The Conservatives are Economically Illiterate Part 1: an Austerity Autopsy
This decade should have seen the UK emerging triumphantly from the global recession amongst a politically fractured and fiscally weakened Europe, its own labour market modernised and renewed, its growth the greatest on the continent, its political clout such that an adroit leader could have exploited the differences in opinion amongst our allies and lead the EU to mutual, reinvigorated influence and prosperity. Then we voted Conservative and had a referendum on Brexit.
A combination of prolonged austerity, the Brexit referendum and very publicly failing EU negotiations have seen Britain slump at a time when the EU is in its ascendancy. Our experts all told us this would happen, have consistently been telling us, but the celebrity we’ve imbued modern politics with means we rarely hear them over goofy useless weirdos.
Austerity is supposedly about tightening our belts while times are tough. About pulling ourselves up by our bootstraps. About living within our means. Politicians have a fondness for employing folksy metaphors to explain economic policy to obscure the complexity of economics, elide solutions uniquely available to the state and allow them to be factually incorrect and blatheringly inept while avoiding responsibility, since they can, after all, blame the predicament they are aggravating for the problems they cause. Thus having a high national debt becomes the same as a family maxing out its credit card, to be dealt with immediately by cutting the family’s expenditure on fripperies like hospital staff, sound fiscal policy, schools, police, the armed forces and domestic security. In truth this approach on a macroeconomic scale is like trying to save money by dropping hours at work. It’s like asking your boss for a pay cut in order to pay off a loan. Like trying to keep your head above water by paddling less. Like
As the scale of the global recession that economists had been rather limply Cassandraing about became obvious to national governments most dipped their toes gently into responding effectively, with limited stimulus packages. Yet very quickly, terrified by the prospect of imminent success and with Greece amidst a particularly intense crisis due to extraordinary government dishonesty, recklessness and corruption, a year later saw almost every wealthy country undermine its respective recovery.
The big western economy which most competently weathered the storm did so through robust stimulus and a uniquely constructed (and very clever) labour model, and then demanded austerity of the rest of the Eurozone. Panicked by Greece’s dramatic and particularly painful GDP contraction that threw millions into unemployment and poverty Germany more than any other force in the EU spearheaded exactly the wrong response to the recession, reaching out to tighten the purse strings of everyone else. The Euro and its governing policies became a monetary policy hog-tie. Further Germany fought (for a bizarrely long time) against the European Central Bank acting as lender of last resort, like, say, a central bank. Yet as soon as the ECB started lending in late 2011–2012 it eliminated the rising tide of panic and wrestled interest rates throughout the Eurozone down to exceptionally low levels. Had it acted sooner the spread of the contagion to other struggling nations — such as Italy, Portugal and Ireland — may have been ameliorated to a dull footnote. Germany’s success at responding to the recession at home has to a great extent obscured the responsibility its own poor judgement, driven by pseudo-moral narratives and very real but misguided outrage at home, had in worsening the crisis for everyone else. Merkel is an abnormally competent leader, perhaps the best statesperson alive today, but her nervous receptivity to German public opinion intensified the worst emergency the EU has seen so far in the 21st century.
The severity of a nation’s spending cuts and unequal tax hikes dictated how poorly their economies emerged from the recession.
The Troika bailouts were necessary and decent programmes — without them, several states would have confronted the ignominy and horror of extended default and capital flight, even bankruptcy as several governments had taken on huge private debt by undertaking large scale bank bailouts. The size of those private debts typically determined how severely the crunch would unfold in a given nation: you were always right to be a bit annoyed by banks, even if you have forgotten why. Some ‘populist’ - which here just means evil and stupid - politicians and newspapers have called for the collapse to happen anyway. While the effects of a combination of recession and paying off substantial debts have been undeniably exorbitant bankruptcy on a national scale does not wash away indebtedness and the money would still need ultimately to be paid back. Defaulting merely delays payment to the engines of the economy and spooks lenders, making them drive up interest rates on any new loans, ensuring that paying off existing debts would become even more painful. This, among other reasons, is why although Syriza was elected in Greece in rebellion of punitive austerity terms it understood the necessity of capitulating to them all anyway. It had no better option — but one should have been supplied.
