Sunday, October 14, 2012

Osborne's indiscriminate austerity

Whatcha got in da case Gideon? Another £76 billion accounting error?
In October 2012 the TUC presented an astonishing study that clearly demonstrated the abject incompetence of George Osborne. The study showed that false assumptions in economic forecasts had caused an estimated £76 billion underestimation of the economic damage inflicted through Osborne's indiscriminate austerity agenda.

The miscalculation was an astonishingly bad one. Instead of undertaking analysis to determine the value for money for each area of government spending, the Office for Budget Responsibility uniformally applied an arbitrary fiscal multiplication value of 0.5 to all areas of government spending. It is absurd to simply assume that all government spending only returns 50p in the Pound back into the economy. This kind of reckless assumption shows such a mindless disregard for the economic evidence as is possible.

It should be stunningly obvious to anyone (even a modern history graduate like Gideon) that different forms of government spending have create economic returns. Some government investments are more obviously of more intrinsic "economic benefit" than others. Also there are obviously large efficiency disparities between different departments doing the same kinds of activities (for example some forms of health spending are more economically efficient than others). To simply assume that all departments across all sectors of government have a uniform efficiency of 50% shows abject contempt for the concept of evidence based analysis.

After a lot of pressure to revise their absurd assumption, the IMF eventually admitted that the real fiscal multiplication values of government spending range between 0.9 and 1.7; that for every Pound in government spending, between 90p and £1.70 was being returned to the economy and contributing to economic growth. This means that for every £1 billion in "austerity" cuts, the economic damage is between £0.4 - £1.2 billion more than the Tories and the OBR have been claiming.

The TUC obtained their £76 billion figure by estimating that cut services have fiscal multiplication values in the middle of the IMF range (1.3) and calculating the difference between this figure and the OBR's assumption (0.5).

Some Tory apologists might be tempted to try to deflect the criticism away from Osborne by claiming that the OBR are an "independent body", however they were established just two years ago by George Osborne. It must be his responsibility to ensure that the organisation he is creating is actually capable of properly applying rudimentary economic techniques before handing them control of economic forecasting for the whole nation.

To summarise the result of this study in everyday language: Osborne's ideologically driven austerity agenda (Osbornomics) has been destroying countless valuable functions of society that actually put more net worth back into the economy than they cost in government spending. Osborne had been mindlessly eliminating government efficiency.

Another economic excuse that the Osborne apologist might try is the "crowding out" fallacy. They might try to defend the destruction of services that actually generate more wealth than they cost by claiming that these economically beneficial services crowd out the private sector., At the best of times crowding out is just another neoliberal smokescreen to obscure the ideological nature of attacks on state spending, at a time of unprecedented credit drought it is frankly absurd.

Even if they still want to argue the case for crowding out, their argument is torpedoed by the incompetence of forecasting and analysis regime Osborne has implemented. Without the kind of rudimentary economic analysis(determining the fiscal multiplication values of state services) it is impossible to even determine the extent of the so-called crowding out effect. By replacing fiscal evidence with simplistic assumptions, the OBR have demonstrated that to the government and their economic advisers, "government inefficiency" and "crowding out" are unquestionable articles of faith to them. So firmly do they believe in these absurd right-wing myths that they take such primacy over economic analysis, that the economic analysis is simply considered not worth doing. This "let's just guesstimate" attitude is such a crime against economics that it defies reason.

Osborne and the OBR people he's put in charge of economic forecasting are ideologically driven fools that have brazenly disregarded economic evidence in order to justify Osborne's austerity experiment.

I've accused Osborne of "indiscriminate austerity" before; now I have conservatively estimated £76 billion worth of hard evidence, and what's more it is from an organisation the the neoliberal right-wing nut jobs can't possibly criticise. When the most high profile pushers of neoliberal pseudo-economics in the World release a report criticising the mindlessness of Osborne's neoliberalisation strategy and estimating the economic damage at £76 billion, the man is in an undeniably untenable position.

Osborne's performance as chancellor has been so catastrophically bad even his right wing friends are turning on him. What is even more astonishing about this IMF criticism is that Osborne has handed £40 billion over to the IMF under the Tories. The economic shambles must be almost unimaginably bad for them to turn on one of their biggest donors like that.

It is quite amazing that Osborne has handed £40 billion to the IMF for them to impose austerity on other countries via the structural adjustment conditions on their loans, while the appalling austerity miscalculation from his OBR "pet project" has cost the UK another estimated £76 billion.

Given the sheer scale of Osborne's incompetence perhaps the UK might need to ask for its £40 billion IMF donation back. I'm left wondering whether the IMF would apply structural adjustment conditions on the money, I mean that's their usual modus operandi Isn't it?

On second thoughts this probably doesn't matter anyway, Osborne has already voluntarily and enthusiastically done all the barmy right-wing "structural adjusting" that the IMF usually have to force governments to inflict upon their own economies and people. Osborne has wilfully inflicted immeasurable amounts of economic and social harm and on a much grander scale than the IMF would ever have forced a British government to do, based on nothing more than defunct neoliberal ideological convictions.

Bullingdon boys Cameron and Osborne are sure to
just laugh off their  £76 billion accounting error.
The fact that Osborne and the OBR utterly neglected their obligation to carry out due fiscal analysis before embarking on their austerity drive is an obvious dereliction of duty. That Osborne and his OBR team have let ideology over-rule evidence based analysis at such a fundamental level has cost the economy an estimated £76 billion worth of economic damage and an immeasurable amount of social damage (lost services, lost jobs, needlessly unemployed, broken families, chronic depression, damaged communities, child poverty, suicides).

£76 billion worth of incompetence and an immeasurable amount of social damage. How are these people still in their jobs?

I'd like to remind you of David Cameron's words back in June, when he was pressurising the Chief Executive of Barclays to resign over the Libor scandal:

"This must go right to the top"
"People have to take responsibility for the actions and show how they're going to be accountable for these actions"
"It's very important that goes all the way to the top of the organisation."
However there is absolutely no doubt that Cameron will pay no heed to his own words and resign over this catastrophic miscalculation. In fact I'm certain that he will do absolutely everything in his power to protect Osborne from the consequences of his own incompetence too. A £76 billion accounting error and the people that devised the shambolic, ideologically driven setup will just laugh it off and carry on as if nothing even happened.

If an estimated £76 billion worth of damage from their reckless assumptions isn't enough to bring down this malicious, divisive, shambolic and brazenly incompetent government, nothing ever will be.

See also

No comments: