Wednesday 10 June 2015

George Osborne's Very Political Economics

The Conservative Party is structurally stupid. As a force the Gods of social dynamics have condemned to a slow and unlamented decline, so madness inevitably manifests itself in all manner of horrible pathologies. A more signal example of this is George Osborne's speech, made this evening, basically outlawing the state's ability to run a budget surplus.

It was going to take all of 30 seconds for someone to point out that the Tories haven't run such a surplus in government since 1991. There's more to Osborne's move than chutzpah and a sheer lack of self-awareness. As we know, Osborne is the keenest figure in government to subordinate economics to the short-term demands of Tory party strategy. That means, everywhere and always, winning general elections so the forces stacked up behind it can continue having a free hand. The law Osborne is set to announce says that in "normal times", however that is defined, the government must run a surplus. This is in the UK's interest, he argues, because public debt has become unsustainably high and should be paid off: "In normal times, governments of the left as well as the right should run a budget surplus to bear down on debt and prepare for an uncertain future."

As most people have felt the pinch at some point in their lives, Osborne is hedging his bets that voters will see government finances in much the same way as their own incomings and outgoings. Of course, there is a huge difference between the two. When a state spends money, there is a tendency for some, all, or a greater amount is returned to the treasury. It is a body that circulates money around the body of society. For example, when there are blockages, such as the (unfortunately, popular) cuts to social security, businesses that depend in part on the income of people relying on collective provision suffer, they don't invest, they lay people off, and the return to the state is lower.

Osborne knows this, otherwise he wouldn't be so gung-ho about the idiocy that is High Speed Rail 2. But he also knows, thanks to a little help from their friends, the Tories have pulled off the trick whereby economic competency is identified with deficit and debt reduction. Because Labour utterly failed to contest arguments about its record in power, Osborne and friends have pulled off a coup whereby the crisis of the private sector was transformed into a crisis of public spending. This budget lock is about consolidating that position, so come 2020 a - he hopes - Osborne-led Tory party can clean up by monopolising the economic competency card, and, yet again, frighten an anxious and atomised electorate into giving them a go. And if they don't win, a Labour government would find it politically tricky to dump the budget law because, again, who can possibly be against the state living within its means?

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