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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

the politics of austerity economics « Previous | |Next »
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.

RowsonM growth.jpg 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.

| Posted by Gary Sauer-Thompson at 3:18 PM | | Comments (6)
Comments

Comments

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?

Come on, let's not dignify it worth the terms "economics" and "policy". It's just "looting", under another name and poorly disguised at that. They are not expecting resistance to be strong enough.
The people of NSW will understand what's being talked about here, soon enough...

I disagree with paul, and reckon the vast majority of voters, at least in UK, US and Oz, will NOT understand soon enough.

No empathy for those currently targetted, no imagination their own circumstances might change, no ability to know about the full range of policy directions other than the bits selected for them by the likes of Murdoch, no intelligence to see the objectives or strategy underlying the tactics.

Re:
"The Conservative strategy is that a sharp financial retrenchment is the best road to recovery through growth and investment."

And to beat up town planners along the way.

Right-wingers like to pretend that their policies will benefit some inclusive object - "the economy", "the country", "society", etc.

In fact, it's all about self-interest of the policymakers; the inclusive ideology is just a fig-leaf.

There comes a time, therefore, when arguing about "economic" issues becomes pointless. That argument is about an irrelevance, not what is really going on, as Paul Walter says.

The drive behind austerity economics is not the size of the deficit, but the policy changes that the right can engineer by stoking fears about the disaster that deficits can create.

The idea is that with the government facing seemingly unmanageable deficits, the public will be stampeded into a wholesale slashing of government spending to the poor and disadvantaged; but not to government spending that subsidizes and protects business.

As a result, regulatory policies that inconvenience the corporate sector as well as social programs that might benefit ordinary people will disappear. The right refers to this situation as the starve-the-beast strategy -- by depriving the government of adequate revenue, its regulatory powers will necessarily shrink.

So growing federal budget deficits created by the rights' tax cuts will eventually create pressure to cut social programs and regulation.