And the election winner is…austerity politics!!

13 05 2010

So we now have a government that I am guessing virtually nobody in the UK who went into the polling booths actually voted for, a Con-Lib pact. To me it feels like a kind of coup d’etat, in a very polite English kind of way of course without the martial music.  This uncomfortable feeling is compounded by the announcement that a fixed term parliament of five years has been agreed. Not only did we not vote for this government but we are apparently stuck with it for five years.

Of course, there was so little between the parties in terms of policy that in practice any outcome, whether one party or a combination of the parties, would have made little difference to what is about to happen to us as a nation. As is becoming clear, all of the parties, and certainly this new government, are committed to a future of economic austerity.  Already there is talk of big tax rises, both direct through capital gains tax, and indirect, through VAT. While we are still waiting for detail on public spending , events elsewhere, such as in Ireland and Spain where wage cuts in the public sector are being implemented, are surely a harbinger of what is to come.

The almost unchallenged assumption throughout mainstream politics  is that austerity economics is the only way forward.  Much of the already pitifully small investment planned by Labour for upgrading the infrastructure of the UK has been scrapped or threatened with delays. The third runway at Heathrow will definitely not go ahead, the Crossrail project could be canned and the high-speed rail link  from London to Birmingham and beyond is in doubt.

What plans does this new government have to stimulate economic growth, which is the only alternative to austerity? There has been nothing in any of the pronouncements so far which has addressed this in any concrete sense. The focus is entirely on cutting the public spending deficit, mainly  to appease the financial markets, the same markets which were invoked as a reason why this coalition had to be put in place as quickly as it was.

Indeed the mood music is that the Liberal influence will make this government even more prone to sustainability and a green agenda than the last, another way of describing low growth expectations. Both Tories and Liberals are against state involvement in the fostering and development of new industries, something Labour’s Peter Mandelson was a late convert too.

The impression of a coup d’etat by a small, elite group of mainly upper middle class men will be reinforced once the cutting starts. One consolation is that this small group, cut off from any real social base or proper legitimacy,  may not even have the capacity to carry through a major attack on living standards.  But by the same token neither will it have the vision or decisiveness to take the steps necessary to modernise the UK economy. We are likely to be left with the worst of all worlds, an inward looking, pessimistic and unambitious elite which tries to micromanage the UK economy at time when boldness above all is required.

NB One of the main challenges for anybody who looks at the prospects ahead and recoils, is to develop an alternative approach to the economy. This means more than anything looking at why and how economic growth must be put at the centre of economic policy. Daniel Ben-Ami has put together a very helpful list of people who are trying to work in this direction. If you wish to become part of this, do get in touch with anybody on that list.

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2 responses

13 05 2010
Rob Clowes

I’m interested in hearing more about what the development of a non-austerity economics might mean. Presumably its not Keynesian, although it seems that some state spending is being advocated, but I take it in broadly innovation centred ways and not simply to prop up current social arrangements?

Sometimes the term “micro managing” is taken to mean not picking winners in the economy by the state but one obvious way of pursuing growth economics is to do exactly that. With the article comes out against micro-managing this would seem to leave us with “macro managing”. So is this the idea? Is this something we should start advocating more volubly and if so how would it work? Actual picking winners or some pump priming for innovation or what?

It seems to me the analysis suggest a much bigger role for the state in production then. Is what is being called for is an innovation strategy? I guess the way this comes out in the lib/con pact is over the question of green economies which is supposed to bring the innovation with some other environmental fringe benefits. I’m presuming this is likely to be quite undynamic so perhaps engaging with this is a way of developing a more detailed critique.

I’m interested to hear your thoughts and also thanks for the link to Daniel Ben-Ami’s article.

17 05 2010
Leigh Caldwell

A survey on page 5 of today’s Guardian shows, among several other completely inconclusive results, a single strong consensus.

Percentage agreeing with the following statements:
“For future economic growth, Britain needs less regulation and more freedom of enterprise”: 30%
“For future economic growth, the government needs to encourage investment in new industries”: 65%

Now you might look at the rest of the survey and think they have made forced dichotomies out of things which can both be true. But it’s interesting to see that on this question, the public clearly agrees with you, even if the politicians don’t.

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