George Osborne: "My God, they're swallowing his cack!"
George
Osborne, the Chancellor of the Exchequer, has got a swelling. It’s not very big and it’s
not growing very fast. In fact it grew just 2.8% last year and it’s thought
possible that it will grow another 2.3% this year. But the strange physiology
of this bump is that the slower it grows, the more fatal it will be for the
patient.
As
you’ve no doubt guessed from my ponderous attempt at humour, I am referring to
the British economic recovery. But what is wrong with growth of 2.8% I hear you
ask? After all Britain is currently outpacing all its European rivals. And as
regards employment Britain has not just exceeded the job creation of each of
its EU peers, it has created more jobs than all of them put together. Not
exactly Asian tiger pace perhaps but hardly a damp squib either. Maybe I’m just
one of those sad people that can never be happy?
But
comparisons with Europe are not particularly helpful. It’s a bit like comparing
the vital signs of a terminal patient with those of a corpse and getting all
excited because your one is still breathing. The problem with Osborne’s little
swelling is not only its paltry size, but its shape and what it cost to achieve
it.
Size
With
recoveries size matters. The pace of recovery from recessions is generally
proportionate to the depth of the production dip. The deeper the recession the
more exhilarating the recovery. The economic cycle has a lot in common with a
roller coaster in this respect. Or at least that has been the experience for
centuries until the coalition came to power.
This
time the deepest recession since the 30s, and in fact comparable in depth to
that slump, has been followed by the latest and weakest recovery in the modern
era. Three years after the pit of the recession in 2012 the UK grew by just 0.7%.
By way of comparison in 1934 three years after the bottom of the 30s slump the
UK grew 6.8% almost ten times as fast. And while it’s true to say that the
economy picked up a bit after 2012 this recovery still compares very miserably
with every other in the previous century.
But
that’s not the worst of it.
Shape
A
few days ago they released the latest trade figures. In February alone the former workshop of the world imported £10,
300, 000,000 more in goods than it exported. Yes, that’s right. That’s the
figure for just one month. Every day the container ships arrive in our ports from
Asia fully loaded and often depart completely empty. The curious thing about
this mind-blowing scandal is how blasé economic commentators and pundits are
about it. Some even note that this is further evidence of how well we are doing
compared to the rest of Europe. Apparently our great economic success is
sucking in imports from less happier lands.
That
brings me to the shape of Osborne’s little swelling. In short it’s all wrong. Back
in 2010 when the coalition came to power they were agreed on one thing. The
years of Labour’s irresponsible debt fuelled consumption were over. In fact
they argued that Britain had no choice. George Osborne even managed to put a
positive gloss on things by calling for a “march of the makers”. Britain was going to pay its way in the world
again. Consumption would have to take a backseat for a while.
Now
five years down the road let’s break down the components of Osborne’s economic
miracle. First off if you are not working in the service sector there has been
no recovery, none. Compared to 2008 levels manufacturing is still down 5%,
construction is down 7% and overall production is down a massive 10%. Services
are doing pretty well at about 108% of their 2008 level, but that’s it. That’s
the great British recovery that the Conservatives are boasting about from every
billboard. That’s why we are importing £10 billion a month more goods than we
export. Just how long do Cameron and co
think we can continue with our biggest ever trade deficit? Just long enough to
win the election is my guess.
But
that’s not the worst of it.
Cost
Even
accepting that medical intervention rarely comes cheap, the cost of Osborne’s
little swelling is prohibitive.
The
coalition by their own admission had only one choice back in 2010. Under the
Labour government one and a half million jobs had been lost in manufacturing. To
give just the most important problem the proportion manufacturing supplied to
the gross domestic product was (and is) at 10% even below the world average of
12%. The productive heart of the economy on which everything ultimately depends
was in a critical condition. Vast and entrenched vested interests had to be
faced down. The bloated state which was crushing the life out of the productive
sector had to be cut down to size, taxes reduced, regulation slashed, alternative energy subsidies scrapped entirely, and attitudes
to business and profits changed. It would be tough but there was no
alternative.
They
had only one choice but they refused to take it. In short the coalition’s
solution for a Britain teetering on the edge of bankruptcy in 2010 was to go on
a borrowing binge of unprecedented proportions in peacetime. Never mind that
Labour’s 60% increase in real spending between 1997-2010 had left huge scope
for savings, government spending has actually increased throughout this
government’s period in office.
In
troubling times the world still trusts Britain, a country that has never
defaulted on its debt, and George Osborne has exploited that trust to borrow
more than half a trillion. This in addition to Labour’s attempts to solve the
crisis in 2008/9 has doubled the national debt.
The
sheer scale of the dissolute borrowing almost defies description. Half a trillion
in debt has been handed on to the next generation to buy a pretend recovery that
will last only as long as the world is willing to extend us credit. Eventually interest rates will start to rise, at first apparently manageably then suddenly ruinously. Half a
trillion of debt that will blight the economic prospects of our children, just so
those living high on the hog off the state can put off the evil day when they
have to work for a living again.
To
be fair to the coalition the one choice that had to be made was always going to
be a hard sell. When even just reducing the rate of increase in spending is met
by hysteria from liberal journalists, pundits and even economists it’s easy to
see that real reform would be an uphill struggle of Everest dimensions.
It’s
clear that few of our journalists, economists and liberal commentators have
much of a clue where all the wealth comes from to fund their generosity. The
basic assumption seems to be that they can stick it to those funny little
people in the productive sector as much as they like and nothing very terrible
will ever upset their comfortable world.
They
might profit from reading a little Kipling. Here’s a verse from The Gods of the Copybook Headings from a
century ago:
Then
the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.
Osborne
and the coalition had only one choice in 2010. But they didn’t have the courage
to make it. Now Osborne’s got a little swelling that could and should have been
a glorious recovery like in the 30s or the 80s.
Now
there are no choices left for Britain, just two possibilities: a lingering death
or a sudden death.
Sudden
death is preferable, so my advice is to vote Ukip so we get Miliband and Sturgeon. In the collapse and inevitable
pain that results there will be a chance of real reform and rebirth.
No comments:
Post a Comment