27 July 2009

Tories want a repeat of 1981

Philip Hammond, the Shadow Chief Secretary to the Treasury (i.e. George Osborne's second-in-command) has obviously been watching too many episodes of Ashes to Ashes. (I never actually watched any episodes of it, because after watching the first episode of Life On Mars, I decided that John Simm was excellent but the Gene Hunt character was simply too repellent to be watchable).

Hammond said in the Guardian on Saturday that deep cuts would be wielded to satisfy the Standard & Poor's credit rating agency and prevent them downgrading Britain's debt status, which would result in billions of pounds of additional interest rate payments.

One very reasonable response to this is: is it right that Government policy should be dictated by a privately-owned credit rating agency? Certainly not, and it's just another example of how democracy under capitalism is largely a sham. But that's a wider topic, for another post.

The main point today is that Hammond is willingly repeating the mistakes of the early 1980s, when cutting spending during a recession vastly exacerbated its size and duration. Unemployment didn't start falling until 1986 - 7 years after the recession began. It's the worst case of economic vandalism we've ever had in this country.

And a repeat of the 1981 strategy would be even worse this time because the initial global recession is that much worse than the early 1980s - and with the US economy crippled, we can't necessarily rely on an upturn in global demand to pull us out of this one.

Fortunately, sane voices are now beginning to rise up against the cuts, and the weekend's papers saw thoughtful and reasoned articles on why cutting spending in a recession would be a ludicrous thing to do, by Will Hutton and William Keegan. Progressive bloggers like Richard Murphy and Paul Sagar also delivered excellent critiques of Hammond's approach.

We've already covered what's happening to Ireland in this blog - it's like Thatcherism x10 - and the Tories seem to want to turn us into the same kind of economic basket-case. The economy is not going to come off the list of most important issues anytime before the election, so if Gordon Brown were to focus on the Conservatives being a dangerous, economically incoherent party - the bastard sons of Thatcher - it might reap dividends. But of course to do that he needs to emerge from his present perpetual Brezhnev impression and actually get out there and kick some Tory ass. We'd love to see it, but is he still capable, or has all this "big tent" and "government of all the talents" shit left him permanently incapacitated?

Even if Gordon can't do it and the Labour party gets walloped, perhaps it doesn't matter in the long run. I'm now convinced that the Tories will make such a hash of things in office - and the global depression will run so long - that a united, well-led, progressive Labour party could romp home in 2015. Of course the question is whether we can get a united, well-led, progressive Labour party, and not a shower of shit. I believe we can but it's not going to be easy. But more on this as we get nearer the election and the pathway becomes clearer...


badconscience said...

How nice to be described as a "progressive blogger" rather than as a "fucking wanker".

I agree with your point about Brown, but would refine it somewhat. The man thinks that simply droning "Tory cuts of 10%!" over and over is all he needs to do.

He's wrong. "10% cuts" don't mean anything to most people, because it's very difficult to really visualise what that means in terms of reduced public services etc.

Furthermore, most people are not versed in Keynes vs. Friedman, so they don't understand why cuts in a recession will make things worse, not better.

Now, if Brown and co took the time to explain, in clear and simple language, why it is important to keep spending high, and correspondingly why it is dangerous to cut during recession, as you say they could do very well. But my suspicion is that they can't do this, because their view of the electorate is essentially that they are all stupid, and who cannot be reasoned with and only manipulated.

So instead of doing what Obama tries to do, for example, and *explain* policy, they just try to scare people. For all the bad that this is going to cause, perhaps it's a plus point for British democracy that people are not as easily manipulated as Brown would like.

Ok, that's not very well expressed. But I think I just came up with today's blog post, so swing by BC later and hopefully I'll have worked out how to articulate things properly!

giroscoper said...

Really nice to see you on here, Paul. I only discovered your blog recently and it's superb - I'm going to add you to my blogroll if it's OK.

I agree with you that Gordon droning "10% cuts" ain't gonna cut it (no pun intended) this time round. For the reasons you suggest, and also because Labour is also planning cuts of almost as much - so he hasn't really got a leg to stand on.

I think the fear the current Labour leadership has of explaining policy stems from their (false) belief that explaining yourself as a politician makes you look weak - far better to just assert your stance and ridicule your opponents. This all seems to go back to the Thatcher era: before her we had political debate, since her we've had crude assertions masquerading as debate. Of course by now the electorate has sussed it and they just see politicians as idiots...

Van Patten said...

I think Hammond is playing to the Daily Express/ Daily Mail coterie of readers , angling for their votes, of course something a leftist party would never do!

I did like the links. You are right to point out that 1979 was a very different time to the present. However, I do not think the indirect industries such as the anti-Discrimnation lobby were as powerful or numerous back then. Furthermore, if you take out the Nationalised industries, the public sector and public expenditure as a whole was significantly smaller.

The cuts had some negative impact for sure and in terms of the recovery, you'd argue some towns never recovered. However, I think the best way of answering your contention would be to glance across to South East Asia and imagine what would have happened had Thatcher lost in 1979. Are you seriously suggesting that the UK would be in better shape with a top tax rate of 83%? How would the still nationalised industries be faring in global markets against Chinese goods at 1/1000th the cost?

To pose such questions is to look at the ludicrousness of your current argument. In any FTSE 100 company, a finance director unable to find even 1% of cuts in a £600 billion budget would find himself being escorted from site by security. Surely there are some items of expenditure that you don't consider sacrosanct? for example, let's ignore my favourite the EHRC and consider Trident - can we justify that expenditure on a weapon that is unlikely to be used when troops are engaged in a bloody struggle against a numerically superior enemy with inadequate equipment levels? Give me strength!

giroscoper said...
This comment has been removed by the author.
giroscoper said...

Sorry - typo in the last attempt to comment made it unreadable...

While I would agree that an 83% top income tax rate (it was 98% on unearned income BTW) is too high and encourages huge amounts of tax avoidance, I don't think we'd have the rate that high even if Thatcher hadn't been elected - the trend in most industrialised countries, including those with governments from the left, has been downwards since the early 1980s. We might well still have a 60% top rate of tax, though... looks like we are moving back in that direction, fortunately.

Your comment on FTSE 100 companies is interesting and looks initially plausible, but there is a problem. If it's easy to find cuts of 1%, where do you stop? 5%? 10%? 50%? Or is it in fact possible that all the easy cuts have already been made? Don't forget that most public sector bodies have been under huge pressure to cut costs since approximately 1975 - anybody who thinks that public sector budgeting is just across-the-board largesse without constraint needs their head examined. That said, I agree with you that EHRC needs reform - let's start by firing Trevor Phillips and getting a real manager in. And Trident is completely useless - I agree!