Saturday, April 28, 2012

Boneheaded Britain

The big problem with ideologues is their propensity to do genuinely stupid things that leave others paying the price for years, sometimes decades.

With Harper at the helm, Canada has no cause to be smug, but it's Britain that provides the best example of conservative boneheadedness at the moment as the Cameron government plunges the UK into a double-dip recession.   The Guardian's Will Hutton points out how utterly unnecessary this all was:

Yet [George] Osborne – the kamikaze chancellor – and his coalition partners decided that the prime aim of government policy had to be eliminating the structural public sector deficit in just one parliament. Caution was thrown to the wind. The assumption was that the economy would quickly get back to business as usual; after all, as long as markets were free and flexible, what could go wrong? 

Osborne, a laissez-faire economic dry, would repeat Sir Geoffrey Howe's budget of 1981, opening the way for tax cuts in the runup to the general election. He would keep the Murdoch press onside – and repeat the years of Margaret Thatcher's hegemony.

The result has been as inevitable as it is desperately sad. On Wednesday we learned that Britain has experienced a double-dip recession just two years after the biggest decline in output since the early 1930s. Worse, it will not be until 2014 that output will return to 2008 levels – a six-year recession not equalled since the 1870s. What is happening is a disgrace.

Moreover, it is totally unnecessary. Britain has a very strong public balance sheet. The stock of our national debt, accumulated over decades, is modest compared with other countries and our own past. The rate of interest is the lowest since the 1890s. The debt is exceptionally long term and does not need to be refinanced with any sense of panic. Total debt service costs have been higher for only a few decades over the past 200 years.

Britain was supremely well placed to take a measured approach to budget deficit reduction. ...Only an innocent or a fool would insist on it being done in four years, with four-fifths of the burden assumed by spending cuts. It was clear that a vicious circle could be created in which the severity of the programme would so puncture the growth in demand that the weakened banks would stay weakened – and business confidence would remain flat. Britain would be deadlocked in stagnation.

That is what is happening. The Office for Budget Responsibility's forecast of a return to growth next year, driven by a surge in investment and exports, has looked absurd for months. The idea that business investment will jump 40% by 2015/16, the biggest since 1945, is risible.

A collective madness seems to have descended on our policymakers. Too few understand that what besets capitalism is unknowable risk – the risk of transformative new technologies, the risk of making epic business mistakes, or the risk of there being no demand for the goods and services a business produces. 

But it's not really a collective madness, it's the appearance of a class of ideologues who persistently ignore facts in favour of their gut instincts.  And that, in a nutshell, is the recipe for a ruler of the small stature of Stephen Harper.   He has been indulged and pampered by his rightwing acolytes so long that he has thrown caution to the wind in pursuing his illogic.   That he has descended into megalomania was almost pre-ordained.   That we and our kids will pay dearly for his boneheadedness is virtually assured.


Owen Gray said...

Paul Krugman has been arguing for years now that the attempt to placate the "confidence fairy" is madness.

And history backs him up. But folks like Cameron and Harper are convinced that they know better. Perhaps things would be different if either man had ever known want.

The Mound of Sound said...

I'm sure their relatively privileged upbringings do factor into their preference for ideology and their rejection of empathy.

From what I've been reading in some German papers, Europe's right is in trouble from Sarko to the UK to Spain and Greece. The EU is trying to defuse this by insinuating a layer of technocracy between troubled governments and their citizens but their discontent is apparently fueling a rising populism - left and rightwing and decidedly extremist.

Some, such as Gwynne Dyer, have tossed about the idea of climate change splitting Europe into north and south. Not only is the south receiving the scourge of climate change, it's also the half of Europe with the fiscal disaster.

kootcoot said...

It certainly is a scary thing that one of the responses to the problems we face today, re: the economy, environmental concerns and immigration in Canada, the US and Europe is a right (or reich) wing response, similar to what occurred in the 1930's.

When events and the surrounding environment seem threatening, too many folks respond with fear and hate, which in my dichotomy is the "right" and then the left would like to solve the problems through cooperation and learning to share.

However these days thanks to Reagan/Thatcher and their descendents and the Chicago School of Economic mysticism, subscribed to by Harper (even though he only attended the Junior College in Calgary) it would seem the holy economy has been elevated to the status of a deity and every other value that society may have has to serve the god of the economy and the free market (which has never really been even attempted) will see to it that everything works out.

crf said...

Sarkozy did try very hard to get some debt issued by countries in jointly guaranteed EuroBonds. He failed to get the Germans to agree.

Give him credit. He was in a weaker position than Merkel, who is the really the one letting everyone down in Europe. Cameron (n.b., a right-wing leader) effectively declared no confidence in Merkel's orwellian Stability and Growth pact. He said it was to protect The City's financial industry. But I don't doubt he had many advisors telling him that Merkel was pushing pro-cyclical economic suicide. Even though Cameron is pushing "austerity" hard, at least he has the option of changing his policy. The rest of Europe, no matter with left or right governments, as long as they remain saddled with that pact, can't.