Budgeting for stagnation
George Osborne's latest budget has reconfirmed Britain's prolonged collapse in economic activity, as he thrashes around for supply-side "solutions".
He announced a long list of measures: taxpayer guarantees to banks reluctant to lend; tax cuts for the very rich; loans for youthful entrepreneurs; a kite-flying pilot on Sunday trading hours; deregulation of public sector pay and planning; incentives for private investment.
The chancellor expects these supply-side measures to stimulate recovery – on their own. Given that Britain has the highest levels of private debt in the world, given the broken banking system, high unemployment and sustained economic weakness, he appears to anticipate little real opposition to these measures.
The British public have quietly accepted that incomes are falling in real terms, and there is little resistance to rising unemployment.
Yet all the supply-side solutions in the world will do little to aid recovery in the absence of growing demand for goods and services. Nothing will happen if customers (of banks, firms, shops) simply cannot or will not walk through the door.
The chancellor has resolutely refused to address falling levels of demand. The 2012 budget's sound and fury signifies, macro-economically, nothing but sustained stagnation.
* Ekklesia's 2012 budget coverage and analysis can be found here: http://www.ekklesia.co.uk/tags/9137
© Ann Pettifor is director of Prime Economics (Policy Research in Macroeconomics). She is a political economist, writer, and analyst of the global financial system. Ann is co-author of the Green New Deal and predicted an Anglo-American debt-deflationary crisis back in 2003. She is best known for her work on the sovereign debts of low income countries and for leading Jubilee 2000. Ann is also a fellow of the New Economics Foundation. This piece is reproduced, with grateful acknowledgement, from Ann Pettifor's website, Debtonation: The Global Financial Crisis - http://www.debtonation.org/
Select the newsletter(s) to which you want to subscribe or unsubscribe.