Sunday, June 20, 2010

A coalition of cuts

There is only one real issue in the UK today and it is ideology. This may seem strange as Britain, with its deeply embedded political self-image of pragmatism and moderation, can often appear to be an ideological wilderness. Today's papers trail the forthcoming emergency budget, no doubt informed by countless confidential briefings. It is being made obvious that it will launch a massive programme of cuts and, whilst they still talk about us all being in it together, clearly some are more in it than others.

Keynesian liberals are appalled. Here's Will Hutton:
No country has ever volunteered such austerity. It is as tough a package of retrenchment as the IMF imposed on Greece, a country on the brink of bankruptcy. It is twice as tough as the famously harsh measures Canada took between 1994 and 1997. It is three times tougher than Sweden's measures between 1993 and 1995. In British terms, it is immeasurably tougher than what we did after the IMF crisis in 1976 or after the ERM crisis in 1992...

We are not in the position of Greece. Britain has a diversified economy. Our cumulative national debt is not large by international standards. Uniquely, the term structure of our debt is very long – around 14 years. Most of this year's debt will be sold to British domiciled individuals and companies, so the international sovereign debt crisis has much less impact on us. The level of interest on the national debt in five years' time as a share of national output is more than manageable. These are the truths about the situation; to claim otherwise creates distrust.
So why do it? Surely, what we are about to see is the dogmatic implementation of the underpinning political economy of contemporary conservatism, borrowing some of the small state hysteria of the American right, though without the paranoia, lumped together with the perceived self-interest of the business elite, but mainly settling into comfortable, thought free, treasury orthodoxy; the final resting place of the complacent.

Those of us who remember the 80's will realise that these moments do not occur in a vacuum, there has to be an international consensus. Thatcher had her Regan, neo-liberalism was in the ascendancy, attempts at Keynesian stimulus failed in France as Mitterand did a comprehensive u-turn. Today much reference is being made to Canada, Sweden and the like who made major structural adjustments, apparently successfully. Except...

One of the most trenchant critics of the current orthodoxy, Paul Krugman, points out in his blog that these cases are not analogous. Instead, he argues in this New York Times op ed "that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day".

The other similarity with the Thatcher years is the existence of a crisis in the centre-left. In the early 80's it was the split in the Labour Party and the formation of the Social Democratic Party. Both opposed Thatcherism, but now, following the SDP/Liberal merger to form the Liberal Democrats, part of the former opposition is actually in the coalition government, whilst the Labour Party has lost power after a long period of accommodation with, rather than opposition to, neo-liberal political economy. The ideological sterility of Labour's leadership debate shows little sign of a political movement that can speak for any popular discontent arising from this elite economic consensus.

Whilst looking around for a coherent and informed political opposition and merely finding oneself in an intellectual desert, it is hard to escape pessimism. Krugman again writes that, "The triumph of prejudices over the evidence is a wondrous thing to behold. Unfortunately, millions of workers will pay the price for that triumph." And the last word goes to Will Hutton:
Number 10 and the Treasury believe the worst can be offset by aggressively low interest rates and more quantitative easing. They will work to a degree. But what is proposed still risks everything. Politicians pay the price with lost office. Millions of British will pay a higher price – the needless squandering of their lives.

1 comment:

Shuggy said...

On pragmatism, this guy argues that when it comes to economics at least, ideology is a peculiarly Anglo-Saxon disease - with our Continental friends benefiting from a more pragmatic disposition. Will Hutton rates him highly enough to consider some of his best lines worth stealing over the years ;-)

(The open library's link particularly helpful on the content of this book, I think you'll agree.)