George Osborne carries the Budget box, March 2012. Photograph: Getty Images
Show Hide image

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.

Photo: Getty Images
Show Hide image

The case for action against Isil in Syria outweighs the case for inaction

The decision is finely balanced: but I'm voting for intervention, says Dan Jarvis. 

The choice before Parliament is not whether our country enters into a new conflict – it is whether we extend our existing commitment in a conflict that we are already engaged in and cannot hide away from. Those who wish us harm will remain bent on our destruction whatever we decide.

Just over a year ago the House of Commons voted overwhelmingly to support airstrikes against Isil in Iraq. We did so because of the direct threat they posed to our safety and global security. The dangers have since multiplied as Isil have strengthened their foothold in Syria. We’ve seen British holidaymakers murdered on the beaches of Tunisia, bombings in Ankara, Beirut, on a Russian airliner, the horrors in Paris, and terror alerts across the world. Seven Isil-related plots have been foiled in the UK in the past year alone.

If I have learnt anything from my past experience it is that responding to these threats are always the most difficult judgements. There is never a perfect solution. It’s why I have reflected on this issue with care, conscious of what I heard at the National Security Council, and mindful of what is best for my constituents and our country.

That is why I made clear that I would only support extending military action against Isil if it was framed within a wider strategy. Having reflected upon the case for targeting their stronghold in Syria, I am persuaded that the case for action is stronger than the case for inaction.

I understand the voices cautioning against broadening our commitment. The test for them however must be to articulate an alternative strategy for Isil’s defeat. Realistically this cannot be done without targeting their command and control structures in Raqqa.

Answering the call of the United Nations and extending British airstrikes would bring unique capabilities to the struggle against Isil in Syria. The RAF are world leaders in precision targeting. As the French Socialist Defence Minister has said, "The use of these capabilities over Syria would put additional and extreme pressure on the ISIS terror network."

These tactics are working in Iraq. Airstrikes have weakened Isil and a third of their territory has been retaken with no civilian casualties.

Questions have rightly been asked of the Joint Intelligence Committee’s assessment that 75,000 moderate forces are available to help do the same in Syria. It reminds me of the dilemma I faced when commanding Afghan soldiers whose knowledge was invaluable but whose competencies were questionable in other areas. Sometimes you have to work with what you have, but the Prime Minister does need to provide greater clarity about how these troops would function as a coherent fighting force.

Everyone agrees that military action must be accompanied by a diplomatic effort to broker an end to the Syrian civil war. This will take time but a political process is now in place. The Vienna conference agreed a timetable for a political transition within 6 to 18 months. In an ideal world we would wait for this process to conclude, but I don’t believe the nature of the threat we face affords us that luxury.

No-one has argued that the political process would be derailed if Britain joined our allies in acting against Isil in Syria as well as Iraq. I am therefore satisfied that military action could effectively run in parallel to our diplomatic efforts. The government now needs to throw the UK’s full weight behind the negotiations and work with our partners to deliver a lasting peace settlement.

Constructive steps have been set out to address the wider tasks of undercutting Isil’s financial muscle, post-conflict reconstruction and tackling extremism here at home. Now Ministers must deliver on them.

There have been promises to enforce trade sanctions and crack down on the people smugglers that fund Isil’s bloodshed. It is vital that more pressure is put on Gulf States funneling money and arms to jihadist groups. But given much of Isil’s wealth comes from the territory they control, that is what most needs to be undermined.

On reconstruction, the government’s pledge to contribute a further £1bn in humanitarian relief is a significant guarantee. The upcoming Syrian donors conference in London will be crucial in holding the international community to their responsibilities to Syria.

The cancellation of police cuts is also important in our counter-terrorism effort. Further measures will be needed if we are to defeat Isil ideologically and drive radical voices out of our communities. With our security services monitoring hundreds of UK nationals who have returned from Syria however, we need to act to tackle the problem at source.

Overall, the government must strenuously pursue the priorities set out in its motion before Parliament. Isil will only be defeated if Ministers demonstrate the same focus on the wider diplomatic and humanitarian strategy that they have shown in advocating military action. The British public will expect nothing less and it is our job as a responsible Opposition to hold them to that.

Labour has a tradition of standing for the national interest when our country is under threat. When the War Cabinet met in 1939, it was Ministers from our party – Clement Attlee and Arthur Greenwood – that tipped the balance in favour of resisting Nazism. Isil are the fascists of our time. Our struggle against them will be more complex, but the basic judgment it demands of us is the same – the readiness to do what is necessary to keep the British people safe.

I take this decision having voted against airstrikes in Syria without a UN resolution two years ago, mindful of the risks and respectful of those who hold a different view. The mistakes made in Iraq from 2003 cast a long shadow, but we should not be paralysed by the past now that we have UN backing and the conditions of our party conference motion have been met.

When I look to my own conscience, I have to consider how I would feel if the worst happened on our streets and a terrorist atrocity succeeded after backing away from confronting the evil behind it. That is why I will be voting for action on Wednesday. 

Dan Jarvis is the Labour MP for Barnsley Central and a former Major in the Parachute Regiment.