Monday 23 September 2013

What the hell is Ed Balls playing at?

On paper, Ed Balls has one of the easiest jobs imaginable. All he has to do is demonstrate that he is less of an economically illiterate buffoon than George Osborne! The problem of course is that Ed Balls is a dolt who seems determined to make himself seem just as incompetent as the most hated chancellor the UK has ever had.

When Osborne became chancellor, Ed Balls did initially get something right. He set the Labour narrative as "the Tories are cutting too fast and too deep and risk derailing the economic recovery". After more than three years of ideological "Osbornomics" and a spectacularly derailed recovery, Balls' original narrative has been proven right. Osborne has missed all of his economic predictions by huge margins, he's overseen a bigger accumulation of national debt in just three years than Labour did in the preceding 13 years (which included the biggest financial sector meltdown since 1929) and despite the desperately cherry-picked statistics being presented by the Tories as evidence of "economic recovery" the UK economy is still significantly smaller than it was before the financial sector meltdown occurred.

This track record of failure, and Osborne's malicious and aloof character have made him extremely unpopular. Who could forget the way he was booed by a packed crowd at the Paralympics? It is truly a mark of unpopularity when you're the least popular minister in a government that includes a grotesque character like Iain Duncan Smith!

Given this appalling track record of failure and Osborne's massive unpopularity with the public, Ed Balls should be nailing Osborne to the wall for his ideologically driven incompetence. However, Ed Balls has somehow decided that it would be a better strategy to implicitly support Osborne's mismanagement of the economy by pledging to match Tory spending plans, should Labour win the next election.

Essentially, Ed Balls' message to the electorate is this:

"George Osborne is economically incompetent. He's cut too hard and too fast, ruining the economic recovery ... so that is why we will stick to his economic plans should we win the next election"
It's actually quite difficult to think of a more incoherent and self-defeating stance on the economy for Labour to have taken, which is a testament to Ed Ball's incompetence.

As if this ludicrous stance wasn't bad enough, Ed's latest strategy is even more ridiculous. He's actually asking the Office for Budget Responsibility to audit Labour's manifesto spending plans. In order to understand exactly how stupid this ploy is, you first need to know what the OBR actually is.

The OBR was founded by George Osborne, first as a Tory party scheme, before it was officially established as a taxpayer funded thinktank designed to add a veneer of legitimacy to his ideological austerity experiment. Everyone who works at the OBR owes their job to Osborne, and one might expect them to be loyal to the man that handed them their lavish taxpayer funded salaries.

Another factor to consider is that the OBR is stuffed full of economists that belong to the orthodox neoliberal school of pseudo-economics. There is absolutely no way this lot would approve anything even remotely progressive, so asking them for approval is an explicit admission that Ed Balls and Labour are still ideologically committed to the toxic brand of neoliberal gibberish that has brought us deindustrialisation, mass unemployment, profiteering utilities companies, hopelessly botched outsourcing contracts, decades of wage repression, a shambolic and absurdly overpriced public transport system, ripoff PFI "economic alchemy" schemes, and not least, the financial sector meltdown which was caused by an orgy of reckless gambling enabled by wave after wave of neoliberal financial sector deregulations on both sides of the Atlantic.

If Ed Balls is confident enough to ask such a bunch of incompetent neoliberals for their approval, he's openly broadcasting the fact that Labour is an orthodox neoliberal party, not a socialist one. That he's doing so in the same week that his party leader decided to tell the Labour party conference that he wants to "bring back socialism" creates yet another contradictory message. Instead of getting their narrative straight and sticking to it, Labour seem to be casting all over the place, resulting in confusing and mutually contradictory messages..

Perhaps the most damning thing of all about the OBR is the fact that they happily signed off on George Osborne's ideological austerity experiment. All of the predictions the OBR generated to support Osborne's austerity agenda have been missed, and not just missed by a bit, missed by absolutely flipping miles.

Back in 2010 Osborne claimed he could eradicate the budget deficit in a single parliament, and the OBR signed off on it. After three years of economic stagnation that's simply impossible, it now looks like the budget deficit won't just persist all the way through this parliament, it is likely to persist all the way through the next one too, into the 2020s.

Back in 2011 George Osborne claimed that the UK economy would grow by a healthy 2.5% in 2012, and the OBR signed off on it. As it turned out, the economy barely grew by an anemic 0.1%, and without the Olympic bounce, it would actually have been a year of negative economic growth.

Back in 2010 the OBR signed off on Osborne's plans, that had been worked out using a fiscal multiplier of 0.5 (essentially an assumption that all government spending is 50% waste). Two years later they sneakily admitted that in order for Osborne's austerity experiment to be entirely responsible for the stagnating economy, the fiscal multiplier would have to be about 1.3. In the very same month the IMF announced 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 have actually been in the 0.9% - 1.7% range.  The OBR's 1.3 figure happens to be slap bang in the middle of the IMF's revised fiscal multiplier range, meaning that if the IMF research is right, the OBR have admitted that Osborne single-handedly destroyed the economic recovery with his ideological austerity agenda, meaning that they made an unforgivable mistake in signing off on it.
The fact that the OBR has persistently produced wildly over optimistic economic predictions to support George Osborne's ideological austerity crusade, and their embarrassing litany of feeble excuses every time their forecasts have had to be downgraded, led to calls that they be disbanded, from the extremely right-wing Osbophiliac Daily Telegraph, and to me re-branding them as the Office for Budget Recklessness.

That the OBR signed off on, and gave a false veneer of legitimacy to George Osborne's reckless ideological austerity experiment suggests that they are one of the last organisations Ed Balls should be turning to for approval. This organisation has a track record of giving approval to hopelessly botched economic strategies, and producing wildly inaccurate economic forecasts, so what the hell does Ed Balls even have to gain by asking them to approve his plans? If the OBR charter is changed, giving them the powers to audit opposition economic forecasts, there are two possible outcomes.

1. The OBR approve Ed Balls plans, which would mean absolutely nothing, given that they also approved George Osborne's catastrophic ideological austerity experiment. All it would do is demonstrate that Ed Balls' plans are riddled with orthodox neoliberal pseudo-economic gibberish.
2. The OBR don't approve Ed Balls plans (quite likely given that every last one of them owes their job to George Osborne), which would give the Tory party an enormous stick to thrash Labour with until the next election.
In my view, the only thing that Ed Balls is demonstrating with this ploy to have his economic plans vetted by George Osborne's Office for Budget Recklessness, is that he really doesn't have a clue what he's doing.
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