Six reasons why Cameron is wrong on the economy

It is increasingly clear that the PM is out of his depth and out of touch. This is "nothing for noth

In a speech on the economy yesterday that was 2,235 words long, an out-of-touch David Cameron only mentioned jobs and unemployment once each. He didn't mention the young at all in a week when youth unemployment hit the million mark. It is becoming increasingly apparent that Cameron is a) totally out of his depth when it comes to the economy; b) has no clue what to do to fix the problem; c) has little sympathy for those who are less fortunate than he is. He just doesn't care. Cameron has failed to recognise that his government's economic policies are in complete disarray, and all he can do is resort to spin and obfuscation. Austerity in the UK has failed.

The part of the speech that really struck me was this:

[T]here are some who seriously try to argue that additional spending and borrowing will actually lead to less debt in the end ... despite the fact that no evidence supports this assertion. These arguments are just a way of avoiding difficult decisions ... the kind of something for nothing economics that got us into this mess ... which is why no indebted European country is taking that path. Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain.

It is about time we put this joker straight.

1) Actually, additional spending would stimulate growth and that would increase tax revenues, as it did in the US under the Clinton boom. In case you haven't noticed, Dave, your pal Osborne slashed spending and raised taxes, which increased borrowing. That is why you are in such a mess. What if the government borrowed £100bn that was funded by the MPC through QE, and used the money to say, build ten nuclear power stations. That would lower the cost of fuel, employ people and help masses of small and large firms. It would raise productivity and in the long-run lower our debts, wouldn't it? If not, why not, Prime Minister?

2) There is an enormous amount of evidence to suggest that fiscal and monetary stimulus can increase growth. There is actually no evidence from anywhere in the world to support the ideology you have been following of an expansionary fiscal contraction, especially when it is not possible to lower interest rates. Such a view is "oxymoronic", as Larry Summers has said.

3) These arguments are not a way of avoiding making difficult decisions. They are what has to happen, because your government made the wrong decisions by imposing austerity before the recovery was fully established. You can't blame the eurozone, as it was clear when you formed your government that there were major downside risks to UK recovery from the European periphery and European banks. You just chose to look the other way and go forward with your mistaken policies, wilfully disregarding the potential dangers for the British people.

4) "Something for nothing economics" is a nice phrase but is totally meaningless. If I recall, Dave, you matched Labour's spending plans, supported deregulation and opposed rescuing the banks. It looked like you may have to do the latter if things continue the way they are. Lloyds and RBS are in trouble again. What you did was slash and burn hoping for growth, but you killed off the tender shoots of recovery. The policies you have undertaken without a growth plan is "nothing for nothing economics".

5) "No indebted European country is taking this path." Well, actually, most other European countries grew faster than the UK did over the last twelve months. GDP growth was as follows. Belgium 1.8 per cent; Germany 2.6 per cent; France 1.6 per cent; Netherlands 1.1 per cent; Austria 2.8 per cent; Finland 2.8 per cent; and the UK 0.5 per cent. The eurozone is headed into recession because they are stuck in monetary union. Portugal this week went to the IMF and asked for more stimulus as austerity has failed there too. Austerity doesn't work when banks aren't lending and your major export market is heading into depression. The German central bank, the Bundesbank, today cut its 2012 growth forecast to between 0.5 per cent and 1 per cent, from a June prediction of 1.8 percent. It said a "pronounced" period of economic weakness can't be ruled out if the crisis worsens.

6) "Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain". Denmark has lower bond yields than the UK and lower unemployment, and its new government is introducing more fiscal stimulus. These other countries would do this if they could, but they are stuck in a fiscal and monetary straightjacket. That is why there is talk of the eurozone breaking up.

Dave, you are in a big mess on the economy. What are you going to do if the crisis worsens, as it looks like it might? Panic, I guess.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Why the left shouldn’t abandon freedom of movement

Jeremy Corbyn is right to avoid making promises on immigration. 

Jeremy Corbyn was on the BBC’s Today programme yesterday morning, answering questions about policy ahead of his party conference speech.

The main line of questioning was on immigration, something Corbyn and his team have had to think hard about in recent months.

For over a decade, all parties have been trying to marry policy with popular opinion on Britain’s migrants. Brexit has exacerbated this dilemma, what with the UK’s participation in freedom of movement teetering on the rim of the dustbin of history.