Without the Troika bailouts the cataclysm that would have befallen Greece and other recipients would have been devastating for the entirety of Europe, the UK very much included. But the Eurozone could have taken a smarter path: bankruptcy is worse than loans contingent on austerity but that is a crushingly low standard. The EU had a duty of morality and self interest in bailing out the PIIGS nations but its terms for doing so ended up creating avoidable self-inflicted wounds.
The most horrifying part of austerity’s counterproductive effects are that economists caught them almost immediately. The Eurozone wiped about 7.7% of its GDP away permanently compared with the counterfactual of doing literally nothing in 2012–2013. The effects of a recession that should have been mild by historical standards — Keynesian economic and modern monetary policy has made rare what was once regular and hugely debilitating — were intensified to become a political threat to the neoliberal consensus and provoked a rise of so-called ‘populists’, who were in reality far right, incompetent and myopic politicians who clamoured for austerity in the first place.
Austerity Adventures in the UK
Which brings us to the Greatest Nation on the Planet. The Conservatives came to power as part of a coalition government in 2010 and its Chancellor of the Exchequer George Osborne immediately implemented an austerity programme (what then-Prime Minister David Cameron termed an ‘age of austerity’) that made its most severe cuts in 2011–2012. The Conservatives also relied on quantitative easing (Osborne’s ‘primary tool’) for tackling the recession despite rock bottom interest rates already limiting the effectiveness of monetary policy tweaks. The Bank of England was in the bizarre position of pursuing its own limited stimulus while the Chancellor dramatically cut spending. (Once abolished from the front bench Osborne saw the light, suddenly recognising some of the many deleterious effects of his own policies without acknowledging they were his. As enlightened beings it is our moral responsibility to punish Conservative politicians and strip them of any power, for it immediately renders them competent and good.)
The supposed point of austerity was two fold: the first was to dodge a Greek-style insolvency crisis that was impossible because the UK has its own currency and central bank, making it an instant if rather unavoidable success. The second was to reduce the national debt by eliminating the budget deficit, a long term structural issue that urgently needed to be dealt with in the aftermath of a recession For Some Reason.
The Government failed and knew this shockingly quickly. The OBR, IMF, World Bank and other economists (who reached a pretty solid consensus on the issue) again very quickly caught the oversight, explained the problem, and have been explaining it for the past half a decade. To emphasise: economic experts at every respected economics institute that exists — including the OBR, a watchdog created by the Conservative party itself! — immediately reached the conclusion that austerity and all of the severe, horrible sacrifices we have made as a people have rendered the problems they were supposed to solve much, much worse. Yet austerity has continued and is set to continue in the coming years. Our journalists are not desperately trying to drill the opinion of academics into our skulls because academics do not engage in amusingly sensational antics like publicly undercutting each other’s leadership bids before dooming their own. The Conservatives should have been laughed out of office no matter which sad-looking lagomorph stood next to a monolith, cheeky child-faced northerner or bearded Commie led the opposition. But instead the Conservatives’ nonsense claims of defeating recession and debt with austerity are repeated uncritically until it is assumed they speak with any kind of expertise or authoritative support, some five years after we discovered factually that any distant hope of success was not to be.
And the Government knows this. The Conservatives have been forced to make embarrassing concessions about when the deficit will be eliminated since their first prediction of 2015: by the end of 2012 they realised this would be impossible. For almost a decade they have been the reverse of doomsday zealots, stuck in a permanent cycle of promising to rescue us from their cult’s Armageddon by predicting the deficit would be eliminated in 2016, then 2020, then the mid 2020s. It is axiomatic that a Conservative Government pursuing austerity and budget surpluses will instead achieve deficits and debt: the universe fixes this as a law as immutable as the speed of light in vacuo. And this talk of deficit obfuscates the actual problem, which need not even be terribly substantial, which is national indebtedness. Rather than tackling the national debt — the primary purpose of this policy — austerity has instead seen it enormously exacerbated.
The reason is shockingly straightforward, and has indeed been known about since the late 1930s, only to be rediscovered by our Columbus-like Chancellor in 2012: austerity hurt financial growth so much that taxes raised year after year have been consistently disappointing. Pursuing austerity during a recession and when at absolutely no risk of state default contradicted everything economics has taught us over the past 80 years, which is so impressive that it sounds like rhetorical hyperbole but isn’t.
During recessions mainstream economics is that, beyond fiddling with interest rates, the government should intervene by increasing spending to make up for loss of investment, to shore up market confidence and encourage and replace nervous businesses and consumers. The state can spend to make up for a reduction in spending. The exact formula depends on circumstances and has some caveats but the Conservatives were faced with a textbook example: tax cuts help stimulate the economy a small amount, while spending increases help a great deal. A wiser person than the entire gaggle of Conservative MPs — several hundred people paid by our taxes to know about this — may notice that austerity is exactly the opposite. Economists, investors, businesses, and credit ratings agencies all did notice, and Britain’s credit rating was downgraded because of rather than despite its austerity. Losing our hard fought for credit rating makes Government borrowing even more expensive — effectively adding an extra cost to the debt by shoving up premiums. The blunder is total.
The Conservatives even had an excellent excuse to do the right thing in the form of crumbling infrastructure in dire need of enormous civic investment, a fact the tepid interim Chancellor of the Exchequer Phillip Hammond mumbled about without any sense of ambition during his autumn statement. Sequential Conservative Governments have in direct contradiction to everything economics has learned instead spouted gibberish that government indebtedness could be effectively reduced by slashing spending in the wake of a huge global downturn, and have continued to do so even while the rest of the developed world has both recovered from recession and abolished austerity. This sounds like another rhetorical flourish, but is not: paying the entire nation to watch The Great British Bake Off would have been more patriotic and more fiscally sound than the past seven years of austerity. Especially since it’s going to be rubbish on Channel 4.
The current Conservative party still pursues austerity without the excuse of the recession. The UK lost 5% of GDP permanently and has already experienced a completely unnecessary lost decade of growth. This debacle and the fact that it was caused by a Conservative Government is never presented honestly or openly — instead the UK is compared to Europe generally, which enacted similar policies with worse results, in order to justify those same policies.
Austerity has worsened the debt and had a catastrophic effect on the economy’s growth. Every problem it was meant to solve has intensified. Meanwhile, spending cuts have wrought disaster on some of the finest institutes on the planet and seriously undermined the quality of life of the British public. We are resilient in our own perpetually annoyed fashion, and are, because of our desperate need to suffer, excited to endure hardship if we believe it necessary in the long term. In truth we have bought nought but dismal failure and misery with our sacrifices. Short of a book it is impossible to comprehensively detail the detrimental effects of austerity on our lives and institutions— the uptick in violent crime, the dismantling of meaningful border control, the hacking of the NHS which still inexplicably runs Windows XP, the indignity of clawing back mobility scooters from the disabled, the humiliating swell in food bank use, the rise in self harm and suicide amongst the disabled, the scrapping of modernised mental health care initiatives, pay caps seeing highly trained specialists disappear abroad, local councils not being able to afford bin collections, university funding crises, the embarrassment of a PM calling it scaremongering for police to suggest staff reduction of a fifth means she would end up deploying the army on the British Isles four days before she was forced to do so — but we’ll give it a go.
Health
NHS (and total healthcare) spending relative to GDP is suffering its longest sustained fall in history. We have always spent less than the OECD and EU average on our healthcare and always hugely over performed in terms of efficiency, quality and access due to its genius structure, the ideological premises underpinning how it is used and the sheer heroic sense of public service amongst staff. Conservative cuts have reversed every single one of these successes for relatively minor savings. Austerity has resulted in the largest funding and staffing crisis in NHS and post-war healthcare history. The effects of this have been high medical staff turnover, imploding morale, extraordinary wait times for basic services, a surge in paramedic and medical staff suicides, year-round bed blocking, a serious decline in health outcomes, spiralling costs, hospital insolvency and mass hospital and specialist ward closures. Cuts to NHS and social care resulted in 30,000 additional deaths in 2015 alone.
Cuts to NHS and social care resulted in 30,000 additional deaths in 2015 alone.
…cuts to NHS and social care resulted in 30,000 additional deaths in 2015 alone.
In that one year austerity has been several times more deadly for human life than terrorism has been throughout the entirety of western Europe and Britain since 1970. Yet you have not heard of this: keep it in mind next time you spot a red top newspaper’s front page news being a new pill showing a sliver of a percentage improvement in one mice trial. The medical reporting of our most-read newspapers is errant nonsense scribbled by idiots. The most important health news in modern history is simply not being reported with anything near the bombast it deserves.
Education and children
Legal requirements that the Government eradicate child poverty by 2020 were quietly removed after signs of penury amongst children climbed as a direct result of austerity measures, which embarrassed Conservatives, who sometimes pretend to be prurient and so try to avoid confessing their deep seated desire to make children go hungry. Before and even during the recession New Labour’s ambitious project to eliminate child poverty in the late 90s-2000s oversaw its striking decline and a hithertofore unthinkably decent target for a society so awash in capital seemed attainable. The rate of children in poverty then plateaued and has since risen as a direct result of declining wages for working families and a reduction in state welfare and credit measures for families, all trends that are increasing. Two thirds of children living in poverty belong to families in which one member is working, and even if they did not, this abandoning of principle to raise the floor for the most innocent of our society is inexcusably and unnecessarily horrible. This in turn has led to schoolchildren having to miss out on subjects, unable to afford basic school uniforms, books and equipment and swathes of children going to school hungry.
Primary and particularly secondary schools are facing critical funding crises even before new rounds of funding cuts due to begin in 2019. This is directly contributing to staff shortages, reduced teaching hours, increased classroom sizes, funding drives amongst parents and an inability to provide basic equipment. In the midst of this deprivation one prominent Conservative even made a bizarre push to reintroduce grammar schools at huge expense while scrapping school lunches, her need for declining educational standards not satiated enough, never satiated enough, to ward away her insipid raving.
Prisons
Austerity has resulted in a remarkable deterioration in the quality of life of prisoners and the safety of prison staff and inmates due to chronic understaffing and lack of resources. A quarter of our prisoners live in overcrowded conditions. The prisons themselves are deteriorating into rat-infested, violence and disease filled hovels with crumbling architecture and security, a pattern seen consistently during inspections, no matter how recently the prisons were built. Drug abuse is rampant, self-inflicted injuries and death are at record levels, rape and sexual abuse is unprecedented, attacks against officers have surged. Conditions are deplorable.
Jobs
Under the Conservatives the recession has not merely lingered in the job market thanks to austerity but reinvigorated long-term structural problems while introducing new ones, wiping away job security for almost half of us. Almost 3% of those of us counted as being in work are on zero hour contracts meaning we do not even know if they are working; more than a tenth seeking full time work are stuck working part time, almost a third of us are stuck in temporary occupations because there are no permanent jobs available.
The Conservatives trumpet the headline unemployment rate because it was never intended to record or capture the transformation of a secure labour force with the full rights and obligations of employment into the gig economy. The result is that the idea that Britain is experiencing record low unemployment seems more like a taunt than objective reality: headline unemployment deliberately does not capture ‘slack’ — inactive job seekers, pensioners and students, those between jobs, those with temporary jobs — yet the reality we experience as human beings is that one in five of us do not have jobs, and one in ten of us want jobs but are unable to get them. The austerity-malformed job market and our ageing population is making real unemployment figures more useful in capturing this transformation than headline unemployment.
Meanwhile, and partially due to high real unemployment, the wages of British workers lost a tenth of their value, the highest of any EU economy except Greece due to enormous cuts to public services, meagre nominal wage growth and dismantled welfare programmes. We are the only large economy to see GDP grow while wages fell.
