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Leader: For Osborne the axeman, no failure is too great

The Chancellor's determination to persist with his strategy has more to do with politics than economics.

For George Osborne, every economic failure serves only as confirmation of the wisdom of his approach. Confronted by the threat of a triple-dip recession, a rising Budget deficit and the loss of the UK’s triple-A credit rating, the Chancellor has chosen not to lessen his commitment to austerity but to “redouble” it. On one point we can agree with Mr Osborne: the credit downgrade is no basis for a change in policy. The judgements of Moody’s, in common with those of all ratings agencies, do not deserve their exalted status. It is remarkable that anyone believes the agencies that rated AIG and Lehman Brothers as well as various mortgage-backed securities as “safe” investments up until the financial crash of 2008 should be regarded as anything other than irrelevant.

Had the Chancellor made this point before the election or at any point since, he could have legitimately shrugged off the downgrade – but he did not. On the contrary, he made retention of the triple-A rating the ultimate test of his economic policy and argued, in opposition, that its loss would be a “humiliating” moment. When the UK was taken off negative watch by Standard & Poor’s in October 2010 (it has since been put back on), Mr Osborne boasted of a “big vote of confidence in the UK and a vote of confidence in the coalition government’s economic policies”. Having prostrated himself before these false gods, the Chancellor cannot now dismiss their pronouncements as easily as he would wish.

In its explanation of the downgrade, Moody’s told us nothing that we did not already know. The UK’s “sluggish growth”, it observed, is likely to extend into “the second half of the decade”, with a reduced pace of deficit reduction the inevitable consequence. It is these points, rather than the loss of the triple-A rating, that should force a change of direction from Mr Osborne. At the time of his “emergency” Budget in June 2010, the Chancellor declared: “Unless we deal with our debts, there will be no growth.” Yet he has learned that the reverse is true – unless you stimulate growth, you cannot deal with your debts. The man who made such play of his fiscal rectitude is now expected to increase the national debt by 58 per cent over the course of the parliament and by more in five years than Labour did in 13. Rather than borrowing for growth, the Chancellor is borrowing to meet the costs of failure.

Contrary to what some on the right claim, there has been no shortage of austerity. Infrastructure spending has fallen by 42 per cent, VAT has risen to 20 per cent and 370,000 government jobs have been cut, so that the public-sector workforce is at its lowest since 2003. Yet because of the disappearance of growth, coupled with a resultant fall in tax revenues and a rise in long-term unemployment to 879,000 since 2010, which caused a rise in the benefits bill, deficit reduction has stalled. Even with the additional £2.3bn from the auction of the 4G mobile spectrum, borrowing will be higher this year than last.

Having presided over an economy that has grown by just 0.4 per cent since the autumn of 2010 – a slower rate than every G20 country except Italy and Japan – the government puts ever more emphasis on its superficially impressive employment record. In the past year, unemployment has fallen from 8.4 per cent to 7.8 per cent and employment has reached a record level of 29.7 million. Yet while ministers celebrate the expanding quantity of jobs, they devote little attention to the diminishing quality. As our economics editor, David Blanchflower, explains on page 19, there are now over a million people working part-time because they are unable to find full-time jobs. Together with David Bell, professor of economics at the University of Stirling, he has developed an “underemployment index”, based on individuals’ preferred number of hours. It shows that the UK’s level of excess labour capacity is now at its highest level (43.8 per cent) since the recession began in 2008. As a result of this fantastic waste of human potential, ever more find themselves in jobs unable to secure an adequate standard of living.

Although Mr Osborne would never admit it, his determination to persist with his strategy has more to do with politics than economics. The electorate continues to regard the coalition’s austerity measures as a necessary corrective to years of profligacy by Labour. Mr Osborne’s hope is that, if the next election is again fought over the issue of deficit reduction, voters will put their faith in the original axeman.

For the Chancellor, the worse it gets, the better – but the country, with its growth prospects reduced by austerity, faces years of avoidable misery.

 

This article first appeared in the 04 March 2013 issue of the New Statesman, The fall of Pistorius

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The New Times: Brexit, globalisation, the crisis in Labour and the future of the left

With essays by David Miliband, Paul Mason, John Harris, Lisa Nandy, Vince Cable and more.

