Tory Economic Policy is More Akin to a Mass Experiment in Human Despair

We are living in the midst of an economic meltdown, which as the latest economic figures reveal is being made worse not better by a chancellor whose incompetence and mendacity is now beyond doubt.

The damning revelation that the UK economy shrunk by 0.3 percent in the last quarter of 2012 now sees the country headed for a triple dip recession, an economic calamity which calls for an immediate moratorium by the government on its present course and a reversal of its addiction to austerity. If not for the brief and mini economic boom provided by the Olympics, the UK economy would have likely registered negative growth for the whole of last year, and thus have made history for all the wrong reasons.

It really does not take a genius to understand that the nation’s overall debt is being made worse as a consequence of low consumption, increasing unemployment and underemployment, and a concomitant decrease in tax revenues. As a result, and by any objective reckoning, the government’s economic policy has been a disaster.

The difficulty is that a change in the policy being followed and failing so abjectly will by definition involve a step-change in ideology. Why? Because the economic strategy that is being implemented by this government is the product of ideological blinkers and not sound economic theory.

Since the economic crisis first hit these shores at the beginning of 2008 the glaring weakness in the economy has been a collapse in demand. The deficit grew in the wake of the crisis as the previous Labour government increased borrowing to fill the gap of plunging tax income on the back of rising unemployment, businesses going bust, and an increase in people claiming benefit, not to mention the need to bail out the banks to tune of £500 billion. Without this intervention the UK economy would have collapsed completely.

Now, five years on, and after two and a half years of a Tory-led coalition government, the official number of unemployed in the UK, according to the most recent figures released by the Office for National Statistics, is 2.49 million, a decrease of 37,000 compared to the previous quarter. However these figures are for the third and last quarter of 2012. The number of people in full time employment fell by 341,000 between September and November 2012, while the number of people in part time employment increased by 660,00.

But rather than takes steps to tackle the causal factors responsible, the present government has focused almost entirely on the symptoms – i.e. getting the deficit down by slashing spending, including benefits, even though this can only deepen the recession rather than produce a recovery.

As the US economist and nobel laureate Paul Krugman asserts: “Economics is not a morality play.”

Yet this has been precisely the approach to the crisis by Osborne, Cameron, Clegg et al. In this morality play it has been overspending, a jamboree of consumption, which has led us to the mess we’re in. And, now, in order to clear it up, a national exercise in economic self flagellation is required.

Clearly, given the lack of comparable measures introduced to dole out some of the resulting pain to the rich, this national exercise is to be restricted to the poor and ordinary working people – the undeserving poor as opposed to the deserving rich, you might say – making this a Victorian morality play.

Strip away the government’s rhetoric over the need to cut spending, the solution to this ongoing economic depression is really very simple. Bringing down the deficit requires growth; growth requires a resurgence in spending; and a resurgence in spending requires the reintroduction of demand into the economy.

This is where the locus of government intervention must be, as the investor and lender of last resort to stimulate economic activity. Investing in infrastructure projects such as housing, roads, transport, the emerging green economy, schools, hospitals, etc will create jobs, which in turn would get people off benefits and back to paying tax and spending in the real economy, thus producing a multiplier effect. Businesses do not create jobs – this is one of the great myths of modern political and economic discourse – consumers create jobs.

But no one should be in any doubt that the obsession with deficit reduction on the part of the government is really an obsession with keeping the markets happy, which brings into sharp focus the issue of sovereignty. However even here it doesn’t take a leap of logic to understand that of more importance to the ever-mystical bond markets is the introduction of measures designed to lift the economy out of depression and thus make the prospect of a decent return on UK bonds better over the short to medium term than it is at present. With interests rates at zero and unable to be reduced any further, this requires the implementation of a fiscal stimulus to create the demand already mentioned.

The billions in taxpayers’s money handed to the banks via Quantitative Easing has barely touched the real economy. Banks are refusing to lend at the same time as there are no consumers creating the demand that businesses need in order to expand. When it comes to the thousands of small to medium businesses that need to borrow to cover the gap between normal operating costs and income, by this point increasing numbers of those have either gone to the wall or been forced to contract as a direct consequence of an ongoing cycle of deepening recession.

Which brings us back to the question of ideology.

The financial and banking meltdown which hit the global economy just over five years ago was an economic 9/11. And just as that terrible event gave the Bush administration its pretext for going to war in Iraq, its economic equivalent was the pretext needed by the Tories to set about rolling back the state in Britain. The attack unleashed on the public sector, the attacks on benefits, pay and conditions across the board, has been accompanied by the demonisation of each of the aforementioned demographics. In other words, the economic crisis has seen class war declared in order to push through the structural readjustment of the economy and with it society in general. The public sector, a necessary ballast of demand through good times and bad, has effectively been declared the enemy within as part of this process.

This is the context in which these latest economic figures should be considered.

13 comments on “Tory Economic Policy is More Akin to a Mass Experiment in Human Despair

  1. jock mctrousers on said:

    Yes, it’s not blinkers; it’s class war! There are two blatantly obvious objectives, one economic and the other seemingly vengeful. The first can be achieved by incompetence, which perfectly suits Cameron, Osborne and Clegg – drive the economy to ruin so the state’s assets can be bought up by their pals at firesale prices, like the fall of the Soviet Union; the second is the ruling class’s revenge for the uppity behaviour of the scum since universal suffrage, and especially since WWII and the welfare state – acting like they’ve got a right to education, housing and healthcare!? The fall of the Soviet Union springs to mind here again; the US and UK ruling classes actually look like they’re trying to engineer a similar social catastrophe to cull the working-class who’ve become surplus to requirements.

