Yesterday, The Times ran a headline that should belong in a twisted, parallel universe where economic logic is reversed:
Yes, tax revenue inevitably slumped in these dire conditions. But as far as we know, the chancellor will continue to cut government spending, this time greater and faster, in an attempt to meet his pledged deficit reduction targets.
Forget the fact that depressing demand further will only exacerbate the downward spiral. Forget the fact that Osborne’s logic resembles, as Krugman aptly puts it, ‘a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.’ We know Osborne will not consider any alternative because we’ve been here before, and back then he insisted:
The alternative of more spending and yet more borrowing is now frankly ludicrous and places those who advocate it on the outer fringes of the international debate.
The ‘outer fringes’ of the international debate. Opposition to his plan is ‘ludicrous’.
It’s just over a year since Osborne wrote that, but Cameron repeated the theme as recently as May, calling those that demand a policy retreat ‘dangerous voices’.
Let’s see, then, the list of people who the PM and chancellor consider ‘ludicrous’ and ‘dangerous’ for demanding reduced austerity at a minimum, and often a complete halt replaced with spending on stimulus.
First, there’s obviously Krugman, joined by Joseph Stiglitz, Vicky Pryce, Robert Skidelsky, Jayati Ghosh and Steve Keen.
Then there’s twenty economists who backed Osborne in 2010, whose intervention he hailed as ‘a really significant moment in the economic debate’. Only one of them is now willing to still explicitly endorse Osborne’s policies.
The Economist now utterly agrees with this persistent and powerful message:
Austerity brings with it a vicious circle of decline, squeezing domestic demand and raising unemployment, thereby hurting revenues, sustaining big deficits and draining away confidence in banks and sovereign debt.
Even the IMF, World Bank and WTO are now united in warning about the risks of rapid austerity. They’re joined by:
Mark Carney of the Financial Stability Board, Margaret Chan of the World Health Organization, Angel Gurría of the Organisation for Economic Co-operation and Development, Donald Kaberuka of the African Development Bank, Haruhiko Kuroda of the Asian Development Bank, Luis Alberto Moreno of the Inter-American Development Bank, Josette Sheeran of the United Nations World Food Programme, and Juan Somavia of the International Labour Organisation. The forum said it was the first time the heads of the world’s major institutions had come together in such a way.
I could go on hyper-linking all night long, and I must thank the exhaustively researched Wiki page on British austerity for many of the pointers. But none of this seems to make a shred of difference.
And the reason is obvious. To admit that you got it wrong is embarrassing. It’s also, almost certainly, political suicide now that the coalition’s identity is so inextricably tied up with the wonders of austerity. Cameron is apparently convinced that austerity and growth are not incompatible. Indeed, in his warped world the latter requires the former.
But the evidence suggests otherwise. And so, now, do the experts. Meanwhile, real people suffer because of the government’s stubborn, shameful and wilful ignorance of the facts. That, for me, is unforgivable.