Osborne shouts bingo - but let's first keep up with Paraguay

The UK cannot achieve a sustainable recovery until it can pay its way in the world, and despite a 25% depreciation of the currency over the last 5 years it still fails lamentably to do so.

Osborne’s reckless boast that he has been proved right over the economy will come back to haunt him. None of his claims stand up to examination.

“Those in favour of Plan B” (i.e. stimulating the economy to produce growth), he asserts, “have lost the argument”. That will be news to employees whose real earnings at current rates will have shrunk by £6,660 during the 2010-15 parliament. It will also come as a surprise to the UK’s biggest companies still sitting on corporate cash stockpiles of £700bn because they doubt the level of demand justifies new investment in plant or services.   The stock exchange and finance markets may be frothing, but the real economy isn’t.

Nor is it likely to be any time soon. In the last 5 years UK investment has fallen by a quarter in real terms, which is devastating in terms of future growth potential. It now stands at just 14% of GDP, against a global average of 24%. Indeed in terms of the global investment-to-GDP league Britain now stands 159th, behind El Salvador, Guatemala and Mali. A recovery based on low wages, poor productivity and weak investment must be expected to stutter and slip back by 2015.

Nor does the historical evidence indicate that Osborne’s counter-intuitive plan, known by the oxymoron of ‘expansionary fiscal contraction’, has ever worked.  It has been tried three times before – the so-called ‘Geddes axe’ cuts in 1921-2, the May businessmen committee cuts in 1931, and the Howe budget in 1981. The first enforced expenditure cuts very similar in real terms to today and led to a decade of anaemic growth.   The second was only saved from a similar fate by Britain being forced off the gold standard. The third led to growth only because interest rates were eased, bank lending loosened and a reviving US helped to reflate the world economy. None of those conditions remain now to be applied, so there is no reason to believe the Osborne ‘recovery’ will defy historical precedent.

Osborne’s second claim is that “Britain is poorer because of a huge failure of economic policy in the past decade” (i.e. it was all Labour’s fault). In other words, falling incomes today are due, not to his own policies of austerity, but to Labour’s over-spending which caused the recession. But Labour didn’t over-spend, and didn’t cause the recession – the bankers’ crash did that. The budget deficit in 2007 just before the crash was only 2.9%, below the OECD average, and only rose to 11.6% in 2010 because of the enormous bank bailouts. Even by the time of the election in 2010 the UK national debt had only risen to 77% of GDP which compared with 75% for Germany, 84% for France, and 93% for the US. Labour spending was not out of line with other lead countries.

Equally it is disingenuous for Osborne to claim that today’s diminishing incomes – the longest fall in wages since the 1870s and on average 9% down in real terms since pre-crash levels – owes nothing to his austerity programme and all to the recession. Of course the latter has had a major impact, but to pretend that £81bn of expenditure cuts and £18bn (and counting) of benefit cuts have not significantly exacerbated the downward pressure on incomes is absurd.

Third, “nor are we seeing”, the Chancellor has claimed, “a return to unsustainable levels of indebtedness and household borrowing”. Well, actually, we are. Frighteningly, household lending is just 0.3% below its 2008 peak, while lending to firms is now 22% lower and if account is taken of inflation it’s fallen by a stunning 32%. There is no other way of describing this except as unsustainable. At the same time it’s clear that another major housing bubble is well under way, driven by Osborne’s own Help to Buy scheme, with estate agents the fastest growing sector in the workforce. Debt-to-income ratios, previously falling, have now turned up again. Plainly the recovery, such as it is, is propelled by borrowing.  And an economy dependent on consumer debt together with low wages, weak investment and poor productivity is likely once again to slip back after an initial short burst of expansion.

Osborne’s last assertion was that “growth had been too concentrated in one corner of the country – and HS2 will transform the UK’s economic geography”. The former statement is certainly true, with any recovery heavily concentrated in London and the south-east. But HS2, even if it goes ahead with a price-tag heading north of £50bn, will not remotely produce the degree of economic rebalancing required. The country’s finance sector is still too large and dominant, while manufacturing is shrivelled well below its potential.

The UK cannot achieve a sustainable recovery until it can pay its way in the world, and despite a 25% depreciation of the currency over the last 5 years it still fails lamentably to do so. The UK has only had a surplus in traded goods six times in the last 55 years, and last year the deficit on traded goods was £106bn, equal to 7% of GDP. HS2 won’t conceivably solve a problem of these proportions – only a fundamental revival of the UK’s capabilities for high-tech manufacturing will achieve that.