  2. This Tory government is doing what they have been longing to do for the past 10+ years which is to claw back money from the working class and the poor which I believe they think we are not entitled to, I can imagine the bastards discussing the working class like we are all vermin needing to be slapped down put in its place, if they could get away with it we would have nothing, they know the chances of re-election are nonexistent, so they will do as much damage as they can before they get told to do one in the next election. Bastards…

  3. George Hallam on said:

    jock mctrousers: Yes, it’s not blinkers; it’s class war!

    I agree that government policy is not the product of anybody wearing “ideological blinkers”.

    These people don’t think ideologically. They just use ideology to justify what they want to do (or are told to do. And, ultimately, that is determined by their backers – big business in general and finance in particular. Murdoch and the media act as enforcers. If you want to call this ‘class interest’ then, it sounds a bit Marxist, but it will do as a short hand. (After all Marx didn’t invent the idea of class interest, he just used it more than most.)

    I don’t agree that this is “class war”.

    The Left seem to be addicted to using military language that they don’t understand.

    “War is nothing but a duel on an extensive scale. .. we shall do so best by supposing to ourselves two wrestlers. Each strives by physical force to compel the other to submit to his will: each endeavours to throw his adversary, and thus render him incapable of further resistance.”

    “the aim of all action in War is to disarm the enemy, and we shall now show that this, theoretically at least, is indispensable.
    If our opponent is to be made to comply with our will, we must place him in a situation which is more oppressive to him than the sacrifice which we demand; but the disadvantages of this position must naturally not be of a transitory nature, at least in appearance, otherwise the enemy, instead of yielding, will hold out, in the prospect of a change for the better. Every change in this position which is produced by a continuation of the War should therefore be a change for the worse. The worst condition in which a belligerent can be placed is that of being completely disarmed. If, therefore, the enemy is to be reduced to submission by an act of War, he must either be positively disarmed or placed in such a position that he is threatened with it. From this it follows that the disarming or overthrow of the enemy, whichever we call it, must always be the aim of Warfare. ”

    Clausewitz ‘On War’ Chapter I. What Is War?

    What we are faced with now is not class war. It is the opposite: class peace.

    The war is over and the mass of the population has lost.

    Organised resistance has ceased. The main organisations of the working class – the unions are bound hand and foot. The key positions are staffed by latter day versions of Pétain, Laval, Weygand, Bousquet, and Leguay.

    Meanwhile the Labour Party leadership emulates the likes of Eugène Deloncle, Jacques Doriot and Marcel Bucard, as recreate La Cagoule and the LVF

    I repeat this is not war; the victors are just enforcing their demands.

    Now go away and find out what is happening in Lewisham.

    http://www.youtube.com/watch?feature=player_detailpage&v=XfVMLrPRJrA#t=7s

  4. George Hallam on said:

    jock mctrousers: If it’s over and we lost, why would I care what’s happening in Lewisham,

    What though the field be lost?
    All is not lost; the unconquerable Will,
    And study of revenge, immortal hate,
    And courage never to submit or yield:
    And what is else not to be overcome?

    We need to be objective. We have lost and organised resistance ceased a long time ago.

    But that is not the same as saying that it is all over.

    You should care what’s happening in Lewisham because we have been able to mobilise new forces that, in time, will be able to renew the struggle.

  5. George Hallam: What we are faced with now is not class war. It is the opposite: class peace.

    The war is over and the mass of the population has lost.

    Speak for yourself.

  6. George Hallam,

    I remind you of what Marx and Engels wrote in the Manifesto: ‘The history of all hitherto existing society is the history of class struggles. Throughout history we see the oppressor and oppressed in constant opposition to each other. This fight is sometimes hidden and sometimes open.’

    We haven’t lost, we are losing. There’s a difference.

  7. George Hallam on said:

    John: We haven’t lost, we are losing. There’s a difference.

    I realise that I have never made much effort to ingratiate myself with the readers of this site, so the temptation to contradict me is probably quite large.

    However, our positions on this matter are actually quite close.

    So, much as I enjoy an argument, I will concede.

    Otherwise there is in danger of this becoming a parody of a Monty Python sketch.

  8. George Hallam: I realise that I have never made much effort to ingratiate myself with the readers of this site, so the temptation to contradict me is probably quite large.

    You’re being over-sensitive, George. I was merely responding to your contradicting me. It’s not a problem. I think I know where you are coming from, but as you say there isn’t much difference in our views, more the way we articulate them.

    George Hallam: So, much as I enjoy an argument, I will concede.

    No need. There is nothing to concede. It’s not about winning, it’s about comrades reaching a consensus and helping one another achieve clarity.

    After all, we are all communists here :)

  9. Interesting conference that will discuss, among other things, the present split within the ruling class on austerity.

    there is also a Glasgow marxist forum discussion on the same topic tomorrow night in Glasgow at 7.30 Partick burgh hall- speaker Hillel Ticktin- all welcome

    sandy

    Critique Conference

    23 Feb 2013
    10.00 am- 5.00 pm

    London School of Economics

    Why Keynesianism cannot save the system

    Speakers:

    Hillel Ticktin – The conflict between the two sections of the bourgeoisie over the return to 19th century capitalism vs Keynesianism
    Michael Cox- The conflict between the two sections of the bourgeoisie over the return to 19th century capitalism vs Keynesianism
    Savas Matzas – Greece and Capitalism today
    Yassamine Mather – Iran’s economy in free fall

    St Clements Building
    London School of Economics

    critique@eng.gla.ac.uk
    http://critiquejournal.net/conf2013.html