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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The public like radical policies, but they aren't so keen on radical politicians

Around the world, support for genuinely revolutionary ideas is strong, but in the UK at least, there's less enthusiasm for the people promising them.

You’re probably a getting a little bored of the litany of talking head statistics: trust in elected officials, parliament, the justice system and even democracy itself has been falling steadily for years and is at record lows. Maybe you’ve seen that graph that shows how people born after 1980 are significantly less likely than those born in 1960 to think that living in a democracy is ‘essential’. You’ve possibly heard of the ‘Pasokification’ of the centre-left, so-named the collapse of the once dominant Greek social democratic party Pasok, a technique being aggressively pursued by other centre-left parties in Europe to great effect.    

And so, goes the logic, there is a great appetite for something different, something new. It’s true! The space into which Trump et al barged leaves plenty of room for others: Beppe Grillo in Italy, Spanish Podemos, Bernie Sanders, Jean Luc Melanchon, and many more to come.

In my new book Radicals I followed movements and ideas that in many cases make someone like Jeremy Corbyn seem positively pedestrian: people who want to dismantle the nation state entirely, use technology to live forever, go off grid. All these ideas are finding fertile ground with the frustrated, disillusioned, and idealistic. The challenges of coming down the line – forces of climate change, technological change, fiscal crunch, mass movements of people – will demand new types of political ideas. Radical, outsider thinking is back, and this does, in theory at least, offer a chink of light for Corbyn’s Labour.

Polling last week found pretty surprising levels of support for many of his ideas. A big tax on high earners, nationalising the railways, banning zero hours contracts and upping the minimum wage are all popular. Support for renewable energy is at an all-time high. According to a recent YouGov poll, Brits actually prefer socialism to capitalism, a sentiment most strongly held among younger people.

There are others ideas too, which Corbyn is probably less likely to go for. Stopping benefits entirely for people who refuse to accept an offer of employment is hugely popular, and in one recent poll over half of respondents would be happy with a total ban on all immigration for the next two years. Around half the public now consistently want marijuana legalised, a number that will surely swell as US states with licenced pot vendors start showing off their dazzling tax returns.

The BNP effect used to refer to the problem the far-right had with selling their ideas. Some of their policies were extremely popular with the public, until associated with the BNP. It seems as though the same problem is now afflicting the Labour brand. It’s not the radical ideas – there is now a genuine appetite for those who think differently – that’s the problem, it’s the person who’s tasked with delivering them, and not enough people think Corbyn can or should. The ideal politician for the UK today is quite possibly someone who is bold enough to have genuinely radical proposals and ideas, and yet appears extremely moderate, sensible and centrist in character and temperament. Perhaps some blend of Blair and Corbyn. Sounds like an oxymoron doesn’t it? But this is politics, 2017. Anything is possible.

Jamie Bartlett is the head of the Violence and Extremism Programme and the Centre for the Analysis of Social Media at Demos.

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