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March 27, 2011
In his The despair doesn't come from the marchers in The Observer Nik Cohen makes a good point about the politics of austerity in the UK. The Conservative strategy is that a sharp financial retrenchment is the best road to recovery through growth and investment.
Martin Rowson
Cohen says that the 2010s resemble the 1930s and 1980s, a decade of recession and insecurity presided over by a right-wing government:
The bitter lesson of recessionary times in Britain is that rightwing governments can survive and prosper despite mass unemployment as long as the majority are surviving and prospering with them. The coalition hopes to repeat the success of its predecessors. It believe it can pile spending cuts and tax rises on to a weak economy and by a mysterious alchemical process no one but initiates understands private enterprise will boom and provide the jobs and income to change Britain into a rich country with a small state.
The mysterious alchemical process of course is the dynamics of the free market. It will do its thing with lots of help from the government. It will do its thing because of the confidence fairy.
Paul Krugman in The Austerity Delusion in the New York Times observes:
Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong....Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.
So jobs now, deficits later was and is the right strategy.
In the UK growth has stalled, unemployment is rising and the government has marked up its deficit projections as a result. The confidence fairy appears to have gone walkabout.
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The rationale of budget decifit hawks used to justify the austerity cuts is shown to be bunkum when you look at the drop in corporate tax rates by 2% in the UK, and the 1% cut in fuel taxes, among other things.
And the UK public can't see this for what it is?