Thursday, 17 November 2011

Running out of excuses

George Osborne's tenureship of the Exchequer has been notable for the parade of excuses for his economic failures.  For the most part it was Labour's legacy; for a short while it was last winter's snowfalls; now it's the Eurozone.  It can't be long before he's blaming it on the boogie.

New Statesman blogger and former Bank of England Monetary Policy Committee member David Blanchflower has published a piece that shows clearly that the the blame lies squarely with Osborne's economic policy.

Blanchflower writes:

The recession can be split into four parts. First, the "down" part which started in the second quarter of 2008 and went on for a total of five consecutive quarters of negative growth, during which output fell by an enormous 7.4 per cent. Second, the "up" part, which also lasted five quarters (from Q3 2009 to Q3 2010) when under Alistar Darling and Gordon Brown, growth increased by 2.8 per cent. Then, the "flatline" phase under George Osborne, which is also fifteen months long (from Q4 2010 to Q4 2011) with growth of 0.2 per cent, assuming we use the EU's estimates. Osborne destroyed Darling's recovery. Then, finally, the "stagnation" phase, lasting 24 months (from Q1 2012 to Q4 2013) with growth of 2.1 per cent over two years, or an average of just over 1 per cent.
So by the end of 2013, only 5.6 per cent of the 7.4 per cent drop in output will have been restored. This is worse than the 1930-1934 double-dip recession, which had only a slightly bigger output drop but was over in 48 months. By the end of 2013, this will number 69 months and counting. 
He concludes that there's no point blaming the Eurozone - the profile of Britain's recession closely fits domestic political decisions.  Blaming the Eurozone becomes even more asinine when one reflects that France and Germany are performing rather better than the UK.  One reason for this might be that the French and German economies are much more solidly founded on manufacturing, rather than financial services; Osborne, like so much of his party, is a creature of the City and the financial sector in a way that blinds him to the workings of the real economy - assuming that he has the will and the intellectual courage to look.  If Britain is at greater risk than France or Germany, it's partly because we have allowed our economy to be far too dependent on the financial sector.

It's also interesting to wonder what the effects of the Olympics might be on those numbers - I'd expect they would be worse without the large amounts of public spending and visitor revenues that the Olympics imply.

And one of the important implications of these numbers is that they are way worse than the Office of Budget Responsibility's growth projections, which underpin Osborne's deficit reduction strategy (such as it is). This implies that for all the pain of austerity, in Britain - like Greece - there is every prospect that austerity measures will make the deficit worse, at huge economic and personal cost (not that the Tories and their yellow chums appear to care much about the latter).  It is looking like a failed strategy whose costs will overwhelmingly fall on the poorest and most vulnerable.

The political implications of this are important.  It is imperative that the Tories are not allowed to get away with their blame game, or with claims that tax cuts for the rich or (as Blanchflower points out) the frivolities of deregulation will make any difference.  Osborne never looks like a man whom nature has fashioned to stand up and take responsibility - he must be called to account.

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