Wednesday, June 18, 2014
First of all, do you want to remember the excuses given for austerity?
There was a fiscal crisis, an unmanageable deficit: the state had overspent. Labour had been too generous during the boom, and left us high and dry in the bust.
The only way to restore the confidence of investors and consumers was to get the state’s finances back in order. Then would follow investment, growth, and a return to prosperity.
And, what is more, austerity would be socially just: everyone would tighten their belts, and everyone would take a share of the loss.
I want to ask you something: is there anyone you know who you could look in the eye and say that to?
Let’s just deal with the myths.
New Labour didn’t overspend; it was obsessed with ‘fiscal credibility’. They cut the debt by a record amount, £34bn, in their first term. Public spending shrank in the first term. When the credit crunch struck, public spending was 41.1% of GDP - lower than under Major.
Only after the credit crunch and ensuing recession began did it rise to 47.5% for 2009-10, due to bailouts, stimulus spending, and the collapse of the tax base. The relative size of the state grows like this during every recession.
Public spending wasn’t the cause of the crisis; the government are making it a casualty of the crisis.
And what of the recovery supposedly induced by ‘expansionary austerity’?
A few points.
First. There is a global recovery. It’s weak, and the World Bank has just cut its growth projections. But it’s been happening. Not everywhere. It won’t happen in Australia, because Australia never had a recession. Why? Many institutional and market-specific factors, but one of them is certainly that it had a large fiscal stimulus and no austerity. Still, we’re coming out of crisis, and this is good.
Second, this was the longest period of economic contraction and stagnation in the post-war period. If you dodge the blame for economic stagnation, then you can’t claim the credit for economic recovery.
Third, in point of fact, when this government took office and began its austerity programme, the economy had actually returned to growth.
And for about a year, with the effects of stimulus still working, and austerity not yet implemented, it continued to grow. It then plunged back into stagnation. According to the Office for National Statistics’ most recent figures, we actually got the double dip recession.
Finally. There was no doubt that there would be a recovery - unless capitalism is finished. It was always a question of when, under what conditions and how strong.
The scholarship demonstrates that austerity suppresses growth.
That is exactly what happened in the UK economy, as anticipated by the government’s own Office of Budgetary Responsibility.
Why was the government’s argument wrong?
We are told that the public sector cannot be productive, that it is only ever parasitic on private sector dynamism. Free the private sector, and business will boom.
Mariana Mazuccato’s research shows this not to be the case - the public sector is at the centre of innovation, new technologies, new markets. It invests where business is too timid to. Think of Apple technology, impossible without public sector dynamism. Globalization: also impossible without a big public sector.
Because, there is no such thing as a ‘free market’, or the ‘hands off’ state. The state is always involved: it’s a question of how, and for whom.
But if the private sector is as good as all that, there’s no reason why businesses have been sitting on billions in cash! If they’re as efficient as everyone says, ministers shouldn’t have to be skulking around the country begging businessmen to invest.
But no. Bank of England data shows that the bank deposits of non-financial corporations rose from £76bn at the end of 2008 to £419bn by July 2013. That’s masses of potentially productive capital, not in use.
Because that’s what you get if you leave investment up to those who only care about a profit.
Remember also that the deficit, blamed on public spending, did not fall when spending was cut; it rose. George Osborne’s response? More of the same ‘failed policy’.
But was it a ‘failed policy’? People say austerity is ‘ideological’. Insofar as any policy must be ideological, I suppose that’s true. But what people mean is that it’s strategically unintelligent.
However, there is no socially neutral way to resolve a crisis; no solution that doesn’t bear its cost more heavily down on one class, and distribute gains more lavishly to another.
Austerity may suppress growth now, but by weakening labour, driving down wage costs, cutting taxes on business and - this is important - opening the public sector to private profit, it gives them a lot to look forward to in the future.
And when the governor of the Bank of England says, we must rebalance the economy away from consumption toward investment, this is what he means.
So the government aren’t stupid. And the rich aren’t stupid. If they were, they wouldn’t have all the money.
The brings me to the last myth I want to talk about: social justice.
Many Tories, Harry included, trumpeted their party’s progressive credentials before the last election.
But mark the sequel.
A record drop in living standards.
Wages have fallen year-on-year since the first three months of 2010 according to the Office for National Statistics - the longest drop for fifty years.
Child poverty is set to rise to 5m by 2020 on current trends according to Save the Children.
Housing Benefits cuts are causing a sharp rise in homelessness - a 32% rise in 2012-13 according to Crisis.
This led to the ‘man bites dog’ story of the year, when the OECD pointed out that cutting the welfare state would hurt the poorest most, because the poor need the welfare state more.
But some people benefited. The income of the richest shot up, and the share of income going to profits shot up. In 2009-10, 89% of all new income went to profits. Oxfam reported earlier this year that the richest five families have more income than the poorest fifth of the population.
And buried in these gross figures are the human stories.
There was the woman in Scotland in her early fifties, maybe not much older than Harry - who killed herself after her benefits were cut because she didn’t pass an Atos work capability test.
There was Tim Salter, a 53 year old agoraphobe who committed suicide after his benefits were cut, leaving him penniless.
There was the 28 year old David Barr, who threw himself off a bridge after his benefits were stopped.
These are not standalone cases. A survey by the Scottish Association of Mental Health found that mental health workers are inundated with people on the brink of suicide, because of benefits cuts. David Stuckler and Sanjay Basu, both academics in the field of medicine, have mined the data across all the countries affected by austerity and documented an excess of 10,000 suicides, a million cases of depression, and a devastating blitz on public health on a whole series of indices.
And do you notice something? With all this social misery - I have hardly scratched the surface - they don’t talk very much about the Big Society any more.
Remember the talk of mutuals and compassion? Remember a third way between big government and markets?
I wouldn’t blame you if you’d forgotten - they have, why shouldn’t you? But it was good enough for you, ‘the suckers’, to be sold this before the election. They think you’ll buy anything.
What will they sell you at the next election?
The notion of a fiscal crisis driven by public spending was always a myth.
But a convenient one.
If you interpret the crisis as primarily one of spending, if you scapegoat the poor, you avert discussing something more troubling: the crisis of capitalism.
Who knows where that discussion could lead to? At a minimum, perhaps, controls on capital flows, new taxes on wealth, new forms of public ownership beginning with the banks. Unthinkable for business, unthinkable for the parties of business, and unthinkable for the business-owned media.
I think I’ve described to you a pattern here.
Austerity, sold under the rubric of growth and prosperity and fairness, brings us only stagnation, declining living standards and injustice.
Profits grow, but little else does apart from squalor and misery.
And while George Osborne and his allies cry ‘success’, for millions of people hope dies.
And this is what it is to live under austerity.