With the IMF and Osborne's favourite economists revising their figures, the pro-cuts argument now lacks intellectual support
Photo: Betsie Van Der Meer/Getty
In this deep slump the numbers are so huge that they may pass us by. It's hard to make the scale of suffering feel real. This week, as the Office for Budget Responsibility forecast, unemployment leapt, and is expected to keep rising through next year and beyond. Opponents of this government said it would happen – and it's all too easy to smirk with we-told-you-so glee. But those 70,000 new jobless people have wretched tales to tell, so familiar they risk becoming humdrum.
How many more stories can you read about sacked 50-year-olds who think they'll never find a foothold again? How many more tales of woe from young people with no foot on the ladder, afraid that after a year or two a new generation fresh from school and college will be preferred to them? Graduates deep in debt tell of hundreds of applications and no replies. Public servants who loved their useful work find only a few hours waiting on tables. Highly skilled professionals pretend they are "consultants", but can't scavenge a living from fast-fading contacts. "Self-employed" window cleaners knock on doors fruitlessly. Families collapse under pressure from unpaid bills, as angry workless parents or adult children at home grow more depressed and unemployable. This is politely private behind front doors, not Jarrow marching into the news.
Add in the underemployed, and the 20m hours of work they can't find amounts to another 500,000 more out of work. Now add in the 25% rise in zero-hours contracts, with no guaranteed income at all. This is spreading from catering and care to the hiring of doctors and lecturers – a pre-trade-union, wild west, "flexible" market.
How can we imagine this week's additional 70,000 unemployed? They would fill Old Trafford stadium. Now imagine the 979,000 young unemployed. Visualise an average secondary school assembly with all its pupils: the young unemployed would fill 993 secondary schools, all their pupils on the scrapheap.
In 2010 George Osborne's palanquin was borne aloft by a host of imaginary porters, now vanished, one by one. All he has left to keep him up is blind faith. Growth is flat, debt is rising, banks won't lend, business won't invest its hoarded £700bn with no consumer demand. Indebted households save instead of spending, afraid an interest-rate rise will poll-axe them. Legal & General reports the highest level of job insecurity, so even those in work are not in a spending mood, let alone the 2.5 million jobless.
Now Osborne has lost his last prop as unemployment rises. Exports tumble, despite a 20% fall in sterling, so all we sell to foreigners is top London property left empty as "investments" in ghost town fashionable streets. RPI inflation runs at 3.2% while wages have fallen 10%, not back to pre-crash levels until 2020, according to the Resolution Foundation. So where on earth is growth to come from? This is a frozen wasteland economy and only government can revive it with life-giving breath.
This week Osborne's most crucial supporter betrayed him: the IMF, once staunch proponent of his austerity, came knocking at his door. His performance was "lacklustre" – a strong word for IMF officials. They warn "it may be time to consider adjustment to the original fiscal plans". If these arch-austerians can U-turn, why can't he? Their recantation gives him good cover. His obduracy exposes their real purpose. Osborne and David Cameron seized the great bank crash as their chance to hack back the state. The more likely it seems that they won't get a second term, the more eager they are to press on with their project to outsource, shrink and commercialise as much of the state as they can. Cuts in benefits, putting the NHS up for tender, and grinding down council services and housing is their intended legacy.
Now comes a serious embarrassment: the intellectual support Osborne claimed for such rapid cuts has just been kicked away. In 2010 Harvard economists Professor Carmen Reinhart and Kenneth Rogoff delivered a gift to American Republicans and British Conservatives with apparently concrete evidence that any country that let its debt rise above 90% of GDP was destined to sudden and catastrophic collapse in growth.
Examining 20 advanced countries, they concluded that hitting that 90% level triggers a fall from 3-4% growth to -0.1%. But this week a University of Massachusetts student, Thomas Herndon, and two professors, Robert Pollin and Michael Ash, uncovered "miscalculation, data errors and unsupportable statistical techniques" that have blown the austerians case out of the water. It has shaken the economic world to it foundations. Writing in today's FT, Pollin and Ash are careful to say this disproof doesn't mean governments can borrow "profligately", but "judicious deficit spending remains the single most effective tool we have to fight against mass unemployment caused by severe recessions". Osborne may regret his reliance on Reinhart and Rogoff, when he claimed they "demonstrate convincingly that all financial crises ultimately have their origins in one thing – rapid and unsustainable increases in debt".
Top pay still soars up, doubling the income share of the top 1%, who now take 14.5% of everything earned. In the 70s it was said the politics of envy was futile, as sharing out the pelf of the rich yielded too little to be worth the fight. Not so now. The High Pay Centre shows taking a mere 10% from earnings over £150,000 would almost deliver a living wage to all in the bottom 25%. Why not stem the upward rush of income? Labour and Tories alike used to say "globalisation" was the cause of this osmosis – but that's not so either, since the increase in inequality is so much more marked in the UK than anywhere else in the OECD.
Facts may be sacred, but in politics feelings win the day. Oliver James in the Guardian wondered when the indignation tipping point comes, the Berlin wall moment. That's unknowable: despair and passivity may triumph. Well-insulated London politicians, policymakers and commentators controlling the most powerful communications may fool enough of the people enough of the time. They may forever convince those not in their top 5% set that others must suffer for the good of the country while they take no noticeable pain.