Through new corporate tax breaks, new corporate subsidies and new corporate welfare and bonus initiatives, which combined are an order of magnitude greater than welfare expenditure cuts, the Conservatives enacted a large scale redistribution of wealth from the British public to foreign governments and foreign corporations, an unthinkably pointless and stupid project. While undertaking harsh austerity measures the Conservatives have been considerably more generous with taxpayers’ money than the rest of the G8 towards foreign corporations. For all of the immense wealth in the nation the British public do not get to enjoy its dividends, yet politicians and right wing newspapers have the temerity to pretend we have a state lavish with its spending on the vulnerable.
The productivity gap with the EU has, after narrowing under New Labour, widened again after Conservative governments have dithered in tackling the problem and made it worse by slashing investment in infrastructure. Middle income jobs have been wiped out en masse since the recession. By late 2012 half of the 12–13 million in poverty belonged to working families, for the first time in British history.
Conclusion
You would be hard pressed to name a single success of the Conservative Party. Austerity deepened the very problems it was supposed to solve, worsened our lives in every way the Government was capable of via fiscal policy, made Britain less competitive and less productive, made the public considerably poorer and re-introduced problems that had been fixed in preceding decades. We lost a decade of growth because of the poor choices made by politicians.
Even when terror clutches our hearts or seals our mouths a cold, visceral ache in our chest presses us to help other people. On an individual basis the idea that comfortable human beings could let a child or elderly person go hungry, be disassociated from society by homelessness or slowly die in loneliness and fear is terrifying: we empathise with each other so much that it barely seems human to be so lacking in compassion. Yet when confronted with political and particularly economic opinion there is a strange inclination to pretend that it must be uncoupled from normative judgements of the viewpoint and the individuals who hold it. While the right affects outrage at sexual, religious, gender and ethnic liberation, human rights and justice it simultaneously dismisses condemnation of the evil, cowardly and witless ideas it argues for as political correctness and affronts to freedom of speech and the press. To condemn their immorality is cast as a threat to the very freedoms we actually express with our capacity to judge. To point out wickedness is described as being uncivil and dangerous to the democratic process to the extent that order is threatened.
In truth conveying opprobrium is a just, right and a necessary function of free and democratic politics and a main engine of positive change. When people suffer and die as a result of a state withdrawing some right or obligation or dismantling some organisation we do not get to disregard it as merely a natural and inexorable consequence of politics: that choice killed people and those responsible for it are guilty of those deaths.
Perhaps we tell ourselves there is some small relief to be found in the extraordinary complexity of the beliefs with which the apathetic and the cruel have shielded themselves from confronting the ethics of plunging the vast majority of the public into a rejuvenated acuteness of hardship and condemned our most needy to newfound anguish. At least they are incapable of confronting the horror they cause by building a tottering edifice of axiomatic belief, completely removed from empiricism and inquiry and fact. They believe that austerity could not have prolonged the recession, because reigning in spending just makes sense, and anyway we couldn’t afford to keep going as we were, so of course they do not see it as awful and shouldn’t expect any better. What can you do?
Because of this there is a great temptation to dismiss Conservative MPs as bumbling caricatures without any plan or agency, to tell ourselves in charmingly self-indulgent articles that the most educated people on the planet really are a gaggle of bumpkins. ‘Never ascribe to malice that which can adequately be explained by incompetence’, as the saying goes: no one could possess such a sickness of the soul that they would enact such an obvious catastrophe for so many people with their eyes open. Yet the Conservative Party has consistently, with austerity more than any other policy, siphoned our labour and its bounty and gifted it to those who already have so much while denying the vast majority of the public fundamental entitlements. They have a morality, and it is ghastly and twisted. It is good and right to recognise this as malevolent greed as well as incompetence.
Luckily, leaving the EU will solve these problem, surely. Next up: The Conservatives are Economically Illiterate Part 2: Brexit Harder.
