George Osborne carries the Budget box, March 2012. Photograph: Getty Images
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Mehdi Hasan on why Austerity isn't working -- but no-one in the government is listening

There's nothing wrong with saying "I told you so".

Yesterday I returned to London from a family holiday in the United States - where a small stimulus has led to a growing economy and 25 consecutive months of job growth - to discover that the British economy has now re-entered recession, after shrinking a further 0.2 per cent in the first quarter of 2012. Or, as the Tory-supporting Sun put it on its front page today:

Official: Dip's a double

Don't say we didn't warn you. In fact, don't say I didn't warn you.

If any further evidence was needed that austerity isn't working, that cuts don't work, that George Osborne is a "kamikaze chancellor", this is it. Critics of the New Statesman's economics editor, David Blanchflower, must feel rather foolish right now. Once again, Blanchflower and the Keynesians are vindicated while Osborne and the Austerians are humiliated.

Surveying the empirical evidence from across the continent, Yahoo finance blogger Henry Blodget put it best:

IT'S OFFICIAL: Keynes Was Right

Blodget explained:

Now, this is not to say that the global debt-and-deficit situation is not a huge problem. It is. It is merely to say that, of the two painful ways to work our way out of the problem – "austerity now" or "stimulus now and cuts later" – the second one seems more effective.

In other words, based on the experience of the last five years, it seems that Keynes was right and the Austerians are wrong.

As I said, none of this should really come as a surprise to anyone as all of this was predictable - and predicted. As Paul Krugman has noted:

It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case – that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks – was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.

And now the results are in: Keynesians have been completely right, Austerians utterly wrong – at vast human cost.

But the Austerians won't give up without a fight. They seem to have two tactics. The first is to blame the lack of growth on anything other than the cuts - be it the euro crisis, the weather, health-and-safety regulations, the family dog, etc, etc. Yesterday I tweeted this quote from City AM editor Allister Heath, from June 2010:

The years ahead will be very tough - but there will be no double-dip recession made in Downing Street.

Heath responded with this tweet:

Unfortunately, I underestimated this government's competence and commitment to supply-side reforms. They haven't delivered.

Good of him to say so. But "supply-side reforms"? Er, the UK economy, like the global economy, is suffering from an epic lack of demand. Households aren't spending, banks aren't lending, companies aren't investing. "Red tape" isn't what's behind the record rate of unemployment or the absence of growth and confidence. The main reason why the UK economy contracted in the first quarter of this year is because there was a 3 per cent decline in the construction sector - driven, of course, by the Chancellor's crazy decision to slash capital spending.  

Even Heath's fellow Austerian, the Telegraph's Jeremy Warner, grudgingly acknowledges this point today at the end of a desperate if heavily caveated defence of Osbornomics and "consolidation":

When companies won’t borrow to invest, there’s a strong case for governments to do so in their place. And yet when you look at where the axe is falling hardest, it is on government investment – spending on schools, hospitals, roads, bridges, affordable housing, and so on. This is the easiest thing to chop, so that’s where the coalition has acted first.

In fact, this form of state spending should be doubled, tripled or even quadrupled. . .

Hear, hear!

The second tactic is to pretend that those of us who draw attention to the political and economic significance of this double-dip recession are somehow "enjoying" or taking "pleasure" from the catastrophic (lack of) growth figures. I've had lots of tweets from Tory trolls using this line of attack. This isn't just nonsensical and offensive but a brazen and desperate attempt to try and divert attention away from those damning figures, which deserve highlighting, and away from the Austerians in Westminster and Fleet Street, who deserve criticising.

We're also told by the cuts-defending Austerians that it is "irresponsible" to talk down the UK economy. But I, for one, won't take lessons in "responsibility" from those who happily, shamelessly and opportunistically talked down the economy when they were in opposition, going so far as to claim that the UK was on the verge of defaulting on its debts and making ludicrous comparisons between the British and Greek economies.

One of the presenters on ITV1's Daybreak programme tried this "You're far too pleased about the recession" tactic this morning, in an interview with Ed Balls. The shadow chancellor's response, however, was spot on:
 

Interviewer:  Well let’s talk about that then, talk about the recession, we are in a double dip recession, I guess you’re sitting there saying: ‘I told you so’?

