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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Clinton and Trump: do presidential debates really matter?

The ability of the candiates to perform in front of the cameras is unlikely to impact the final result.

The upcoming televised presidential debates between Hillary Clinton and Donald Trump are undoubtedly the most eagerly anticipated for many years. No doubt there are various surprises in store – this has been, after all, the most surprising of campaigns.

People will be particularly fascinated to see if Trump dials down his bombastic rhetoric and perhaps even adds some substance to the vague policy pronouncements he has made so far. To a lesser extent, many will also be interested in whether Clinton can add the necessary zest to what some consider her lacklustre style, and whether she can prove she’s made a sterling recovery from her recent bout with pneumonia.

It’s possible that some voters may in fact change their minds based on what they see in the two’s only on-camera encounters. And yet, barring a true disaster or devastating triumph, it’s unlikely that anything the candidates say or do will make much difference to the overall result.

This might not seem all that surprising for these two candidates in particular. Leaving aside how long they’ve both been in public life, social media and the 24-hour news cycle have put Clinton and Trump under incredible scrutiny ever since they announced their respective candidacies – and their every sentence and gesture has already been analysed in the greatest detail.

Trump in particular has received more free publicity from the networks and Twitter than even he could afford, and it’s highly unlikely that he will say anything that the US public hasn’t heard before. Similarly, voters’ impressions of Clinton are apparently so deeply entrenched that she probably won’t change many people’s minds.

Yet there are also broader reasons why presidential TV debates are less important than we might imagine.

Looking the part

Even before the media environment became as saturated as it is today, debates were rarely, if ever, decisive in presidential elections. The exception was possibly the very first TV debate in 1960, which pitted the then vice-president, Richard Nixon, against John F. Kennedy.

At the time, the election was so close that the young, relatively inexperienced but highly telegenic Kennedy was able to reap the benefits of putting his case directly to viewers. He was the underdog; a relative unknown in comparison to Nixon and so had more to gain from such national exposure. Nixon, as the establishment figure, had a lot to lose.

In the end, Kennedy’s narrow victory may well have been because of his debate performances. But his success also demonstrated another important feature of television debates: that viewers take more notice of what they see than what they hear.

Notoriously, television viewers responded very favourably to Kennedy’s film-star good looks, but were turned off by Nixon, who refused to wear make-up and looked sweaty and uncomfortable under the studio lights. In contrast, those who listened on the radio believed that Nixon had come out on top. It seems that viewers saw Kennedy as more “presidential” than Nixon, especially given his calmness under pressure. Kennedy did work hard to exploit some of Nixon’s weaknesses on policy, but in the end, that turned out not to be the point.

Kennedy’s success was one of the reasons that neither of his two successors, Lyndon B. Johnson and then a resurgent Nixon, participated in any such events when they were running for the presidency. Although some debates were held in the primaries, there were no face-to-face contests between presidential candidates in 1964, 1968 or 1972.

The next debates were held in 1976, another tight campaign. These yielded a notorious moment in the second encounter between Gerald R Ford and Jimmy Carter, when the incumbent Ford appeared to throw the election away with a poorly judged remark declaring that there was no Soviet domination of Eastern Europe. As myth has it, this gaffe stalled Ford’s polling surge; he ultimately lost the election.

Yet even this was not decisive. Although the comment did the president no favours, it’s highly debatable whether it in fact had an impact on the overall result; Ford actually closed the polling gap with Carter between the debates and the general election. People’s reactions to the debate had less to do with the substance of his remark and much more with the media’s constant replay and analysis of that moment, which continues to mar Ford’s reputation to this day.

Selective memory

This pattern has continued in the election cycles that have followed, as slips and awkward moments rather than substance provide the media with dominant themes. Many people recall vice-presidential candidate Dan Quayle’s cack-handed attempt to compare himself to Kennedy in 1988, or George Bush senior’s ill-judged glance at his watch when listening to a question in 1992; few probably remember much about what policies they discussed, or whether, if they won, they carried them out.

If anything, the shortcomings of the TV debate format have become more pronounced in the current cycle. Although neither of the main candidates in this year’s election wants for national exposure, the primary debates have tended to favour the underdog and those who claim to be outsiders.

On the Republican side, Trump’s various moderate competitors were one by one hobbled and engulfed; Clinton, for her part, spent months slugging it out with her remarkably successful left-wing rival Bernie Sanders, never quite landing a televised knockout punch and ultimately only defeating him properly after six months of primaries.

While credible policy proposals seem to matter less than ever, things that would have once been considered catastrophic gaffes have become par for the course. Indeed, one could argue that Trump’s success so far is because he has built his campaign on half-truths and outright lies without care for the consequences.

So despite all the anticipation, this year’s debates probably won’t tell us very much about what will happen after the president takes office next January; the analysis will almost certainly focus less on what the candidates have to say and more on how they say it. Voters will no doubt tune in in great, possibly record-breaking numbers, but they’ll come away with precious little sense of what’s in store for their country.

Equally, the spectacles we’re about to witness might be pyrotechnic enough, but they’re unlikely to decide the result in November. And in the unlikely event that they do, it won’t be for the right reasons.

Andrew Priest is a lecturer in Modern US History at the University of Essex

This article was originally published on The Conversation. Read the original article.