British Chancellor of the Exchequer George Osbourne speaks during the Conservative Party Conference in Manchester. Image: Getty
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US election 2016: Trump threatens to deny democracy

When asked if he would accept the result of the election, the reality TV star said that he would have to “keep you in suspense.”

During this insane bad-acid-trip of an election campaign I have overused the phrase “let that sink in.”

There have been at least two dozen moments in the last 18 months which I have felt warranted a moment of horrified contemplation, a moment to sit and internalise the insanity of what is happening. That time a candidate for president brought up his penis size in a primary election debate, for one.

But there was a debate last night, and one of the protagonists threatened to undermine democracy in the United States of America, which throws the rest of this bizarre campaign into stark relief.

It was the third and final clash between an experienced if arguably politically problematic former senator and secretary of state – Hillary Clinton –  and a reality TV star accused of a growing number of sexual assaults – Donald Trump – but the tone and content of the debate mattered less than what the latter said at one key, illuminating moment.

That statement was this: asked if he would accept the result of the election, Donald Trump said that he was going to “look at it at the time,” and that he would have to “keep you in suspense.”

If your jaw just hit the floor, you have responded correctly. The candidate for the party of Lincoln, the party of Reagan, the party of Teddy Roosevelt, declined to uphold the most fundamental keystone of American democracy, which is to say, the peaceful transition of power.

Let that sink in. Let it sit; let it brew like hot, stewed tea.

This election has been historic in a vast number of ways, most important of which is that it will be, if current polling is to be believed, the election which will bring America's first female president to the White House, almost a century after women's suffrage was enabled by the 19th amendment to the constitution in August 1920.

If the last near-century for women in America has been a journey inexorably towards this moment, slowly chipping away at glass ceiling after glass ceiling, like the progression of some hellish video game, then Donald Trump is as fitting a final boss as it could be possible to imagine.

For Trump, this third and final debate in Las Vegas was do-or-die. His challenge was near-insurmountable for even a person with a first-class intellect, which Trump does not appear to possess, to face. First, he needed to speak in such a way as to defend his indefensible outbursts about women, not to mention the increasing number of allegations of actual sexual assault, claims backstopped by his own on-tape boasting of theoretical sexual assault released last month.

This, he failed to do, alleging instead that the growing number of sexual assault allegations against him are being fabricated and orchestrated by Clinton's campaign, which he called “sleazy”, at one point to actual laughs from the debate audience.

But he also needed to reach out to moderates, voters outside his base, voters who are not electrified by dog-whistle racism and lumbering misogyny. He tried to do this, using the Wikileaks dump of emails between Democratic party operators as a weapon. But that weapon is fatally limited, because ultimately not much is in the Wikileaks email dumps, really, except some slightly bitchy snark of the kind anyone on earth's emails would have and one hell of a recipe for risotto.

In the debate, moderator Chris Wallace admirably held the candidates to a largely more substantive, policy-driven debate than the two previous offerings – a fact made all the more notable considering that he was the only moderator of the three debates to come from Fox News – and predictably Trump floundered in the area of policy, choosing instead to fall back on old favourites like his lean-into-the-mic trick, which he used at one point to mutter “nasty woman” at Clinton like she'd just cut him off in traffic.

Trump was more subdued than the bombastic lummox to which the American media-consuming public have become accustomed, as if his new campaign manager Kellyanne Conway had dropped a couple of Xanax into his glass of water before he went on stage. He even successfully managed to grasp at some actual Republican talking-points – abortion, most notably – like a puppy who has been semi-successfully trained not to make a mess on the carpet.

He also hit his own favourite campaign notes, especially his opposition to the North American Free Trade Agreement (NAFTA) - but ultimately his intrinsic Donald Trumpiness couldn't stop itself from blazing through.

Remember the Republican primary debate when Trump refused to say that he would accept the party's nominee if it wasn't him? Well, he did it again: except this time, the pledge he refused to take wasn't an internal party matter; it was two centuries of American democratic tradition chucked out of the window like a spent cigarette. A pledge to potentially ignore the result of an election, given teeth by weeks of paranoiac ramblings about voter fraud and rigged election systems, setting America up for civil unrest and catastrophe, driving wedges into the cracks of a national discourse already strained with unprecedented polarisation and spite.

Let it, for what is hopefully just one final time, sink in.

Nicky Woolf is a writer for the Guardian based in the US. He tweets @NickyWoolf.