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 idea that sitting all day behind a desk increases your output is a fantasy

If you don’t trust people, at least make sure that you imprison them, seems to be the idea.

Scruffy and tieless, I was the odd one out. Taking a break from research in the London Library, I settled at the bar of an Italian restaurant and resumed reading Tony Collins’s excellent book Sport in Capitalist Society. While the hedge-fund managers looked askance, the young Hungarian waiter recognised one of his own. “That was the subject of my PhD,” he explained, before giving me a sparkling history of sport and Hungarian society.

He now juggles waiting tables with writing articles. It’s not easy. He tells me that when he rereads his old academic work, “Sometimes I need a dictionary!” Like many other people in today’s economy, he balances different jobs, the remuneration and fulfilment varying significantly.

As you have probably noticed, it seems that almost everyone is employed but hardly anyone has a job. Of the 42 million people of working age in Britain, 23 million are in a full-time job; roughly 14 million are full-time parents or carers; most of the rest work part-time, or are self-employed, or work for a business that is so small that it is, in effect, a form of self-employment. The “job” – the salary, the subsidised canteen, the pension – is on the wrong side of history. That is both liberating and scary.

There are two separate points here. The first, deriving from the privilege of choice, is that some people (I am one of them) are happier with the variety and freedom of self-employment. The second is that many people do not have a choice: solid, dependable jobs are a dead concept. We had better get used to fending for ourselves, because we are going to have to.

The phrase “portfolio career” was popularised by the management thinker Charles Handy. “I told my children that they would be well advised to look for customers, not bosses,” as Handy put it. “The important difference is that the price tag now goes on people’s produce, not their time.”

This transition from time-serving to genuine contribution can be good news for workers and employers alike. The art of being an employee is to string things out while pretending to be busy. The art of being self-employed is the opposite: getting things done well and efficiently, while being open to taking on new work. Employees gain an incentive to look effortful, the self-employed to look effortless.

The idea that sitting constantly behind a desk increases output, which underpins the old concept of a job, is a fantasy derived from control: if you don’t trust people, at least make sure that you imprison them. As an unfortunate consequence, the projection of phoney “busyness” consumes more energy than actual work and brings a kind of compound stress: always bustling around, never moving forward. “Never walk past the editor’s office without carrying a piece of paper,” young journalists are advised.

When I turned pro as a cricketer, an old hand told me that if I ever felt lost at practice, I should untie my shoelaces and then do them up again. “We don’t measure success by results but by activity,” as Sir Humphrey quips in Yes Minister. Ironically, I had never realised that my career as a sportsman – apparently playful and unserious – would prove to be the outlier for opposite reasons. Where most careers have drifted towards freelance portfolios, professional sport has tightened the leash. When you have to eat, sleep and train according to strict rules, your job is at one extreme end of the control-of-freedom spectrum. Yet even in elite sport there is more room for semi-professionalism than the system usually allows, especially in games – such as cricket – where physical fitness is necessary but not sufficient.

Yet the reality of the portfolio career inevitably brings new problems that are bound up with wider forces. A life that is spent moving from one institution to another – from school, to university, to a lifelong job – is becoming exotic, rather than the norm. For most of us, there will be no retirement party, no carriage clock. It is not just finding income that is being devolved downwards; so, too, is the search for meaning, purpose and identity. We live in what Handy calls a “de-institutionalised society”.

There are civilising aspects to the trend. First, the new employment landscape reduces the likelihood of people wasting their lives in the wrong job just because it is safe. Handy cites data suggesting that 80 per cent of employees feel dissatisfied in corporate jobs while 80 per cent are happy leading freelance lives. Nor does the old lie – that of backloading happiness, with corporate sacrifice giving way to happy retirement – stack up. We are better off balancing duties and pleasures all the way through.

Second, the decline of the job-for-life may gradually undermine the assumption that everyone’s wealth and prospects (let alone their value) can be determined by a couple of questions about an employer’s address. Social assumptions based on (apparent) occupation are increasingly ridiculous. Guess who the scholar is in the Italian restaurant: the waiter. It’s a good lesson. Your Uber driver could be a landscape architect, funding his professional passion with part-time top-ups.

The language of employment (“Where do you work?”) has been slow to catch up with this reality. When asked, “What do you do?” a freelancer can give a full and interesting answer, only to prompt the follow-up question, “So, what do you do, then?” If conversation becomes less like a mortgage questionnaire, that can only be a good thing.

Hugo Rifkind, writing recently in the Times, admired the Scandinavian-inspired decoupling of taste from wealth. “It is a ­better world . . . where you are not judged on the lineage of your sideboard.” I am more radical. It is a better world when you are not judged on your job.

Better or not – and like it or not – we will have to get used to it. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war