Friday, 12 October 2012
Tell me again why austerity is such a good idea
Once upon a time, the International Monetary Fund (above) backed Chancellor George Osborne's hair-shirt variant of neo-conservative hatchet-wielding. It's painful, they said, but it's necessary: otherwise budgetary deficits will yawn ever wider, confidence will drain away, the banks will get weaker, and stagflation (or worse) might ensue. The IMF provided the Treasury with much-needed intellectual firepower.
Now? Well, now they say they were wrong. In much the same way as they used to hold up their hands and say 'we admit it, we helped to ruin this African country's economy. Can we try again on another one?'
They got the spreadsheets askew. Instead of each pound of cuts reducing output by a pound, it's more like £1.70 - something Keynes could have told them when they started. And something that means that, for all the pain we've already endured, we've not got anywhere near the Chancellor's financial targets for this Parliament. And we never will, while we're on this course.
There's historical precedent for this realisation. Just when the world seemed to be creeping out of the Great Depression, another recession hit - in 1937 and 1938, the so-called 'Roosevelt recession' put the world back yet another couple of years. Goverments eased up on growth; they reduced some of their stimulus; the economic 'benefit' from rearmament hadn't yet kicked in. World leaders started talking about 'competition', 'productivity', and the like: sure signs, when you see and hear them, that they're near the end of their intellectual tether. What happened? Er yes, you've guessed it: growth sagged. Now we're repeating the trick, much to the frustration of any economically literate historian you could corner.
All this at a time when (look away, liberals and leftists) President Obama may very well now lose the Presidency, and a much less expansionist regime take over in the White House, it's all very, very disheartening.
Austerity? You can keep it.