Saturday, 23 February 2013

The Economic Consequences of Mr Osborne

The sound of roosting chickens is unwelcome, as it may even drown out the vultures swooping round the foetid corpse of the Coalition.  The expected announcement that the UK has had its credit rating reduced is hardly earth-shattering given the build-up (thirty years of neo-liberal economics, asset bubbles and the rampant selfishness that characterises contemporary capitalism).  Given that the ratings agencies themselves are as culpable as the policy-makers in the creation of the current Depression there is almost a sense of poetic inevitability.

History may be kinder to Brown and Darling than contemporary commentators.  Once it became clear that there was both a confidence and liquidity crisis that was not going to go away with soothing words, the actions they took were as calculated in the circumstances as they could be.  The scale of the crisis, and the unprecedented risks imposed by globalisation and unfettered rampant amorality in the corporate sector, meant that actions were uncharted.  The corporate blood-suckers were happy enough to take the handouts while at the same time criticising the administration that had permitted their landing to be much softer and less personally humiliating than they deserved.

Osborne has famously banged on about there being no Plan B - and will doubtless do the same in the face of the current reputational implosion.  I have remarked in the past that there is no Plan A, which is the real root of the current stagnation, beyond carrying on with a watered-down version of the Brown-Darling formula of printing money and desperately hoping that a policy of public sector cuts (popular with the ignorant followers of such leeches as the Taxpayer's Alliance) will not actually achieve the opposite of its intended impact.  Quantitative easing, Mervyn King's panacea, is fine if there is cash circulating round the economy - but in a climate of fear people are paying down debt, saving against the  possibility that they too will be consigned to the recycling bin so that bankers may gorge, leading to what Keynes identified as the paradox of thrift - what is good for the individual undermines the benefits for the country (to coach it in terms that the Daily Mail might be capable of interpreting).

Osborne's economic literacy has never really been in doubt, as its existence is about as certain as Richard Dawkins's belief in God.  Government economic policy appears to be influenced by a cabal of those entirely culpable for creating the mess in the first place, bleating that deregulation and removing the controls on "wealth-creators" (i.e. speculators, parasites and the spivs) will somehow gimmick up the holy grail of economic growth.  It failed before, and there is no reason why the current inept clowns  can demonstrate any changes in circumstances that would encourage the credulous to even consider believing their lies and hypocrisy,

Trickledown as a policy approach has been used by neo-liberals as an excuse for destroying social cohesion and increasing inequality.  Reagan, Thatcher and Blair were all apostles of accreting wealth to the already-wealthy - all should stand indicted.  The levels of inequality in the UK, both between regions and classes, are dangerous territory for the whole community.  I have never been of the opinion that equality of outcome is either desirable or achievable, but, and this is the complex argument that the right-wing sloganeers can never grasp, promoting further inequality is immoral, evil and counter-productive.

If Osborne, his cronies and advisors ever escaped from the vortex of the rich, pseudo-prosperity of the Tory, central London bubble, they would realise that their ineptitude is storing up problems for generations to come.  Their defence may be that they represent constituencies outside, but this is specious - they live hermetically sealed among Tory groupies and the new squirearchy of the nouveaux and the corrupt - and their social and political circle regards the world beyond as an unfortunate set of problems that challenge their divine right to rule.

Travelling around the country, there does not feel to be the sunlit uplands of trickledown-led growth.  Instead we have social insecurity, the rich retreating into gated developments and the rest waiting for the next piece of bad news.  Town and city centres being denuded of shops, the capture of the social space by the corporate, and the general hopelessness that permeates almost everywhere outside Gideon's cocoon are all clear manifestations of failure.  Through applying the neo-liberal orthodoxies, this bunch of fools has inflicted far more damage than they could have hoped for.

Saddling people with debt throughout their lives (from tuition fees through huge, lengthy mortgages to small-scale debt in order to maintain subsistence) is a thoroughly immoral and counter-productive policy.  Social participation depends upon having some feeling that there is a social system worth joining, which is not based on either altruism or the form of cynical noblesse oblige that means that the Tory right supports minimal welfare provision as a form of social opiate.  The language of stakeholding is ugly, but it is important - the abolition of universal benefits and entitlements and the destruction of communal services such as arts and libraries has the consequences (intended or not) of reducing people's willingness to contribute and the legitimacy of state support for society's good things.

If this is Plan A, then it sets out such a dystopian and hopeless vision that it is quite surprising that anyone bothers to get up in the morning.  The creation of the strivers/shirkers divide was symptomatic of an mindset that is desperate for soundbite over substance, while playing to the shrinking gallery of those prepared to assume that the current economic maelstrom is the precursor to a new paradigm of a low tax, hi-tech knowledge economy - the vacuous phrasings of the fiscally and morally illiterate.

It could have been different.  For a party steeped in history, the Tories are remarkably doltish.  The nearest parallel remains the 1930s, and the ineptitude of the National Government's response to the economic crisis.  Hardly surprising that the Conservatives led most of this - applying discredited conventional wisdom and consigning at least five years and millions of people to a miserable subsistence before rearmament produced an economic stimulus.  Osborne, a prisoner of his client class, bestrides zero influence, doing nothing to mitigate the impacts on the wider economy and playing to a gallery of selfish, pig-headed commentators who know that supply-side "reform" is in their interests.

Recently Miliband has been moving away from the blindly-acquiescent endorsement of the previous Labour government and towards a tactically-inspired, but nevertheless welcome, reappraisal of what economic policy should do.  There is much more spin than substance, but the mansion tax and the 10p tax rate are simple representations that, managed properly, can create an expectation that the tax system will be equitable and fair.  This is welcome as it creates the climate for the post-2015 debate to have more space to engage with wider social and equity issues.

Any party serious about economic policy should be clear that there are are a number of priorities that economic policy supports, rather than leads.  The nature of the society that they want to promote is clearly the starting point - but in terms of short-term economic intervention should be asking three questions:

  • How do we reform personal tax?  Progressive taxation is axiomatic and economically prudent, and it might be an opportunity to create stepped bands of all direct tax, removing National Insurance anomalies and potentially even creating much more accountability through funding local government more directly.
  • What is corporate taxation designed to achieve?  Osborne seems to regard a race to the bottom as a means to competitiveness, rather than recognising that the human and physical resources that companies exploit are wider goods.  At the same time, there may be a case to combine business rates and employers' National Insurance to reflect the costs that capitalism imposes, and potentially influencing regional disparities (for example through a central London levy for infrastructure on the lines of the successful Parisian example)
  • Where can the state do the most good?  This is a much longer question to which I will return, but the current assumption that the private sector is the default solution is a pernicious, self-interested canard.
The deficiencies of the Osborne years will take a great deal to unravel.  As the most incompetent Chancellor that can be conjured up, there is a certain schadenfreude in his humiliation by the ratings agencies, but this is temporary.  The real task ahead is for there to be a genuinely libertarian left economic and social strategy that reflects reality rather than the pinhead bonus-grubbing parasites of whom Gideon and Dave are the poster boys.  Serves them right.

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