Dividing Lines: The economy

Continuing his series on the major policy divisions in politics, Rafael Behr tackles the economy.

What’s the issue?
This is the big one. When the coalition was formed it claimed its governing purpose was to rescue Britain from an economic emergency. The remedy devised by George Osborne was an immediate course of spending cuts to reduce the Budget deficit and limit the rise in public debt as a proportion of gross domestic product. The theory was that a shock-and-awe display of fiscal discipline would reassure international investors that Britain was a “safe haven” from global turbulence. Cutting the public sector is also meant to release growth potential in the private sector, which was thought to have been “crowded out” by state expansion under Labour.

Is it working?
No. The economy didn’t grow at all last year. It is 3.3 per cent smaller than at its boom-time peak. Osborne is on course to fail his self-imposed tests of credibility – eliminating the “structural” deficit (the part of government overspend that doesn’t vanish automatically when the economy is operating at full capacity) and reducing public debt as a proportion of GDP by the end of this parliament.

What went wrong?
The government says its inheritance from Labour was worse than previously thought and that the eurozone crisis has blown recovery off course. Labour says the rush to austerity has drained demand out of the economy; when companies and households were too indebted or too frightened to spend, the government should have stepped in to stimulate activity – hitting the gas instead of slamming on the brakes.

So, Labour would turn on the money taps again?
Economically, that is the logic of Ed Balls’s position but politically he is in a bind. Lots of people are persuaded that an underlying cause of the crisis was “Gordon Brown spending all the money”. Whenever Balls attempts to make his macroeconomic argument, he ends up trying to rehabilitate the reputation of a period in Labour’s record that even many on his own side think is better off left for dead. Besides, by the time of the next election, the public finances will be in such a woeful state that there will be no spare capacity to increase spending. The campaign will be about who cuts what and with what end in mind.

Couldn’t the government borrow to spend?
Yes. And it is quietly doing just that, because there is no growth. There is a case for saying that the low long-term interest rates available now make it a good time to borrow for investment in such things as housing and transport that would create jobs and strengthen our economic capacity.

Even Osborne has discreetly conceded the point that cuts alone won’t kick-start growth. In his Autumn Statement last year, the Chancellor said he would find £5bn for infrastructure investment, but the money has to be carved out by making cuts to other budgets. He has painted himself into a corner, insisting any dilution of austerity would be a disaster and portraying borrowing as inherently wicked. So, to be true to their own political script, the Tories have to pretend to be less reliant on borrowing than they are. It is higher now than at the last election, and rising. David Cameron recently claimed that the government is “paying down the debt” but by any measure it simply isn’t.

That’s a bit sneaky, isn’t it?
Very. The question is how long they’ll get away with it. There is a strong expectation that the credit-rating agencies will downgrade the UK this year, torpedoing Osborne’s “safe haven” claim. Balls’s problem is that he struggles to call out the Tories for relying on debt: his core macroeconomic analysis demands the same fiscal remedy. Intellectually, his position can be made coherent but it relies on a distinction between “good” Labour borrowing – premeditated to spur growth – and “bad” Tory borrowing – accidental, driven by a failed austerity plan. The difference is not immediately obvious to many voters.

Besides, no one doubts that the Tories at least want to limit public spending, while Labour risks looking like it wants to duck that challenge altogether. In order to reassure swing voters that it is a careful steward of taxpayers’ money, the opposition could end up accepting spending restraints that don’t permit the kind of stimulus that has been central to its macroeconomic prescription.

So Labour thinks we should be borrowing more but doesn’t feel comfortable admitting it, and the Tories are borrowing more but pretend they aren’t?
Pretty much. A vital difference is that many Conservatives think the government isn’t cutting budgets deeply enough. The Tory hawks think the way out of the growth impasse is on the “supply side”– cutting back on regulations and employment rights in the belief that excessive bureaucracy is stifling enterprise. Labour sees that as a sign the Tories are using the financial crisis as a pretext to pursue an old agenda of shrinking the role of government in public life. It doesn’t, Labour says, tackle the underlying problem of inadequate demand.