The problem is a familiar one. Immigration is generally a good thing, but in the eyes of the majority of voters – and in reality in certain pockets of the country – it doesn’t look that way. But for a party seen as “soft” on immigration, pandering to the harder line of rhetoric from its opponents merely reinforces the perception that there is a big problem – and validates its opponents’ policies.

The Labour leader has angered some in his party by insisting he won’t be drawn into making “false promises” on immigration numbers. This is the right decision. The Tories’ targets are arbitrary, set them up to fail, and do little to quell public dissatisfaction with the number of migrants.

An inaccurate government headcount, whether it’s successfully brought down or not, doesn’t translate onto your street, or local schools, or queue at the doctor’s surgery – just as a politician’s reassurance about the positive net contribution from migrants doesn’t. The macro doesn’t satisfy the micro.

And Corbyn calling for a cap would not only be unconvincing to voters, but a betrayal of his supporters, who have projected their liberal politics onto him and love it when he champions migrants. Corbyn himself has never really been into free movement; he’s unconvinced by the benefits of the single market. Of course he is. He’s a eurosceptic, and a eurosceptic who is suspicious of capitalism, to boot.

But having a leader of a mainstream party sticking up for migrants is an important thing; someone’s got to make the positive case, and it’s not like Corbyn’s one to compromise for votes anyway. Particularly as he builds his whole reputation on being a “man of principle” and a “real alternative”.

Rather than “false promises”, Corbyn’s given us a number of false problems instead. He speaks about the effect of migration in terms of depressed wages and pressure on public services. If he were in government, he would reintroduce a “migrant impact fund” (amount unspecified) to make up for these.

The first problem with this is that Corbyn knows as well as Boris Johnson and Theresa May and George Osborne and Ed Miliband and Tony Blair and Caroline Lucas and everyone else who’s attempted to make policy on this does that, actually, migrants overwhelmingly come here to work. Indeed, he underlined his stance against scapegoating migrants in a passionate passage of his speech yesterday. They don’t “take” people’s jobs, and it is not the number of them that brings down wages or drives up rents.

Where wages are kept lower than the national average by the presence of migrant workers, you will find numerous agencies that pay them less than the minimum wage, fail to give them proper contracts, and often advertise jobs solely overseas. Where you find these agencies, you find businesses happy to turn a blind eye to their recruitment and employment practices.

Where rents are driven up higher than the local average by the presence of migrant workers, you will find landlords who are happy to make money from people willing to live ten to a house, share bedrooms and have a poor quality of life.

Boston – the town in Britain with the highest proportion of EU migrants after London – is a textbook study of this. A high level of workers is needed for agricultural and factory labour. They aren’t stealing people’s jobs, and unemployment is relatively low. But those who benefit financially from their presence, and take advantage, are the ones who cause the consequent negative social and economic conditions in the town. Conditions that led it to voting higher than anywhere else for Brexit.

So Corbyn’s “migrant impact fund” is a nebulous fix to a false problem that not even he believes in. Even the name of it sends the wrong message, making migration sound like a spate of bad flooding, or noise pollution.

It’s our light-touch enforcement of employment law, and murky regulation of exploitative agencies that slip through its net, which need government money and attention. Perhaps “shark impact fund” would be a better name for Corbyn’s fix-all pot of gold.

Giving councils extra funds for public services is priced into Labour policy already (if the party truly is anti-austerity) – and should not now be linked to a negative idea of migration in a tacked-on attempt to to make something palatable for voters. It’s a bit like Ed Miliband’s “Controls on Immigration” mug. Simply giving something a new name, or stamping on a motto, doesn’t wash with voters.

Those who argue that the country has voted against free movement, and we should accept it, that may be so. But it’ll do the Labour party little good campaigning to get rid of it. Once it’s gone, and we’ve replaced it with some kind of points-based system, places with high levels of migration will still have high levels of migration – because those are the places where jobs need filling. It’ll either be EU migrants who manage to stick around, or other immigrants drafted in out of necessity having been assessed under a points-based system. If investment in these areas isn’t ramped up, residents will still feel left behind, and will still see migrants around them as the cause.

So what about the many pro-Brexit areas where there is a very low number of immigrants? This really is irrelevant. The problem in these areas is the problem the country over: lack of funds. Unless you invest, people will remain unsatisfied. And if people remain unsatisfied, they will continue to look for something to blame. Unfortunately, Corbyn is joining the legions of politicians who are handing them that easy target. And he is least likely to see the electoral benefit of it.

Anoosh Chakelian is deputy web editor at the New Statesman.