Balls: Well I sat here on this sofa, one and two years ago and said if the government tries to cut spending and raise taxes too quickly, faster then other countries it will backfire. And the thing which makes me angry is that George Osborne and David Cameron were so personally just dismissive, they just said it was rubbish and now we are back in recession. Their plan has categorically failed, families and businesses are now really paying the price. That self-defeating austerity has put us through such pain and we need an alternative plan. We’ve got to get jobs and growth moving, they should’ve done this much earlier.


Showing anger at the coalition's arrogance, incompetence and failure to listen or respond is the right response to such questions. Now is the time for the Labour leadership to sit on the fence or split the difference or triangulate; now is the moment to channel the public's anger and discontent. It seems to be working for President Obama.

Remember: we are not all in this together. And the argument over the cuts isn't just about politics or economics; it's about real people's lives and livelihoods. Britons are suffering. According to new figures from the Trussell Trust charity, for example, the number of people visiting foodbanks for emergency food in the UK has doubled in the last year, to over 128,000 people.

So let's be clear: Ed Miliband is doing a fine job on phone-hacking, the Murdochs and Huntgate but these aren't the issues that will win him the next general election. The economy was, is and will continue to be the defining issue of this parliament - and, as yesterday's GDP figures conclusively demonstrate, the coalition government has made a mess of it. If the Labour leader is able to stand before voters in May 2015 and pull a Reagan, Cameron and Clegg will be in big trouble. And Osborne's much-hyped reputation as a master strategist will be buried for good.


 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Tim Farron: We must not let racists hijack the EU referendum result

The Liberal Democrat leader says in an IPPR speech that "Britain is better" than "Farage, Le Pen and their ilk". 

Like so many people, I felt shocked and emotional about the result of the vote on 23 June.
 
I know many people who wept at the news.
 
I can understand that.​
 
Not because I love the specific institutions of the European Union, but because I feel European.
 
I also feel British. And English.
 
And northern.  And I don’t feel any conflict between those identities, in fact they reinforce each other.
 
But the result seemed to throw this balance into doubt.
 
And yes, I also felt angry.
 
I still feel angry now, but perhaps for a different reason.
 
Because never in recent history have we, in the political classes, let down the people of this country so disastrously.
 
And I make no distinction here between those who voted to Remain and those who voted to Leave.
 
They were battered with dodgy statistics. From both sides.
 
They were lied to.
 
On both sides too – though it is the NHS and the £350 million that particularly sticks in the throat.
 
And worse than that.
 
They were misled by lackadaisical politicians, playing games, who had campaigned for years to leave the EU – but hadn’t bothered to come up with a plan about what to do if it happened.
 
We, the political classes, have left a country bitterly divided as a result.
 
Between parents and children, families, neighbours.
 
Between the nations of our own union, who have worked and fought together for centuries.
 
Between us and our continental neighbours.
 
And now the biggest danger of them all.
 
That because of those divisions, we are in danger of letting malevolent forces hijack the result.
 
Plenty of my mates voted leave and I can tell you that the overwhelming majority of those who did vote leave are utterly appalled that Farage, Le Pen and their ilk now seek to claim the result as a victory for their hateful brand of intolerance, racism and insularity.  Britain is better than that.
 
But I’m not so blinded by those emotions that I don’t see the new divisions that are opening up between us.
 
New political boundaries which chop the old certainties of Tory and Labour into little pieces.
 
Because there’s a new battle emerging.
 
Between the forces of tolerant liberalism and intolerant, closed-minded nationalism.
 
And, of course, you know that, as leader of the Liberal Democrats, which side I’m on.
 
But I also know what side most people in this country are on too.
 
In the 48 per cent and also in the 52 per cent.
 
So let’s be clear about this.
 
I am absolutely committed to the cause of an open-minded, open-hearted United Kingdom.
 
United in every sense of the word.
 
Because, as Jo Cox said, we have more in common with each other in this country than what divides us. 
 
And, yes, I campaigned my heart out to stay a member of the European Union. And would do again given the chance.
 
But a nation divided against itself can’t stand.
 
Nor can it hammer out a way forward from the current impasse.
 
And our combined history cries out for some more inspiring political leadership.
 
Which can say that, in or out, we remain an open-minded, outward-looking nation.
 
Which can say, in or out, we will be European and British and from our own towns, villages and cities.
 
And be proud of all of them.
 
Which can say to those from other countries who have committed their lives alongside us in the UK: we will stand by you, no matter what.
 
Let me just say that again.
 
We will stand by you.
 
As we stood by each other across Europe in the Second World War.
 
We will stand by you, who have chosen British communities to live in.
 
Not only that but we need you.
 
If the tens of thousands of people who make it possible to run our schools and health service were to worry about our commitment to them...
 
So much so that it threatens their commitment to us...
 
It would seriously undermine services that are used by some of the most vulnerable people in this country.
 
The Conservative and Labour parties may have so forgotten themselves that they’ve missed this urgent consideration.
 
But we haven’t.
 
So I make this absolute promise.
 
To use what power we can muster, to make sure that those who have committed their lives and families to this country will be protected.
 
That no kneejerk populism will be allowed to threaten them or uproot them.
 
And I ask now all the many candidates for high positions in Westminster to join me in this undertaking.
 
I don’t just say this as the leader of a political party.
 
I don’t just commit my own party to this.
 
I speak as a Member of Parliament in one of the most open-hearted nations on earth.
 
I speak as a proud citizen of this country.
 
We will not stand by to let Nigel Farage or Marine Le Pen dictate our policy, our direction, or our morality.
 
So, yes, I campaigned to remain.  I’ll carry on campaigning to remain.
 
But we have gone beyond June’s referendum now.
 
There are more fundamental, more urgent issues that we must face today.
 
Existential issues about our nation.
 
About what they’re saying about us in the rest of the planet.
 
The newspapers.
 
The investors.
 
About protecting neighbours and friends born in other countries from hate.
 
So, yes, I recognise and understand the motivations of many of those who voted the other way to me.
 
I’m a white, working class, middle aged, northern male.  By voting remain, I pretty much confounded the predicted behaviour my demographic might suggest!  And for once it put me at odds with lots of the people I grew up with. 
 
Who are as proud as I am about the same things I’m proud of in our country.
 
I understand their fears for their own communities.
 
I completely get why being talked down to by Cameron and Osborne, threatened with a ‘punishment budget’ might push even the most internationalist person to vote leave! 
 
And nobody ever said the European Union was perfect. Least of all me.
 
Its aspiration of peace and co-operation in Europe is vitally important.
 
It still is.
 
But I’m aware that the reality of the EU can often be inflexible.
 
I understand that people’s liberal commitment to local communities, which I absolutely share, sometimes led them to vote differently to me.
 
I understand those who voted for Brexit and their frustration about the way that the big banks were allowed to torpedo the economy.
 
And torpedo so many people’s lives.
 
Without sanction. Without even a loss of bonuses.
 
While those who have tried to make a more tangible contribution their whole lives, have been sidelined, bullied and left behind.
 
I understand that, possibly better than any other leader.  Because whilst South Lakeland voted remain, it was the only place in Lancashire or Cumbria that did.  And I grew up in and I belong to the very part of British society that most heavily voted leave. 
 
And yes I understand their fears that their communities have been changed. Maybe even overwhelmed.
 
Not so much to satisfy Brussels, but specifically to reduce the wages of the big food manufacturers. 
 
Or the cleaning contractors.
 
Or the care homes.
 
Because what June’s vote did reveal, above everything else, is how angry people have become.
 
And though we might argue about the reasons for it, their anger is justified.
 
We have banking institutions that have let them down, suffocating their businesses.
 
We have an economic policy that favours the rich over everyone else, middle class, working class alike.
 
We have a housing crisis that’s consuming our children.
 
We have a Treasury so cut off from reality that they urged people not to vote for Brexit – because it might mean property prices would rise more slowly.
 
As if people weren’t struggling now to get a foot on the housing ladder.
 
To help their children scrape enough together to rent a place of their own.
 
We have people treated like cattle with zero-hour contracts.
 
We have those who worked as pillars of their community all their lives...
 
Running small businesses.
 
Managing farms...
 
Making a difference...
 
Only to see themselves gazumped by salaries ten or a hundred times as much by cash-hungry bankers in their twenties.  The devastation of our communities n the Lakes overwhelmed by excessive second home ownership is a case in point.
 
In short, we have an underlying, aching discomfort which goes to the heart of the reasons for the immediate crisis.
 
More than a discomfort.
 
It is a great and abiding fear, gnawing away at the heart of our society.
 
And we have a political class, which I don’t particularly like having to accept I’m a member of, which has abandoned people disastrously to their fate.
 
I believe that, in the national interest, we remainers and brexiters can most of us understand the motivations of voters on the other side to us.
 
We’re able to see beyond the stereotypes.
 
And to say together.
 
This open-minded nation will survive.
 
It will survive because these Liberal values are shared by so many of us. 
 
The right to say ‘this is who I am’. ‘This is who we are’.
 
And the enterprising commitment to challenge the big bureaucracies and the big businesses from below.
 
That’s why we will defend people wherever they came from originally.
 
Those who were born and bred here who are locked out of success by boneheaded cuts in adult education.
 
But also the Polish families who have work three jobs just to pay the rent, but who still help to run the school fete.
 
And the refugees who provide lynchpins to hospital after hospital from one side of the country to the other.
 
Right across the nation, and woven together, from Cornwall to Caithness.
 
Again, I say this not just as a party leader.
 
I don’t just say this to commit my party to it.
 
I say it as a proud citizen of this country.
 
With a shared history that’s always been outward-looking.
 
Connected through trade to other corners of the world in a way that no nation ever was before.
 
We provided the international language of the world.
 
We led the world in industrial development, moral development and scientific development.
 
And we stood up against tyranny even when it didn’t threaten us directly.
 
When all over Europe, those suffering under occupation, risked their lives to huddle around their wirelesses to listen to broadcasts from London.
 
There never was a moment in our history when we pulled up the drawbridge.
 
There never will be.
 
It just isn’t true that Britain voted to do that.
 
So that’s also my commitment as leader of the Liberal Democrats.
 
To listen to that fear and take it seriously. 
 
And then to hammer out and enact a more humane, more successful, more effective way of doing economics.
 
More challenging, more enterprising and more ambitious.
 
Which shares the rewards of success so that the state doesn’t have to step in so much.
 
To take on the real vested interests that hold us back as a nation.
 
The zero hour contractors.
 
The speculators.
 
The monopolists.
 
Those who would hijack people’s anger for their own racist agenda.
 
So that we can shape a fairer nation.
 
But also keep those outward-looking British values of tolerance and mutual respect that we all believe in.
 
Because there are going to be difficult, maybe dark, times ahead.
 
We’ve been made a laughing stock abroad.
 
We’ve had to watch the shaming pictures of Nigel Farage sneering on our behalf in the European Parliament.
 
We have to find a solution when both the biggest national parties have preferred to unravel than to take a lead.
 
But I’m a Liberal.
 
I believe in people.
 
And I especially believe in our people.
 
In their sense and their humanity, whether they voted to stay or to go.
 
People have been let down for decades by short-termist politicians who put the needs of one part of society above the rest.
 
Now, in the wake of the Brexit vote those divisions are more exposed than ever before.
 
With our country facing huge challenges…
 
– from inequality and injustice to an NHS in crisis and an economy in jeopardy –
 
…we are left with a reckless, divisive and uncaring Conservative Government and Labour fighting among themselves with no plan for the economy or the country.
 
That’s why the Liberal Democrats are needed more than ever.
 
We are the real voice of opposition to the Conservative Brexit Government and the only party fighting to keep Britain open, tolerant and united.
 
Britain is the most sophisticated and welcoming and innovative nation in the world and, in or out, we will stay that.
 
And we Liberal Democrats will do whatever we can, in Parliament and outside.
 
To reshape the way the nation works, to bring it back together.
 
To stay civilised. 
 
To stay united.
 
Because, wherever we were born, we love our country.​
 

Tim Farron is leader of the Liberal Democrats.