Once again the “new times” are associated with the ascendancy of the right. The financial crash of 2007-2008 – and the Great Recession and sovereign debt crises that were a consequence of it – were meant to have marked the end of an era of runaway “turbocapitalism”. It never came close to happening. The crash was a crisis of capitalism but not the crisis of capitalism. As Lenin observed, there is “no such thing as an absolutely hopeless situation” for capitalism, and so we discovered again. Instead, the greatest burden of the period of fiscal retrenchment that followed the crash was carried by the poorest in society, those most directly affected by austerity, and this in turn has contributed to a deepening distrust of elites and a wider crisis of governance.

Where are we now and in which direction are we heading?

Some of the contributors to this special issue believe that we have reached the end of the “neoliberal” era. I am more sceptical. In any event, the end of neoliberalism, however you define it, will not lead to a social-democratic revival: it looks as if, in many Western countries, we are entering an age in which centre-left parties cannot form ruling majorities, having leaked support to nationalists, populists and more radical alternatives.

Certainly the British Labour Party, riven by a war between its parliamentary representatives and much of its membership, is in a critical condition. At the same time, Jeremy Corbyn’s leadership has inspired a remarkable re-engagement with left-wing politics, even as his party slumps in the polls. His own views may seem frozen in time, but hundreds of thousands of people, many of them young graduates, have responded to his anti-austerity rhetoric, his candour and his shambolic, unspun style.

The EU referendum, in which as much as one-third of Labour supporters voted for Brexit, exposed another chasm in Labour – this time between educated metropolitan liberals and the more socially conservative white working class on whose loyalty the party has long depended. This no longer looks like a viable election-winning coalition, especially after the collapse of Labour in Scotland and the concomitant rise of nationalism in England.

In Marxism Today’s “New Times” issue of October 1988, Stuart Hall wrote: “The left seems not just displaced by Thatcherism, but disabled, flattened, becalmed by the very prospect of change; afraid of rooting itself in ‘the new’ and unable to make the leap of imagination required to engage the future.” Something similar could be said of the left today as it confronts Brexit, the disunities within the United Kingdom, and, in Theresa May, a prime minister who has indicated that she might be prepared to break with the orthodoxies of the past three decades.

The Labour leadership contest between Corbyn and Owen Smith was largely an exercise in nostalgia, both candidates seeking to revive policies that defined an era of mass production and working-class solidarity when Labour was strong. On matters such as immigration, digital disruption, the new gig economy or the power of networks, they had little to say. They proposed a politics of opposition – against austerity, against grammar schools. But what were they for? Neither man seemed capable of embracing the “leading edge of change” or of making the imaginative leap necessary to engage the future.

So is there a politics of the left that will allow us to ride with the currents of these turbulent “new times” and thus shape rather than be flattened by them? Over the next 34 pages 18 writers, offering many perspectives, attempt to answer this and related questions as they analyse the forces shaping a world in which power is shifting to the East, wars rage unchecked in the Middle East, refugees drown en masse in the Mediterranean, technology is outstripping our capacity to understand it, and globalisation begins to fragment.

— Jason Cowley, Editor 

Tom Kibasi on what the left fails to see

Philip Collins on why it's time for Labour to end its crisis

John Harris on why Labour is losing its heartland

Lisa Nandy on how Labour has been halted and hollowed out

David Runciman on networks and the digital revolution

John Gray on why the right, not the left, has grasped the new times

Mariana Mazzucato on why it's time for progressives to rethink capitalism

Robert Ford on why the left must reckon with the anger of those left behind

Ros Wynne-Jones on the people who need a Labour government most

Gary Gerstle on Corbyn, Sanders and the populist surge

Nick Pearce on why the left is haunted by the ghosts of the 1930s

Paul Mason on why the left must be ready to cause a commotion

Neal Lawson on what the new, 21st-century left needs now

Charles Leadbeater explains why we are all existentialists now

John Bew mourns the lost left

Marc Stears on why democracy is a long, hard, slow business

Vince Cable on how a financial crisis empowered the right

David Miliband on why the left needs to move forward, not back

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times