Osborne’s targeted austerity measures, based entirely on Conservative small state ideology, rather than economic necessity, have established an economic trap. It’s a vicious cycle, because tax cuts to the wealthy, and low, stagnated wages reduce Treasury income, thus increasing the deficit – which is the gap between Treasury income and what is needed for spending. His solution? Cut spending and public services. Again and again.
Yet this is clearly not working. Reducing spending means shrinking the economy further. The services that the state provides – education, healthcare, social security, housing, for example – also contribute to our wellbeing and raise our standard of living. Of course reducing consumer spending also serves to deflate the economy further.
Meanwhile our overall debt has increased. It’s a strategy doomed to failure all round, and it certainly exposes the lie that the financial burden of paying the deficit is shared and that “those with the broadest shoulders” carry the largest burden. Those experiencing the worst of the cuts are the poorest.
I’m not sure if the Conservatives have massively understated the damage that spending cuts inflict on a weak economy because they don’t understand that this is the case or because they don’t actually care. But you would think that the evidence after five years would have prompted a rethink, if it were the former case.
The initial economic research that was held up to support austerity measures has since been thoroughly discredited. Widely touted statistical results were, it turned out, based on highly dubious assumptions and procedures and a few outright mathematical errors – it didn’t stand up to scrutiny.
The textbook answer to recession was and still is fiscal expansion: increasing government spending both to create jobs directly and to put money in consumers’ pockets to stimulate the economy. Fiscal stimulus measures should continue until economies had recovered. John Maynard Keynes wrote in 1937: “The boom, not the slump, is the right time for austerity at the Treasury.”
You really can’t cut your way out of a shrinking economy. Austerity and spending cuts are actually intrinsic to New Right and neoliberal ideology. Margaret Thatcher radically cut public spending, created recession and generally messed up, but Cameron’s government have gone much further than she dared.
Conservatives have manipulated the general public’s lack of understanding about basic economics, and lied about the “dangers” of debt and deficits in order to radically reduce the welfare state and justify cuts to people’s lifeline benefits, cuts to public services such as the national health service, social care, legal aid, and to councils, for example.
The Tories have also set about reversing all of the social gains of our post-war settlement, in fact. It’s something they have always hated. They have persistently denied that higher spending might actually be beneficial to the majority of UK citizens. Austerity has been paraded as the only possibility, as “economically necessary” but that’s utter tosh.
Gordon Brown said today that when the worst of the global recession hit, his government protected the most vulnerable social groups – including children. He’s right, we didn’t need austerity back then, in the throes of the global crisis. Brown put in place a package of expansionary fiscal measures, and we were in recovery by the last quarter of 2009.
The Conservatives put us straight back into recession and lost our Fitch and Moody international credit ratings to boot. Something that George Osborne pledged he would maintain as a priority, back in 2010.
And the national debt is growing, not shrinking.
Economic competence is measured by our social conditions and the living standards of citizens far more than by dry numbers and the ideological commitments of government. Austerity is failing millions, who have witnessed the biggest fall in living standards since before the war.
And if a political strategy is failing and damaging people’s lives, as austerity clearly is, then it’s time to change that strategy.