too narrow base of housing and the financial services industry. When thoses sectors pancaked in the GFC, tax revenues collapsed. The lesson is that Gordon’s greatest mistake was to rely on volatile cyclical earnings and that in future a more robust and diversified tax base needs to be cultivated, to prevent one sector of the economy from hitting government finances so hard.      

    • Brumanuensis
    • Alexwilliamz

      We do need to get beyond metaphors like ‘leaving office without any money in the bank’ as if the government is an individual maxed out on credit cards etc etc. I’d be interested to know the last government to leave money in the bank as you call it. As far as I can remember Labour left government with Billions in the banks, that was one of the problems…

      You are not wrong to challenge the party in putting together a credible economic policy, although I think Darling would have ‘muddled through’ far more competently than the current idiot, had thing turned out differently. But the key debates need to be as you say what and how we spend money and how we can get the public spending best used to support sustained development of the country and the long term security for the living standards for all. In this regard there may be more than the present way of going about doing things. I’m pretty sure that the ‘high public spending’ actually saw far more cash line the pockets of the corporations and rich than it did to substantially change the lives of the millions with a limited stake in the current political/econolmic settlement.

  • Leslie48

    The “Austerity only” approach is declining especially as it begins to hit electorates hard and most importantly it -disproportionately- hits those least responsible for the economic crises such as poorer and younger families and jobless youth.  Yes  ”the UK tax gap” ( tax evasion + tax avoidance)  can be more effectively plugged to increase tax revenue and yes we need public spending aimed at the  ”infrastructure”   spending as this creates most new jobs. 

    However we cannot  ignore the social and economic problems relating to what will be reduced public spending on matters  such as social transfers like tax credits, housing benefits, unemployment pay.  The UK under any government will have to do that as Milliband and Darling have acknowledged.  The welfare state came into being to support the vulnerable and those suffering misfortune but it cannot be a way of life for those young, fit and able to obtain work nor can it be a seen as a way of supporting large numbers of children or single mums or as attractive reason why migrants prefer the UK to other European states.  This area needs some intellectual and economic policy focus. 

  • greenacre

    The clarion cry to have a nice big slice of others’ lolly wasn’t quite so deafening when everyone, from grannies in council estate flats, through to art-collecting magnates in Kensington multi-room mansions, was selling their home to make a quick buck.

    By all means change government, if you think that will magically transform our gigantic debt into lollipops growing on trees, champagne-filled fountains playing in every city centre, and work for all, etc. But, please, keep a bit of self-respect and let those who managed to prosper keep their rewards, instead of thieving it in the name of doing good.

  • NT86

    Yawn, more hot air from one of the biggest champagne socialists in the country. There’s enough stupidity Owen conveys in the Independent which never gets passed student level politics. People who have experience of living in the real world (some who may be socialists themselves) do not need this patronising drivel being thrown at them.

    Relying on the findings of one thinktank is pretty myopic.

    • Brumanuensis

      If you find him so boring, why are you going out of your way to read his articles?

  • girlguide

    As one of the German ministers has said `saying you want growth, is like saying you want world peace’.  Easy to say, but not so easy to achieve.  

    Hollande’s vision of growth is also easy to achieve – Germany must guarantee Eurobonds.  But the Germans are saying that France and Italy can go ahead with Eurobonds, if they are prepared to put their money where their mouths are, and they’re not able to do so.  Hollande will probably pull back from his policies faster than Mitterand did when he was elected – it took Mitterand twelve months to start backpeddaling.

    Look at Hollande’s time in power in the Correze, which has left that region dubbed as the Greece of France.  He increased the region’s debt by 25% in just four years, with no corresponding rise in growth.  

    • Dave Postles

      An alternative perspective is that the Germans will be perceived to be obstructionist, isolationist, dictatorial and self-interested.  The other variable will be if Obama is re-elected.  The German economy will also be affected if there is a harder-than-expected landing in the Chinese economy. If I understand correctly, the German government is also opposed to EIB pan-European infrastructural investment.  There will probably be severe recriminations.

      • girlguide

        It is hardly isolationist when your position is backed by the strongest economies in Europe.  A huge majority of Germans are against the idea of Eurobonds.  It would be political suicide for Merkel to go against that.

        • Brumanuensis

          In that case, bye-bye Euro.

          Which would be nasty for the Germans. They’re reliant on a devalued Euro to help maintain their large trade surplus. If the Euro is reduced to the core northern European countries, the new Euro’s appreciation in value would badly damage German manufacturers.

          • girlguide

            You underestimate the Germans.  They would do whatever necessary to beat competition.  I work with Germans businesses every week, and they are beyond impressive.  What they see as the way forward for Europe is not that they have to guarantee the overspending of others, but that other eurozone countries adopt German working practices to become competitive.  

          • Dave Postles
          • girlguide

            Hours worked are meaningless.  You could, if you could get away with it, `work’ 45 hours a week and spend your time picking your nose.  What does count is productivity.  Hours worked in the public and private sectors in the UK might look broadly similar, but the productivity between the two sectors is not.

