Tuesday, September 23, 2014

Given his appalling track record of failure, why do so many people trust George Osborne on the economy?






George Osborne's tenure as Chancellor of the Exchequer has been a remarkable display of incompetence. Anyone who tries to deny this is clearly extremely confused about economics, or they're blatantly lying to you.

The easiest way to prove that Osbornomics has failed in its own terms is to look at the economic projections George Osborne made when he first took office in 2010. He bragged about how he was going to completely eradicate the budget deficit by 2015, and how he was going to protect the UK's AAA credit ratings. He has blatantly failed to achieve either of these things. It has long since been accepted that there is absolutely no chance that the budget deficit will be eradicated by 2015, and in 2013 the UK suffered the embarrassment of being stripped of it's AAA ratings by the credit rating agencies for the first time since the 1970s.

The extraordinary scale of Osborne's borrowing is so bad that by the end of the 2010-15 parliament he will have borrowed £207 billion more than he claimed that he would. Under his stewardship public debt will have risen by 50% in just five years, meaning he will have increased the national debt by more than every single Labour government in history combined!

Not only has George Osborne completely failed to eradicate the budget deficit as he claimed he would, and borrowed hundreds of billions more than he claimed he would, the economy is way smaller than he claimed it was going to be back in 2010. Osborne's 2010 projections claimed that by the end of the 2010-15 parliament the nominal GDP of the UK economy would be £1,916 billion, however this has now been revised downwards to £1,788 billion. It turns out that George Osborne has borrowed £207 billion more than he said he would in order to make the economy £128 billion smaller than he claimed it was going to be!

If anyone in the real world would have missed their business projections by such appallingly vast margins, there is absolutely no way they would still be in a job. However with George Osborne the situation is even more ludicrous than the fact that he's still in his job despite his ridiculous track record of failure, because the public actually believe the right-wing propaganda about how much of a success he's been and rate the Tories as by far the most economically trustworthy party!

That Osbornomics has been such an appalling failure in its own terms, yet the public laud the Tories for their economic competence raises the interesting question of how it is possible for the public to be so completely wrong.

Economic fairy stories

The first thing to note is that a huge percentage of the public have no training in the economic basics, meaning that they are susceptible to the most ludicrous economic fairy stories.

One such example of a ludicrous economic fairy story is the endlessly repeated "recovery" narrative. The fact that the UK economy has only just recovered to pre-crisis levels in 2014 means that the entire UK economy has suffered an average economic growth rate of 0% for seven long years. The Tories and the right-wing press would have us believe that we're experiencing a remarkable economic recovery, but in reality we've just endured the slowest economic recovery since the aftermath of the 1720 South Sea Bubble!

Not only has the economy effectively flatlined for seven years, the majority of people have become poorer due to wage repression, cuts in in-work benefits, hidden inflation and the ideological assault on public services. The economy is the same size as it was before the economic crisis, but the majority of people are much worse off now because of the massive transference of wealth from the majority to the wealthy minority that has been going on under George Osborne's watch.

Another example of how people can be bufuddled by economic fairy stories is the way that so many people believe the economically naive idea that the only way to reduce the debt is to reduce government spending. In reality it is possible to dramatically cut spending and massively increase the debt (as George Osborne has spent the last four years demonstrating) and it is also possible to reduce the debt by increasing spending (as was proven by the post-war Labour government, which spent huge amounts on founding the NHS, building hundreds of thousands of council houses and rebuilding Britian's shattered infrastructure, and managed to reduce the national debt by 40% of GDP in the process).

The paradox of thrift has been known about since antiquity, yet still people prefer to think in really simplistic terms, rather than accept the complex reality that cutting spending on economically beneficial things can increase the debt, and increasing spending on economically beneficial things can reduce the debt.

It seems counter-intuitive, but cutting spending can increase the debt and increasing spending can reduce the debt. Most people simply won't accept this fact because they know absolutely nothing about basic macroeconomic ideas like fiscal multiplication and the marginal propensity to consume.


Another economic fairy story that is adored by the public is the idea that Labour blasts loads of money, and the Tories pay off the debts. George Osborne himself used this one back in 2007 when he said
"As has been the case so many times before, it's the next Conservative government that will have to clean up the mess left by a profligate and irresponsible Labour Party". Millions of people believe that this is what has been going on, despite the fact that George Osborne has created more debt in just four years than every Labour government in history combined!

The mainstream media


The mainstream media has a lot to answer for giving George Osborne such an easy ride on his appalling track record of failure.

The right-wing press are notoriously biased towards the Tory party, meaning that he always gets an easy ride from them, no matter how often he has to revise his growth figures downwards and his borrowing figures upwards. However even traditionally left-wing publications like the Guardian are guilty of giving George Osborne a ridiculously easy ride too.

In this article entitled "George Osborne likely to miss deficit reduction target as UK borrowing rises" the Guardian discusses the fact that Obsorne looks set to miss his March 2014 projections by £10 billion, meaning that borrowing in 2014-15 will be £105 billion rather than the projected £95 billion. The fact that in 2010 George Osborne and the OBR projected that the budget deficit would be completely eliminated by 2015 wasn't even mentioned in the article.

Judging George Osborne by his most recent set of economic projections, rather than the promises he made when he became Chancellor in 2010 makes it look like he's going to be just 10% out 
on his calculations (borrowing £10 billion more than he claimed he would in March 2014), rather than 100% out (borrowing £105 billion more than he said he claimed he would in November 2010) . 

The habit of judging Osborne against his most recent set of economic predictions instead of what he promised when he came to power has allowed him to consistently revise his economic growth projections downwards and downwards and his borrowing projections upwards and upwards without anyone pointing out how spectacularly inaccurate his original projections have proven to be.

The Labour party

One of the main reasons that George Osborne gets away with such incompetence is the fact that the Labour party has completely given up trying to present anything resembling an alternative. From one day to the next the only thing the public hear from Ed Balls and the Labour party is that they plan to imitate George Osborne's economic policies.

Instead of pointing out that George Osborne has borrowed £207 billion more than he claimed he would in order to make the UK economy £128 billion smaller than he claimed it would be, Ed Balls has provided George Osborne with a veneer of false credibility by promising to stick to George Osborne's spending plans should Labour win in 2015!

Instead of repeatedly slamming George Osborne's pet quango the Office for Budget Responsibility for the fact their economic projections have proven to be so incredibly inaccurate over and over again, Ed Ball's has provided them with a veneer of false credibility by pledging to allow them to scrutinise his spending plans!

Instead of repeatedly attacking George Osborne's appalling track record of failure, the Labour party keep imitating George Osborne and providing him a veneer of legitimacy that he really doesn't deserve.

The public won't trust Labour on the economy because they appear to be imitating George Osborne with their aganda of austerity-lite. I mean why would anyone choose to believe in a watered-down imitation, rather than the thing that is being imitated?

The incredible stupidity of the Labour economic stance is one of the main reasons that the Labour party is lagging so far behind the Tories on economic credibility.


Conclusion

If we look at the unimaginably vast differences between what George Osborne promised his austerity agenda would achieve in 2010 and what has actually happened in reality, it is impossible to conclude that Osbornomics has been anything but a catastrophic failure.

In other articles I have explained why Osbornomics has failed, but in this one I've concentrated on how the public have come to believe that George Osborne and the Tories are economically trustworthy, despite the absolute mountain of evidence of their catastrophic economic mismanagement.

In my view there are many reasons including the widespread economic illiteracy of general the public (due to the appalling lack of economic literacy training in state schools), the incredibly biased reporting of the mainstream media and the absolutely ridiculous "austerity -lite" stance of the Labour party. 



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