Boris undermines Osborne's austerity argument

Mayor of London points out that "Greek austerity measures are making the economy worse".

Even by his own high standards, Boris Johnson is on combative form this morning. The Mayor of London uses his regular Telegraph column to urge EU leaders to let Greece default on its debts and force it to leave the euro, while in a piece for the Sun, he launches an assault on Ken Clarke's sentencing plans. "Soft is the perfect way to enjoy French cheese, but not how we should approach punishing criminals," he writes.

But it's a line in his Telegraph column that really stands out: "The trouble is that the Greek austerity measures are making the economy worse." It's a point that Ed Balls and others have made frequently in recent months but it's not one that you'll hear from George Osborne, for the simple reason that it contradicts his claim that spending cuts are a precondition for growth.

The austerity measures adopted by Ireland, Portugal (which went one better than Osborne and raised VAT twice) and Greece have exacerbated, rather than diminished, their economic problems. As Balls argued in his LSE lecture last week: "[W]hat they [Portugal], Ireland and Greece have all discovered - just like Argentina, Brazil and Turkey before them - is that it doesn't matter how much they cut spending or how much they raise taxes; if they can't create jobs and growth, their debt and deficit problems get even worse and market confidence falls further still."

Similarly, in Britain, rather than increasing growth, Osborne's austerity agenda has destroyed it. The economy, which grew by 1.8 per cent over Q2 and Q3 2010, has not grown for the last six months. Britain, which was at the top end of the European growth league table, is now fourth from bottom, with only Greece, Portugal and Denmark below it.

Yet according to Osborne's doctrine of "expasionary fiscal contraction", the reverse should have happened. As the state contracts, the economy should expand. But with consumer spending still depressed and the banks not lending enough, where will growth come from if not from active government? Britain, like Greece, cannot cut its way out of stagnation.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era