          • Brumanuensis

            That’s a meaningless comparison because in most cases you won’t be comparing like-for-like.

            Of course, hours worked is not the end of the matter, but it does militate against the common German stereotype that the Greeks are lazy and feckless.

          • AlanGiles

            ”
            You could, if you could get away with it, `work’ 45 hours a week and spend your time picking your nose”

            Thanks. You can always be relied upon to lower the tone, dear. 

            * Leo Parker (1925 – 1962)

          • Brumanuensis

            Germany did not rely on internal devaluation to become competitive. It was a near-purely export-led recovery, in which they moved from a current account deficit of 2% GDP in 2000, to a surplus of 7% GDP in 2007.  It was German surpluses flowing into the Med countries that blew up the housing bubbles that have done so much damage to Spain and Greece. Coupled with the Euro being over-valued for Greece.

            No amount of vim, pep and vigour will save Germany if the exchange rate goes up the swanny. And given that their Eurozone neighbours represent a significant fraction of their export market, a downturn there will hit them hard, even if the exchange rate remains competitive. 

            As for over-spending of others, do you include Ireland and Greece under this heading?

          • Brumanuensis

            Shorter me: It is physically impossible for everyone to simultaneously export their way to recovery.

            It would help if the Germans accepted that they need to reduce their trade surplus. But for political reasons, they won’t.

          • treborc1

            Tell me about the working practices  in Germany, something must have changed since I was their last.

        • Dave Postles

          Bavarians are against assistance to other states in Germany.  Apart from the Dutch government (but not necessarily the Dutch), Germany is pretty much isolated.  So much for a European union. 

  • JJR

    I wonder what Owen understands by the term neo-liberal economics, is it a definition of something or a catch all to encompass the market leaning policies evident since the late 70s. I think it’s important to understand how he defines it, because whilst there has been a lot movement to create world wide free markets, and whilst deregulation has been achieved in certain areas, it’s not been the massive one way shift the crowd chants would have us believe. At the same time as this supposed open door to free markets and the supply side, there has been huge expansion in the state across the west, funded as much with debt as with the nominal growth in output. The interventions in markets have been consistent and large with government agencies swelled to sit on the shoulder of every sector so long as it can bear the ever increasing weight, often with the acquiescence of the large market leaders who understand how regulations help them by creating barriers to entry and imposing costs that small competitors struggle with. We have seen the age of the big corporation and the big state aligning their interests, if that is neo-liberal economics, fine, but it has very little to do with free markets or deregulation

    • Daniel Speight

      Ah JJR I hope you don’t mind others joining in. Defining neo-liberalism is wretched task. Of course we could pull a definition off of Wikipedia but that wouldn’t tell the whole story. We could just say it’s the ideology of the Hayekian economists except who knows what Hayek himself would have really believed the answers for today would be.

      Most likely I would plump for the simplistic reactionary ideas of Ayn Rand whom the great banker Greenspan followed. It’s fitting that we should have been gifted it by a science fiction novelist, after all another great SF write gave us a religion, Scientology, that makes about as much sense as neo-liberalism. (So do you think most Scientologists are neo-liberals, or vice-versa?)

      You see the problem with neo-liberalism is that it’s a mythical beast. If you have ever seen the old TV Series The Onedin Line I think we can start to get close to the core beliefs. You see there was once this golden age when nobody interfered with a man’s right to make money and everyone, or at least some, were very happy.

      But JJR you do have it correct. It would be impossible to bring back this time even if it had existed in reality rather than just in a TV producers mind. Government and business are so intertwined that short of a rebuilding after a nuclear holocaust or some viral destruction of most of the human race, it’s never going to happen. And that’s why it was such a silly idea to follow right from the beginning. It needed the nuts like Enoch Powell and Keith Joseph just like the religious sects need theirs.

      • JJR

        That’s a thing that gets me when this term is thrown about so, the catch all nature of it, a sort of mythical thing that has never actually been, or at least not as the crowd say. Greenspan is a case in point, had he been a dedicated follower of Rand beyond a youthful fascination, he would never had gone to run such a powerful instrument of state intervention, let alone made the huge market interventions that lead to the bubble we are still coming down from. 

        Interesting point about what to follow. Up until the 70s it was all about Keynes, demand management, following the belief that economies can actually be scientifically managed, and it was only when the those policies failed to deal with theoretically improbable circumstances of inflation and unemployment that the moneterists got a say. They still believed they could manage things, just with different equations. 

        Technology, fiat money and the ability to produce globally are forces that push economies beyond scientific control, they in their very nature make it less labour intensive and labour costly to produce goods, giving those who can combine the land, labour and capital an ever increasing advantage in gaining profit from the goods produced. 

        What we have seen is some attempt to insulate the people of the West from the jobs disappearing to technology and the third world through the big state via public employment and transfer payments, that has been the true consensus. The balance has been in how much of the big state the private economy can sustain versus how far the state can be pushed back whilst maintaining social order and cohesion. It’s come to a head because the debt that eased it along is now a poison. 

