Thursday, 11 December 2014

Ideology, Politics, and the Deficit

In terms of actually existing economics, cutting Britain's public spending deficit is not the most pressing of problems. But as we know, this thing we call politics is consumed by a reality of its own devising. Since the tsunami of crisis swept in from the coast, swamping our financial institutions and putting banks into life boats hastily inflated with taxpayers' billions, the Conservatives' singular message has been to blame Labour for the failure of Britain's flood defences. In a rare astute move the Tories have linked their austerity mania with the "necessity" of cutting the deficit and eradicating public debt, and rather craftily - albeit abetted by a friendly press, the LibDems and sundry Blair-tributes on Labour benches - associating economic competence with deficit elimination. Osborne and his little yellow helper in the Treasury haven't, as the graph below demonstrates, but that the chancellor regularly sums up his non-existent long-term economic plan with deficit reduction and is never called to account is demonstrative of the hegemony his party has on the issue. The Tories have set the terms of the deficit debate, so all Labour is doing is responding on their terms. The time for questioning deficit determinism has apparently passed.

One of the attack lines flung at the Tories is their dogmatism. As was revealed last week, Osborne wants to take Britain back to the 1930s with his small state obsessiveness. But, get this, it's not about ideology. The Tories might believe this nonsense, but none of it is free-floating zealotry. It's a philosophical afterthought pinned to the donkey's arse of class interests. Even then, they have shown themselves unfit to rule from capital's perspective. They favour policies detrimental to their own interests. Hence why the Tories are decadent. Actually, this should come with a qualification. The Tories are broken and have not been the party of capital-in-general for some time. The far reaching achievement of John Major (oops!), Tony Blair and Gordon Brown, if it can be described as such, was to have acquired that mantle for New Labour up until the crash. They broke the link that had anchored the Tories since the Liberal collapse in the 1920s. As such, only a fragment of capital now stands four square behind them. That tends to be the socially useless alchemists of the City and capitals split between those catering for a domestic market and active overseas outside of the EU.

This helps explain the so-called "long-term economic plan". Marx noted that capital, in the face of market anarchy, can only assert itself against competition and accumulate by redoubling its efforts. This is done through intensive exploitation to extract more (unrealised) surplus value from its employees. You know the score - lengthening the working day, wage freezes/cuts, scrapping pension and holiday entitlements, introducing new technology, speeding up workloads, etc. In the context of intense international competition and global economic instability, the Tories are taking a road similar to this. But rather than one firm, an advanced capitalist country is subject. And by pursuing this course, austerity is not damaging the capitals the Tories stand on. The city loves it. More outsourcing, more property speculation, more credit, it's boom time for them again until the bubble bursts. And for extra-EU export-oriented capital, freezing public sector wages and permanent mass unemployment make it easier for them to menace their workforce, cut up jobs, and offshore.

The alternative approach in these circumstances is to invest heavily in education, training and infrastructure (just not any old wheeze). Something that capital-in-general would benefit from, again, in the context of global competition. Labour's approach, as reiterated by Ed Miliband today revealed the first point of the party's new pledge card: "We will build a strong economic foundation and balance the books." The very stuff political slogan graffito is made of, I'm sure. No new announcements were made, just a recognition that a) a more "responsible" austerity will continue and b) there will be no new borrowing to fund Labour's manifesto commitments. This, of course, leaves wriggle room for tax rises and revenue neutral measures, like plugging NHS holes with mansion tax receipts, and this is against the backdrop of housing, education etc. promises already made.

As it happens, I broadly agree with some on Labour's right that the party should position itself as careful custodians of public money. Where I do not is on reifying the bottom line as the be-all and end-all, as per the Tories. Doing that, among other reasons, led Labour to being the party of PFI, outsourcing and NHS marketisation. "Prudence" came at the price of more public cash finding its way into private coffers. Labour needs to look at the chain of spending and whether cuts end up costing taxpayers more than would otherwise be the case. So while I am supportive of zero-based budgeting exercises in principle, I am more of a fan of that approach being taken to cuts already made or services/contracts outsourced to look at how much the consequent driving down of affected workers' wages and conditions, plus profiteering has ended up costing the exchequer more. So while Labour's approach to the deficit is different, it's a difference in degree, not in kind.

And here lies the problem. By conceding to Tory deficit determinism, Labour are slipping into decadent territory. By pursuing a "nicer" version of austerity, it too will run the risk of damaging British capitalism while kicking its own constituency for naught. In a time of global turbulence, Labour needs to be boosting the home economy to help weather recessionary winds blowing in from elsewhere. Cutting, cutting, and more cutting is about the most stupid thing you can do. By all means change spending priorities, but not at the price of dragging the ship onto the rocks.

1 comment:

WillORNG said...

Balanced government budgets combined with a deficit with the rest of the world means private domestic deficits, spending more than income. So net private financial wealth is cut running down savings/increasing borrowing.

The logic of Gordon (sic) Osborne's "plan" is that private debt doubles to 180% of income...unsustainably. Frankly that is balls (sic).

Please check out Professor Bill Mitchell's alternative economic outlook blog and heteconomists for thorough critique and real workable alternatives.