Compelling refutations of the austerity narrative

By Simon Barrow
January 2, 2015

PRIME (Policy Research in Macroeconomics) have published an online booklet which really ought to be required reading in an election year, both by politicians and by prospective voters.

Pain, No Gain: the Austerity Scam by John Weeks, Emeritus Professor of Economics at SOAS, University of London (December 2014) explains just why the much-vaunted deficit is not a problem – indeed is a necessary part of the solution – for the British economy.

As Professor Gavyn Davies commented in the Financial Times around the time of the recent Autumn Statement by chancellor George Osborne: “All parties explicitly support balancing the current budget in the next parliament. Deficit spending is clearly still deemed to be politically untenable in the UK.”

Alas, says PRIME, “all parties” are wrong. An emphasis on “cutting the deficit” via reductions in government expenditure as the core of policy may provide useful cover for those whose real agenda is the political one of reducing the size and role of the state, but it is not a sensible or effective economic policy. It should certainly not feature as the central policy for any party with a social democratic mission.

Moreover, the the coalition government’s austerity strategy has paradoxically – yet logically – failed to reduce the deficit as a percentage of GDP as planned, with a gap of some £50 billion between what was planned in 2010 for the current year, and what is now the case.

As Professor Weeks expresses it: “Chancellor Osborne cannot blame Labour for his woes. They are self-inflicted. The public sector balance remains deep in the red because of the stagnation of public revenue over the four years of Coalition government. The chart shows that the Brown government left Mr Osborne an improving budget balance, because the UK economy was in the early stage of recovery."

This nascent recovery that previous government bequeathed the current one demonstrates the old saying, ‘no good deed goes unpunished’, comments the author wrily.

"Far from building on hesitant improvement, the coalition government embarked on recession generating budget cuts. These failed miserably in their aim of deficit reduction, and Mr Osborne attributes his failure in great part to what Labour bequeathed to him in May 2010. The truth is the reverse”, he says.

The established Westminster parties – Conservatives, Labour and the Liberal Democrats – all now accept the deficit misrepresentation that lies behind austerity economics, as does UKIP. The Greens reject it, and so do a majority in Plaid Cymru and the Scottish National Party at present.

Also available from PRIME is Ann Pettifor's important book, Just Money: How society can break the despotic power of finance about which I have written here. This explains with a broader intellectual sweep how control of money has been taken away from democratic institutions and vested in unaccountable corporate ones, why austerity economics is pure superstition, and how claiming back social control of finance is possible – but only if we can give up some major illusions about the nature of money itself.

Meanwhile, doyen Keynsian and economic commentator William Keegan, with Searching Finance, has just published a powerful volume entitled Mr Osborne's Economic Experiment, about which there is more analysis here.

* Pain, No Gain: the Austerity Scam by Professor John Weeks (PRIME, 2014), can be downloaded here (*.PDF Adobe Acrobat document): http://www.primeeconomics.org/wp-content/uploads/2014/12/John-Weeks-Aust...

* More on the Autumn Statement from Ekklesia: http://www.ekklesia.co.uk/autumnstatement

* PRIME: http://www.primeeconomics.org/

* Searching Finance: http://www.searchingfinance.com/

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© Simon Barrow is co-director of Ekklesia.

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