        Any alternative that could have been followed or could still be followed would have to address the actual causes behind the so called policies, I prefer to call them reactions. Accepting you can do little to halt technology, any reaction would seemingly have to involve rowing back the amount of freedom of movement of capital and therefore goods across borders.

        • Brumanuensis

          I get the impression you’ve spent a lot of time reading Mises. And possibly Rothbard. 

        • Brumanuensis

          I get the impression you’ve spent a lot of time reading Mises. And possibly Rothbard. 

          • JJR

            I spend a lot of time reading a lot, I think these things go beyond ideology or orthodoxy, but at a basic level it’s about how human beings interact and react to incentives and how difficult it is to scientifically quantify that and therefore scientifically manage that. There will always be some new variable that moves it on from points where people think they have cracked it. 

            My concern is that those in charge of reacting to events, and they will do this in order to correct a perceived imbalance or affect behaviour do so leaning to heavily on orthodoxies and ideologies that create as many problems as they seek to solve. They and others have deluded themselves that they know how to or are well placed to regulate and incentivise human behaviour. 

            Our human existence has in many ways been about the trial and error of looking for this way and some explanation for what it’s all about anyway, leaning on religion and latterly science among other things along the way. However it seems to me such as making a quantitative science of incentives, as economics has become to many is going to be doomed to fail. Seems to me it’s more of a philosophical pursuit and a study of history, of reason and numberless probability.

            In our current position and stage, those mainly concerned with inequality and reducing disparities should perhaps look a bit wider and notice that there is an eqaulisation going on, it’s occurring between nations though rather than within them, to those who are producing from those who are consuming. 

            Our own discourse is over how to rectify that we are consuming more than we produce and are running out of capacity to do so with future periods of reduced consumption building up. The orthodoxy is to chase demand and consumption in the short term, still believing there is a formula to it, beyond the narcotic buzz, that we can keep delaying that reduced consumption or not notice it when it comes. We are though helped along the way by the rise in consumption in the formerly third world and how that will naturally push more production back to us, but in between times we are pretty much stuck with the balancing act we’ve created, unless we are going to build high walls and go another way.

          • Brumanuensis

            I agree with you up to a point.

            It is true, in my opinion, that the mathematicisation of economics in recent decades has led to what Sandel calls ‘the market society’, where economists often sound like Johnsonian cynics who know ‘the price of everything and the value of nothing’. The desire to express everything in quantitative terms has tended to breed solutions that assume that efficient production is the only goal worth pursuing, without regard for equality, etc. Sometimes an obsession with pseudo-precision means we venerate statistics without the necessary caveats. The GDP figures are a case in point: by obsessing over whether growth was 0.1% or -0.1%, we miss the point that the practical difference is minimal, even if the psychological one is huge. We also forget to ask if, as Robert Kennedy famously asked, GDP is the best measure of our well-being.

            Useful economic tools have become ends in themselves. GDP and quantification are useful tools, especially when we want to approximate the economic consequences of something that is not strictly calculable (e.g. climate change), but they have been turned into goods in their own right. I aslo share your views on over-consumption.

            However:

            I worry you’re going too far. It’s one thing to say that economics may think too highly of its predictive abilities – I always remember Paul Samuelson’s joke about predicting ‘nine out of the last five recessions’ – but useful predictions are still possible. We can quantify things and we can accurately use fiscal and monetary policy to better develop the economy. It may be hard and people may make mistakes, but that doesn’t mean it’s impossible. I mention Mises, because in ‘Human Action’, he has a spiel about how his views are axioms and cannot be refuted with evidence, which is a sure marker of a crank in my view. Hayek had a slightly sounder approach which argued that in the social sciences, appeals to evidence could not prove a theory. This is epistemologically-valid, but he used it, along with his work on prices, to suggest all regulation would and that government’s would always get things wrong, which I think is not sustainable and says more about Hayek’s prejudices than economic fact.

            Anyway, I mentioned Mises because I caught ‘fiat money’ in your initial post and that set off alarm bells in my head. I’m sorry if this offends you, but gold bugs are a pet peeve of mine. But thank you for the interesting posts.

          • Brumanuensis

            ‘would fail’ and ‘governments’.

          • JJR

            No offence taken, and thanks for the considered reponse. Whilst I think Mises, Hayek and that school are on the right lines as far as the (non)ability to  efficiently control the economy, there is enough divergent, opposite and future thought to stop short of calling them the final word.

            Of course it remains a possibility that a government can get it right, I’m just not sure we have got anywhere near. Sure we know what certain actions are likely to cause, we know how to pump GDP figures in the short term, but we have yet to find a competence that can even withstand the incentives of the politicians to remain in office, let alone accurately control an economy. We are yet to be able to move in a universally good way or even agree on what good is

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  • girlguide

    Can somebody please just slip me a length. Thank you.

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