Saturday 20 October 2012

An entirely avoidable "Osbornomic" recession

I know I can be a bit long winded in my posts, this is a consequence of my habit of presenting a lot of complicated facts and then conducting extensive critical analysis on them. The subject of this post is of such enormous importance that I've had to strive to explain it in a very simple, but also entirely accurate way in order that as many people as possible understand it. The best way I could think of doing it is by presenting two damning quotes.
Quote One
The Office for Budget Responsibility

2012 Forecast Evaluation Report
October 2012
"The average multiplier over the two years would have needed to be 1.3 – more than double our estimate – to fully explain the weak level of GDP in 2011-12"

What it means 
In order for George Osborne's ideological fiscal austerity experiment to be entirely to blame for the double-dip recession (that the OBR had abjectly failed to predict) the average fiscal multiplier must be 1.3.

Quote Two
The International Monetary Fund

 IMF Global prospects and policies report
October 2012

"[We previously claimed] that fiscal multipliers used in the forecasting process are about 0.5.Our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession. This finding is consistent with research suggesting that in today’s environment of substantial economic slack, monetary policy constrained by the zero lower bound, and synchronized fiscal adjustment across numerous economies, multipliers may be well above 1."

What it means
Due to the current economic conditions (quantitative easing, widespread fiscal austerity, financial sector chaos, extensive capital flight and significant wealth retrenchment) the IMF are making an astonishing 80% - 320% revision to their previously stated fiscal multiplier (returns on government investment) values. 1.3 happens to be slap bang in the middle of their newly revised range.

To join the dots
I'll spell it out: These quotes are compelling evidence that Osborne's "austerity" is entirely to blame for the double-dip recession. This is not just an Another Angry Voice opinion, it is a fact established upon economic studies undertaken by the OBR and the IMF.

What makes this evidence such a damning indictment of George Osborne's austerity agenda is that these economic organisations should be two of his very strongest allies.
George Osborne created the OBR, in November 2009, announced them officially in May 2010 and they were formally appointed by the 2011 Budget Responsibility and National Audit Act. While Osborne was slashing 100,000s of public sector jobs, the OBR were the minority of people to have publicly paid jobs created for them. Everyone in the organisation can be thankful to George Osborne for having created their jobs.

Since George Osborne became Chancellor, he has provided £40 billion to the IMF, funds they have used to promote austerity oversees via the structural adjustment conditions on their emergency loans.
The figures from these two organisations clearly demonstrate that it is overwhelmingly likely that fiscal austerity is the principle cause of the double-dip recession. The figures could hardly have been more precise. 

I damn the state of affairs where the mainstream media have utterly failed to grasp the importance of this story, instead focusing the vast bulk of their mid-October coverage, comment and debate on "human interest stories" like the (admittedly very disturbing) Jimmy Saville case, the Gary McKinnon's extradition case, Andrew Mitchell's long overdue resignation, Trenton Oldfield's ridiculous sentence for swimming in the Thames, and George Osborne's fare-dodging exploits.

Although noteworthy all of them, the above listed stories should have been massively overshadowed by this compelling evidence that Osborne's mindless austerity is responsible for the double-dip recession.

I am also aghast that the Labour party have failed to pick up on this story and than not a single mention of Fiscal Multiplers was made at Prime Minister's Questions. In fact, Labour were so pathetic that they even allowed David Cameron to get a dig in about the economic record of the Labour Party before restating the endlessly repeated fallacy that "We have to rebalance our economy because the state sector was too big and the private sector was too small". Ed Miliband and the Labour party completely missed the chance to nail Cameron to the wall with the OBR and IMF evidence; that it has been policy based upon this kind of mindless generalisation about the size of the state that has actually caused the double-dip recession.

I know economics based stories are difficult to sell to the public, it is often difficult to spin a narrative to give the story enough "human interest" appeal. However there is significant human interest at the very centre of this economic story, a human who should be being made to answer significantly more challenging questions than "what is your excuse for fare-dodging". The fact that the mainstream media and the Labour party are overlooking this story of compelling evidence that George Osborne caused the double-dip recession, leaves me feeling that I've been left to do the job of the entire mainstream media and the political opposition all by myself.

Please share this post as widely as possible.

Thomas G Clark (Another Angry Voice) 

To see more detailed analysis of this story and the case that George Osborne should be held accountable, follow this link:
George Osborne's indiscriminate austerity

For more information on what Fiscal Multipliers are, follow this link:
What is... Fiscal multiplication? 

To learn more about the Office for Budget Responsibility, follow this one:
The Office for Budget Recklessness?

To see the case I was making against Osborne before these compelling Fiscal Multiplier figures came out, follow any of these:
The catastrophic failure of "Osbornomics"

Austerity and the double-dip
Osborne's fallacy of bond confidence 

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