Austerity's definitely happened. The question is how much damage it's done

The fact that austerity has failed does not mean no-one tried to implement it.

The Atlantic's Matthew O'Brien writes:

Britain's economy is a riddle wrapped in a mystery inside an enigma, but this much is clear: it's a disaster. After its Olympics-fueled growth, such as it was, lifted it out of recession in the third quarter of 2012, Britain might be headed back after its economy fell 0.3 percent at the end of the year the fourth time in five quarters its GDP has contracted. Britain's now verging on a triple-dip recession, which is just another way of saying a depression…

It's no accident this era of zero growth has coincided with an era of austerity. Despite entering office with borrowing costs at 50-year lows, the Cameron coalition decided the government deficit, and not the growth deficit, was the chief threat to future prosperity. It raised taxes and cut the growth of spending, but did so with little regard for what constituted smart cuts and what did not… It's the economic equivalent of shooting yourself in both feet, just in case shooting yourself in one doesn't completely cripple you.

O'Brien goes on to argue that austerity can't be the only cause of Britain's slump. For him, the real puzzle is the collapse in productivity which has lead to a recovery in the labour market (of sorts) without a commensurate recovery in GDP. (That disconnect may partially be the result of some statistical fiddling on the part of the Government).

There's a number of possibilities for such an "enigma", from zombie firms which are only kept alive by the low cost of credit, through measurement error (both that mentioned above and something gone awry with the seasonal adjustments), to genuine slumps — temporary or otherwise — in productivity.

But one group of people think they have the answer to O'Brien's puzzle, albeit by discounting one of his premises. These are the "cut further, cut faster" Tories, for whom a failure to reduce the deficit as quickly as they desire is the same as a failure to implement austerity.

NIESR's director Jonathan Portes has taken on this tendency, in the form of a detailed response to two of its biggest proponents, Tory MP John Redwood and the Spectator's editor Fraser Nelson.

Nelson writes:

We’re witnessing the difficulty the left has in reconciling its official narrative with what’s actually happening. Yes, George Osborne’s policy is not working – but for reasons that the Guardian can’t quite bring itself to accept. It’s not that his evil cuts are retarding the recovery. It’s that he’s slowly abandoning his deficit plan. The figures show that core government spending is going up, along with the debt and (last month) the deficit.

Portes responds that yes, core government spending "is roughly flat in real terms, with cuts in some areas offset by the operation of the automatic stabilisers". But defining austerity in terms of core government spending is arguing at cross-purposes with those who argue that austerity has harmed the British economy.

The simple analysis of the government's austerity program is that the reduction of the deficit is equivalent to austerity. That was the initial definition the government went with, which is why the failure to reduce the deficit to any great degree is seen as failing on its own terms.

But deficit reduction can't be directly equivalent to austerity, since it can also be achieved by growth. (Which is the argument the anti-cuts left has been making consistently for the last three years.) And so we get to the circular argument in Nelson's claim that Osborne has failed at austerity. Because what he is describing as the failure to achieve austerity — slow paced deficit reduction and flat spending — is actually a symptom of the failure of austerity. As Portes writes, the causal inference is wrong. It's not that the Chancellor is abandoning austerity and so the debt continues to rise; it's that debt continues to rise because austerity doesn't work to reduce it, and so the Chancellor is trying to quietly change tack:

The government did not adopt policy changes which led to slower deficit reduction. Instead, the front-loaded fiscal consolidation illustrated above (along with other factors, such as the similar, and similarly misguided, policies pursued by our eurozone partners) derailed the recovery, which in turn led to the slowing of deficit reduction, which in turn has forced the government to abandon its fiscal framework. Again, the IMF sets all this out quite clearly.

For Portes, the important failure of austerity is in the resulting reduction in capital investment, because austerity stands opposed to fiscal stimulus (which he defines as "Government measures, normally involving increased public spending and lower taxation, aimed at giving a positive jolt to economic activity").

The Government, in its desire to cut the deficit primarily through spending cuts with a top-up of tax rises, thus failed to achieve one of its goals. Spending was not cut significantly, but between tax rises and initial moderate growth, the deficit has been reduced. This is the austerity which is decried. The fact that one of the measures through which this was intended to be achieved is not proof that there has been no austerity, but merely further proof that austerity is self-defeating.

And by focusing on attempts to reduce spending and achieve "fiscal consolidation", the government failed to implement fiscal stimulus (even going so far as to reduce public investment by 1.7 per cent of GDP).

The failure of austerity to greatly reduce the deficit, and the fact that automatic stabilisers mean that spending stubbornly refuses to fall — as we swap a pound spent on EMA for a teenager in school with a pound spent on JSA for an unemployed civil servant — are not the same as a failure to implement austerity. It has been implemented, and it has damaged the nation: the question now under discussion is just how much.

George Osborne looking at wheels. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.