After forcing my office to put David Cameron’s speech on the radio, I found myself so irritated by the bit about poverty that I had to storm out to the gym, there to half-wreck the only proper exercise machine out there.
Remember, I’m not some sort of crazed Marxist, romantic denier of economic truths or tribal Labour supporter: here I try to play the ball, not the man. Like Cameron (I presume), I’m an economic liberal, optimistic about the ability of ordinary humans to improve their lot, given the right framework and a fair start.
But this is really annoying:
But also this year, in these difficult times, we’ve won the argument on the economy and debt
No you haven’t! You’ve been as wrong as you can be! Often macroeconomic policy involves making difficult nuanced decisions. Last year was not one of those times. And the Tories blew it. It’s not just left-leaning types who believe that a disorderly attempt at closing the deficit would be dangerous: read The Economist, or the Financial Times
David Cameron, Tory leader, is on thin ice when he calls for action to reduce the deficit to start now, much sooner than Labour plans. He claims intellectual backing for the policy, but the overwhelming view of economists and international policymakers is that the stimulus is still needed because the recovery is fragile and monetary policy remains impaired.
Saying “we’ve been proven right” is downright dishonest: it relies on the fact that the vast majority of the public cannot be bothered to read the more nuanced accounts of the problem, be they from Dillow’s excellent analysis or the FT or even the Independent:
What happens if governments – in the middle of rising unemployment – panic about debt and stop stimulating the economy? We don’t need to speculate. During the 1930s, Franklin Roosevelt launched a huge stimulus funded by debt, and the economy began to recover. Then, in 1935 and 1936, he was besieged by people offering the Cameron argument: the recovery will be stronger if we cut the debt now. The result was that the depression came back with a nasty slap
To properly explain the Augustine dilemma we facerequires Judgment. Which is what Osborne showed he did not have.
But the really irritating bit was about poverty:
Who made the poorest poorer? Who left youth unemployment higher? Who made inequality greater? No, not the wicked Tories. You, Labour: you’re the ones that did this to our society. So don’t you dare lecture us about poverty.
Excuse me? NOT the wicked Tories? Look at the figures from the IFS:
Inequality rocketed under the Conservatives (see figure 3.7 from that IFS document). Then Labour tried to hold it at bay. They introduced several expensive mechanisms to do this – notably tax credits. Underlying inequality was still really racing ahead, thanks to the asset boom. Inequality is a Conservative-born problem. The structural changes they needed to bring to the UK brought deep problems – problems they failed to fix because their mental model for how the economy and society works was faulty. Instead of spending surpluses on softening the impact of change, they frittered it on their core group.