What do the Lib Dems think?
Their instincts are with Labour. Nick Clegg has conceded that infrastructure spending was cut too hard in the coalition’s early days. Yet within the broad outline of austerity the Lib Dems are lashed to Osborne’s mast; they sign off on his budgets.

That doesn’t sound very comfortable.
In this debate, no one is.

 

Rafael Behr's "Dividing Lines" series appears regularly in the New Statesman magazine.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 04 February 2013 issue of the New Statesman, The Intervention Trap

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In Bangladesh, bat in hand, I list all the things that could go wrong

Not everyone gets to play cricket in Bangladesh but I still managed to notch up more worries than runs.

Back from Bangladesh. I picked up a stomach bug while I was out there, and possibly a heart bug, about which I’d rather not go into any detail at the moment, but both will get better as time passes. Meanwhile, as I lie in my bed of pain (the nasty stuff has stopped but I’m still getting the occasional painful ache in the guts), I have my memories.

I must say it was very odd to be treated like royalty while I was out there. (For those who missed it: I was invited to participate in the Dhaka Literary Festival, and saw no reason to refuse, especially after being bought an exceptionally good dinner by the main organiser.) The democrat in me feels shifty even when I’m addressed as “sir” in shops in the UK, so when, one day, on entering the campus at the Bangla Academy, I was actually saluted by a military policeman, I was somewhat taken aback. I wonder if I will see that look in the soldier’s eyes until my dying day: alert, respectful, possibly a bit unhinged. Anyone saluting me must be a little off their rocker, but then how was he to know what a cock-up of a human being I am?

Still, it was extraordinarily pleasant. The highlight was, of course, the cricket match, in which I was invited to play for a scratch team of five from the Authors’ XI, plus two extra lads from the local college, or perhaps affiliated to the local team, the Khulna Titans, whose boss presented us all with caps. I’m wearing mine even as I write these words. I find it soothing.

At the time, though, I was feeling most unsoothed. I found myself going through a list of worries. I should point out that I often start to worry when I start descending the staircase to my own front door – and I was, at this point, roughly 5,000 miles from my front door.

So here are my top ten worries on the way to, during and after the match. I present them in chronological order of beginning to freak me out.

1) Getting shot by terrorists. (That police escort does make one stand out in a crowd, and this lot didn’t seem to be carrying any guns.)

2) Being bitten by one of the dogs lounging around the side of the pitch and having to make the choice between having a series of terribly painful rabies shots, or having rabies.

3) Being stung by a wasp or something on the field and going into anaphylactic shock.

4) Being hit in the mouth by a bouncer and having to go to a hospital to have my teeth crammed back in somehow.

5) Making a huge mow at a full toss not quite as outside the off stump as I’d suspected it was, and missing and being bowled by it.

6) Dropping a catch . . .

6a) . . . and having the ball slam into my mouth etc (see 4).

7) Getting sunstroke/sunburn.

8) Being bitten by a dragonfly, or a swarm of them, while on the pitch. There were loads of dragonflies, for some reason, but they were rather drab. Maybe they weren’t dragonflies, but they flew in the same manner.

9) Throwing the ball back to the keeper in an unmanly or generally disappointing fashion.

10) Being stuck in traffic on the way back for ever and ever, and so missing the event I was scheduled to chair later in the afternoon.

As it is, only number 5) transpired. And maybe a bit of 9). However, I at least made one rather streaky run and so am now able to make the hilarious joke that I have scored on the subcontinent. I marvelled at the state of the pitch: it looked like very fine-textured, pliable tar, or mud baked halfway to being a brick, but soft enough for the spikes on your boot to make a neat hole. Still, it was loads better than the poor neglected pitches at Dogshit Park in Shepherd’s Bush. And I thought of my father, who would have been strangely proud of me for having played in so far-flung a place, and wished that he was still around so he could hear my news.

And so back to London. I was greeted, as I stepped, in my summer linens, from the Heathrow Express at Paddington to the cab rank (I was too tired and sick for public transport), by a blast of chill rain, and shivered as I turned on the cab’s heater. Once again I seem to have fallen in love with a place new to me, and I begin to get indignant at the fact that the weather gets miserable in the UK.

There might be millions of poor people in Bangladesh, but not a single one of them is living in fear that one night they might freeze to death while sleeping out of doors. 

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage