UK Fiscal Policy, a Chancellor & the Squirrel (that lost its nuts)
I get so angry with George Osborne on so many levels it’s probably impossible to write about the current economic position in a coherent manner.
I’ll try. He rolls into town less that two years ago (why does it seem so much longer?) with his gun-toting, whey-faced public school colleagues, desperate to reduce the deficit and sets about shrinking the state to fit his own political ideology: small state, big business, or something. He’s never been overly explicit about his evangelical zeal, but I smell it on him.
The problems he has engendered with his approach, as I see them, include:
#1 – you can shrink the state much more quickly than you can grow a business
#2 – shrinking the state manifests itself, amongst other things, as shrinking confidence and the money to fund the products and services that businesses might offer
#3 – in the meantime, whilst the state shrinks and businesses fail to grow immediately into the gap, the government exacerbate the inflation problem with the one tax hits all unequally VAT, allow energy companies to run absolutely riot with their charges to consumers and defend the continuation of the policy whereby the tax system is run to suit the rich and banks can carry on like one-armed bloody bandits
Anyone with half an eye and an incoherent blog could have predicted rising unemployment, high inflation, low confidence and the failure of the business sector to pull new jobs like rabbits out of hats. And they did.
The Autumn Statement came then as no surprise; having cut the state and reaped the rewards, George announced he was going to cut it a bit more, and a bit more. And then he was going to, once he had saved up some money (and perhaps borrowed some too) spend a bit on roads and rails to stimulate growth (sounds like public spending).
Maybe I’m just an idiot, but isn’t cutting public spending, which is working so well so far as we have seen not, to save money, to fund future public spending a bit whack? Or maybe it’s just the type of public spending Osborne prefers ideologically: roads and rail a more fitting testament to the soundness of his ideology. And that’s even before we mention cutting public spending to reduce borrowing, before announcing more borrowing. Isn’t that an #epic fail by Twitter standards?
I am certain that doing more of the same (cuts) will get more of the same (unemployment, cuts in income and confidence, a battle with inflation etc.). I can’t give you a theory-based reason why, but as I run things round here, I don’t actually have to. George is wrong; he is wrong not least because the economic model he bases his policy on is fucked.
Here is an article from Bloomberg that might elucidate one reason better than I can. It is by an American entrepreneur. It explains why business doesn’t create jobs, that the demand of the middle income citizens does. You can agree or disagree with that, but you’ve got to love the following line:
When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.
Of course, the whole pact with the devil, consumerist capitalist shebang is busted up, perhaps beyond repair now. We are chastened over-consumers and that, to my mind, is probably the positive in all this. World debt is killing economies like nothing on earth. Tinkering around the edges and putting people out of jobs, reducing your PAYE returns as a result, and failing to get tough with corporate greed is going to continue to get us nowhere fast. There is some radical thinking required. And soon. I am going to get on to that later.
In the meantime, here’s an example of a rather disobedient and impertinent red squirrel that would like to tease the Chancellor.
Posted on December 3, 2011, in Art, Biophilia, Hard work is this blogging, News, Politics and tagged Beatrix Potter, Bloomberg, Economic Growth, Economic Theory, George Osborne, Public spending cuts, Recession, Squirrel Nutkin. Bookmark the permalink. 1 Comment.