Thursday, 4 December 2014
Osborne the closet Keynesian
So the country has money to burn and the government is going to splash out with an extra £2bn for the NHS, for road improvement schemes including a tunnel under Stone Henge, for flood defences, railways in the north and Lord only knows what else. All this is possible, in Chancellor George Osborne's very words, because the economy is now "on course for prosperity."
But, just a minute, the economy was growing, when he took over the reigns from Labour and 2010. And not only that, but the deficit was then falling as well: it's rising again now. Had Osborne introduced this public expenditure stimulation at the time, the recovery could well have continued, real rather than zero-hour-contract jobs created, taxation revenues increased through rising prosperity and, most importantly, additional misery for the weakest in our society avoided.
Instead.Osborne put the recovery he inherited into reverse by cutting government expenditure and raising taxes (VAT from 15% to 20%) and we've endured four years of stagnation until a low-wage quasi-recovery fuelled by increasing private debt and yet another housing boom has finally emerged.
In fact Osborne has abused the the classic Keynesian mechanisms to achieve his political ends. In 2010 he deliberately used the existence of a deficit at an allegedly dangerous level (it wasn't) to achieve the Tory goal of shrinking the state*. Now he is using Keynesian expansion in order to win next May's election.
Integrity and devotion to the welfare of the nation are not descriptions which readily.spring to mind.
* For further and better particulars on this see http://mainlymacro.blogspot.co.uk/2014/11/destroying-state-is-no-accident.html