Wednesday 25 July 2012

The catastrophic failure of Osbornomics

What happens when you let a hugely over-privileged and under-qualified
upper-class twonk seize control of your economy and begin implementing
their defunct brand of pseudo-economic dogma,with absolutely no concern
 for (and many would say extreme malice towards) anyone that does not
share their extremely wealthy and privileged background?
On the 25th of July 2012 the Office for National Statistics announced that the UK economy shrank 0.7% during the second quarter of 2012, meaning that the UK is in the worst double-dip recession since quarterly figures were first produced back in the 1950s. The ONS padded out the dismal economic figures with a package of pre-made excuses such as bad weather, supposed structural weaknesses in the manufacturing and construction sector and the extra bank holiday for the Queen's Jubilee celebrations.

It is difficult to figure out what the ONS are playing at by offering a list of pre-packaged excuses in lieu of actual economic analysis, other than trying to curry favour with the Tory party top brass by refusing to mention the elephant in the room; George Osborne's ideologically driven adherence to socially damaging, self-defeating, neoliberal pseudo-economics dressed up as "austerity".

By refusing to even hint at Osborne's culpability for the third consecutive quarter of dismal economic performance the ONS are now in the minority. Liberal Democrat peer Lord Oakshott responded to the 0.7% economic contraction by called Osborne a "work experience chancellor" who has "no business experience [and] has never worked outside politics".  Only a few days previously the Tory mayor of London Boris Johnson criticised Osborne's cut-now, think-later economic policies and a number of high profile (and normally very Conservative) business organisations have also publicly criticised Osborne's mindless obsession with cost-cutting. The head of the CBI, John Cridland criticised Osborne's ineffective growth strategy, Pierre Williams of the Federation of Small Businesses claimed that Tory strategies to improve funding for growth industries simply hadn't worked and the head of the BCC, John Longworth went even further accusing Osborne of "stifling growth". Even the IMF have shown signs of losing faith in Osborne's ideologically driven austerity experiment and they are the most powerful pushers of neoliberal pseudo-economics on Earth and the beneficiaries of £40 billion worth of Tory largess. If Osborne's strategies are considered too extreme for hardline Tories like Boris Johnson, assorted Tory supporting British business leaders and even the most powerful ultra-conservative neoliberal pushers on Earth at the IMF, it is quite remarkable that the ONS have refused to even consider the possibility that Osborne's obsession with implementing defunct neoliberal pseudo-economic reforms may have something to do with the desperate state of the economy.

Brendan Barber, the general secretary of the TUC, pointed out that the UK economy is now actually smaller than it was when the Tory led coalition came to power in 2010. An astonishingly bad economic performance given the all time low 0.5% Bank of England base rate, £375bn of quantitative easing cash handouts to the financial sector and the lowest cost of government borrowing in recorded history. Osborne's ideological experiment has been nothing short of an economic catastrophe and a crystal clear vindication of the many people who that tried to tell Osborne and the Tories that trying to cut your way out of a recession is economic lunacy.

The fact that the economy has actually contracted over Gideon's time at the helm is absolutely terrible news for him because a shrunken economy means a smaller tax take.  A smaller tax take means that savings made through his ideologically driven cost-cutting measures will be wiped out by losses in tax revenues, meaning that the structural deficit will remain. This latest 0.7% contraction shows up Gideon's economic projections as the insanely over-optimistic fantasies they always were. Without a growing economy, severe cuts in spending wont work, and with severe spending cuts the economy wont grow.

Still Osborne has never been one to accept criticism, his statements on the shocking scale of economic contraction consisted of little more than veiled attacks on the previous Labour administration and excuses about problems in the Eurozone. Both of these excuses are transparently lame. Osborne's statement that "We all know the country has deep-rooted economic problems" is clearly a thinly veiled attack on the previous administration. Neo-Labour were culpable of allowing the financial sector to inflate a vast bubble of "easy credit" that eventually resulted in the most significant economic crisis since the Second World War, however in the subsequent two years they took measures to get the economy growing again. Osborne inherited a weak but recovering economy from Labour and drove it rapidly back into recession.

Osborne's "debt crisis abroad" excuse is even more pathetic, yes there are problems in the Eurozone, but these are largely problems created by austerity. Thanks to the strong economic performance of Germany and the relatively stable economic performance of France, the chaos in Spain and Greece has largely been balanced out if the Eurozone is taken as a whole. All four of Britain's major export markets (the US, Germany, France & the Netherlands) are weathering the economic storm much better than the UK and it would be fair to expect the UK to benefit from the fact that there is still demand in the economies of their four key trading partners, however under the Tories the trade deficit has been ballooning back towards pre-crisis levels, meaning that the economic benefits of UK exports are more than cancelled out by the UK reliance on imports.

The fact that Osborne has concentrated his energies on his facile neoliberal cost-cutting exercises, digging for dirt in order to smear his political opponents and giving huge tax breaks to his rich mates instead of supporting the manufacturing and construction sectors has had the triple consequence of reducing aggregate demand, increasing the trade deficit and stifling economic growth.

Given the abject failure of Osbornomics, one is reminded of David Cameron's comments in regard to the Barclays Libor rigging scandal: "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." I'm pretty sure that this sentiment will be completely forgotten about when it comes to Osborne's catastrophic mishandling of the UK economy.

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