Could Brexit turn the tide on George Osborne’s austerity economics?

Shelving his surplus and 'Brexit budget' are a concession that hard times cuts are folly

Osborne Budget

 

Cracks are emerging in the government’s signal policy of a ‘long-term economic plan’, and of the post-crash economic consensus, in the wake of Britain’s vote to leave the EU.

Sold as a way to ‘clean up the mess’ left by the previous Labour government, which was falsely said to have caused the financial crash of 2007/8 by its profligacy, the Tory policy of cutting our way to growth has failed in its own terms.

Public debt stands at £1.6 trillion, or 83 per cent of GDP, private companies are still hoarding billions rather than investing (even more so after Brexit), and growth only showed signs of life after George Osborne eased up on austerity in 2012, at the urging of the IMF.

Indeed, the IMF has since joined a swelling chorus of voices who say the supposed blessings of Thatcherite economics have fuelled the growth of inequality.

Meanwhile, the social cost has been enormous, with public services falling apart, real wages frozen at their pre-crash levels, child poverty rising and hundreds of thousands relying on emergency food.

As of two weeks ago, Osborne was proposing more of the same, with his ‘Brexit Budget’ of greater slashing in response to further economic woes post-Brexit.

This would have been consistent with his arguments over the six years since the crash. Recession? Free the wealth-creators, and shrink the state!

But instead the chancellor has quietly ditched this ‘punishment budget’ following the referendum result, and shelved his target of a budget surplus, both in order to counter the Brexit blues.

Osborne said, rather coyly:

‘The government must provide fiscal credibility, so we will continue to be tough on the deficit, but we must be realistic about achieving a surplus by the end of this decade.’

This recognition that squeezing the public sector in hard times is folly signals a real and welcome concession in the post-crash economic argument – but while the old is dying, the new is yet to be born.

What should the government do now to repair and improve the economy? Prem Sikka offers some progressive ideas in this piece for Left Foot Forward published on Monday.

Is there potential for a broad coalition on a new approach? The ground does appear to be shifting.

Patrick Hosking, financial editor for the Times, (a newspaper which urged deeper and wider cuts last year), said this week that ‘deficit-cutting has to be put on hold’, and criticised Osborne’s plan to turn Britain into an offshore tax haven by cutting corporation tax to 15 per cent.

He instead called for government investment in ‘digger-ready state infrastructure projects’, saying we should ‘take advantage of the fabulously favourable climate in the financial markets’, since ‘the government can borrow more cheaply than at any time in three centuries’.

Hosking concludes:

‘There is no shortage of credible capital spending projects. Without a fiscal boost, a probable mild recession later this year could easily turn into something much darker — with far worse implications for the long-term public finances.’

David Blanchflower, economist and Labour Party advisor, goes further and claims victory for the Keynesians.

Writing in the Guardian yesterday, he said: ‘This is the end of the disastrous experiment that was austerity, which was an ignominious failure that I opposed from the outset.’

He goes on:

‘When a negative shock comes John Maynard Keynes taught us that fiscal and monetary policy has to work together to provide stimulus.

That worked incredibly successfully in 2009 as governments threw the economic kitchen sink at the recession.

Growth spurted only to be slowed by austerity in 2010. The same is needed this time. All hands to the pumps. Austerity is dead. At last.’

This seems a tad optimistic. Osborne and the Tories won’t stop worrying and love the state any time soon.

But the arguments for austerity are potentially on the ropes, panting and looking dazed.

If the organised Left has an alternative ‘economic plan’ to neoliberal orthodoxy, now would be the time make their case.

Adam Barnett is staff writer for Left Foot Forward. Follow him on Twitter @AdamBarnett13 

2 Responses to “Could Brexit turn the tide on George Osborne’s austerity economics?”

  1. ad

    Bexit means we will be poorer. The government will have less wealth to spend. The age of austerity will last until the end of our lives.

  2. Luciano Giampaglia

    (msg for mod: If my message is accepted pls scrap my first attempt. Incorrect data at one point. Its a WIP but I want to be accurate.)

    Your missing the bigger picture.

    We live in a system that has collapsed completely, TWICE in 75 years, and had 11 downturns in between. We are now heading into the 12th Brexit or not, nothing can stop it. Every politician comes to power promising “this will never happen again” and fails miserably. You cannot stop systemic failures through policy.

    The simple fact is, for the bottom 70% of the western population, capitalism is dead, and it has been for decades. Whilst you may breath life into the zombie by building roads, you will see from my wordpress site that this will only work for so long and does NOTHING to fix ever crippled western demand. China is discovering this right now.

    This global economic system we have is attempting to contravene physics. It requires “infinite growth” which is impossible. It doubles in size every 30 years at just 3% average global growth rate, with each doubling comes a doubling or required energy input. You may shave a third off that via efficiencies and renewable’s but 30 years later your still screwed.

    Below this line, is my attempt at bringing epiphany to the masses in a few paragraphs. Its a work in progress so please excuse any issues with spelling on my part. All of the information is from accredited sources and referenced on image as often as possible. Google, can verify for you, every word I have written. I also recommend people google a video called “there is no tomorrow” It packs as much punch on screen as I am attempting here.

    —————-
    *******ECONOMIC & HISTORY: CRASH COURSE*******

    *WHAT HAPPENED TO YOUR WAGES POST 1980 UK/US*
    https://s31.postimg.org/aysjda1ob/wtfwages.png

    *WHAT HAPPENED TO POOREST U.K PEOPLES POST 1980*
    https://s31.postimg.org/x8emx9c3v/Inequality_1984_to_2013_II.jpg

    *WHAT HAPPENED TO AMERICAN PEOPLES PRE/POST 1980*
    https://s31.postimg.org/n0itmgf57/Family_income.jpg

    *A REASON WHY WE DON’T TAX THE RICH ANYMORE & WHO WAS PRIMARILY RESPONSIBLE*
    https://i.imgsafe.org/ca8f872ce0.png

    *EXAMPLES OF HOW CAPITALISM HAS FAILED THE WESTERN MAJORITY*
    UK: https://s31.postimg.org/mf22rqbob/Household_debt.png
    US: https://i.imgsafe.org/ca8f3a739a.jpg

    *WHAT THE 1% DID WITH OUR STOLEN WAGES*
    https://i.imgsafe.org/ca8f59b57d.jpg

    *WHEN THE WAGE THEFT TOOK OFF. US DATA*
    https://s31.postimg.org/m9b10ldpn/image.png

    *UK=A MIRROR IMAGE*
    https://s32.postimg.org/y79bz3wx1/Inequality_Growth_1977_2013_I_01.jpg

    I can replicate this picture in most capitalist countries. A model Exported via financial markets of US&UK over the 1980’s and 90’s is now dominant. It is supply side economics, and it doesn’t give a crap how much money is in your pocket, you are a consumer only. And only when you cant consume do they care, but only enough to rape your country’s savings to allow them to keep lending you the wages you no longer get for what you produce, and haven’t done since 1980, never to change.

    *HOW SOCIALISM CAN SAVE CAPITALISM FROM ITSELF & AN EXAMPLE OF WHAT UKLABOUR PARTY UNDER CORBYN WANT*
    https://s31.postimg.org/x542fjo7v/soccap.png

    ^imagine if UK steel workers were given this option.

    *The three Lies we are all told regarding Karl Marx & Socialism by the defenders and beneficiaries of Capitalism:*

    Media Says Marx =
    1) Central planning.
    2) Government ownership
    3) Single party rule
    ^
    He never wrote a single word on those topics. He wanted democracy at work. His entire focus was on the problems and injustices of capitalism and how to solve them, this is why our capitalist masters and media have lied to us for generations, because his life and writing are a danger to the slave master relationship that the 1% / “employers” want regardless of the former USSR or America, or anywhere where the 1% controls the show, capitalism promised to get rid of this with equality, justice and liberty and then failed to do so anywhere on this earth.

    *Congratulations*
    You now know everything you need to know about how capitalism is failing the majority and how to change it which is more than most politicians and economists. You may also have trouble sleeping at night if you’ve understood it all.

    In summary, Capitalism, has collapsed *twice in 75 years* and had 11 downturns in between, now entering the 12th. As I have proven, and many places are proving, we can do better than capitalism. We MUST do better than capitalism, or else its only ever downwards for the western majority from here on out.

    We need to move far quicker than we are at reclaiming our economies for the many not the few. We are running out of time…
    http://imgur.com/aY0LuYb
    Give it a few seconds, large gif.

    Thank you for reading.

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