YouGov finds Britain becoming more sympathetic to the weak than France or Germany, growing more concerned about social housing, more eager for government intervention on jobs. Calumnifying the sick and unemployed may not work indefinitely. Enough people are squeezed, enough know someone crushed – and more will soon.
Guardian
How many more stories can you read about sacked 50-year-olds who think they'll never find a foothold again? How many more tales of woe from young people with no foot on the ladder, afraid that after a year or two a new generation fresh from school and college will be preferred to them? Graduates deep in debt tell of hundreds of applications and no replies. Public servants who loved their useful work find only a few hours waiting on tables. Highly skilled professionals pretend they are "consultants", but can't scavenge a living from fast-fading contacts. "Self-employed" window cleaners knock on doors fruitlessly. Families collapse under pressure from unpaid bills, as angry workless parents or adult children at home grow more depressed and unemployable. This is politely private behind front doors, not Jarrow marching into the news.
Add in the underemployed, and the 20m hours of work they can't find amounts to another 500,000 more out of work. Now add in the 25% rise in zero-hours contracts, with no guaranteed income at all. This is spreading from catering and care to the hiring of doctors and lecturers – a pre-trade-union, wild west, "flexible" market.
How can we imagine this week's additional 70,000 unemployed? They would fill Old Trafford stadium. Now imagine the 979,000 young unemployed. Visualise an average secondary school assembly with all its pupils: the young unemployed would fill 993 secondary schools, all their pupils on the scrapheap.
In 2010 George Osborne's palanquin was borne aloft by a host of imaginary porters, now vanished, one by one. All he has left to keep him up is blind faith. Growth is flat, debt is rising, banks won't lend, business won't invest its hoarded £700bn with no consumer demand. Indebted households save instead of spending, afraid an interest-rate rise will poll-axe them. Legal & General reports the highest level of job insecurity, so even those in work are not in a spending mood, let alone the 2.5 million jobless.
Now Osborne has lost his last prop as unemployment rises. Exports tumble, despite a 20% fall in sterling, so all we sell to foreigners is top London property left empty as "investments" in ghost town fashionable streets. RPI inflation runs at 3.2% while wages have fallen 10%, not back to pre-crash levels until 2020, according to the Resolution Foundation. So where on earth is growth to come from? This is a frozen wasteland economy and only government can revive it with life-giving breath.
This week Osborne's most crucial supporter betrayed him: the IMF, once staunch proponent of his austerity, came knocking at his door. His performance was "lacklustre" – a strong word for IMF officials. They warn "it may be time to consider adjustment to the original fiscal plans". If these arch-austerians can U-turn, why can't he? Their recantation gives him good cover. His obduracy exposes their real purpose. Osborne and David Cameron seized the great bank crash as their chance to hack back the state. The more likely it seems that they won't get a second term, the more eager they are to press on with their project to outsource, shrink and commercialise as much of the state as they can. Cuts in benefits, putting the NHS up for tender, and grinding down council services and housing is their intended legacy.
Now comes a serious embarrassment: the intellectual support Osborne claimed for such rapid cuts has just been kicked away. In 2010 Harvard economists Professor Carmen Reinhart and Kenneth Rogoff delivered a gift to American Republicans and British Conservatives with apparently concrete evidence that any country that let its debt rise above 90% of GDP was destined to sudden and catastrophic collapse in growth.
Examining 20 advanced countries, they concluded that hitting that 90% level triggers a fall from 3-4% growth to -0.1%. But this week a University of Massachusetts student, Thomas Herndon, and two professors, Robert Pollin and Michael Ash, uncovered "miscalculation, data errors and unsupportable statistical techniques" that have blown the austerians case out of the water. It has shaken the economic world to it foundations. Writing in today's FT, Pollin and Ash are careful to say this disproof doesn't mean governments can borrow "profligately", but "judicious deficit spending remains the single most effective tool we have to fight against mass unemployment caused by severe recessions". Osborne may regret his reliance on Reinhart and Rogoff, when he claimed they "demonstrate convincingly that all financial crises ultimately have their origins in one thing – rapid and unsustainable increases in debt".
Top pay still soars up, doubling the income share of the top 1%, who now take 14.5% of everything earned. In the 70s it was said the politics of envy was futile, as sharing out the pelf of the rich yielded too little to be worth the fight. Not so now. The High Pay Centre shows taking a mere 10% from earnings over £150,000 would almost deliver a living wage to all in the bottom 25%. Why not stem the upward rush of income? Labour and Tories alike used to say "globalisation" was the cause of this osmosis – but that's not so either, since the increase in inequality is so much more marked in the UK than anywhere else in the OECD.
Facts may be sacred, but in politics feelings win the day. Oliver James in the Guardian wondered when the indignation tipping point comes, the Berlin wall moment. That's unknowable: despair and passivity may triumph. Well-insulated London politicians, policymakers and commentators controlling the most powerful communications may fool enough of the people enough of the time. They may forever convince those not in their top 5% set that others must suffer for the good of the country while they take no noticeable pain.
YouGov finds Britain becoming more sympathetic to the weak than France or Germany, growing more concerned about social housing, more eager for government intervention on jobs. Calumnifying the sick and unemployed may not work indefinitely. Enough people are squeezed, enough know someone crushed – and more will soon.
Guardian
