Recession Depression

If the UK’s economy is actually recovering, most ordinary people haven’t noticed yet. They still feel worse off than before the economic crash, and the pay statistics suggest that they’re dead right.

osborne dunceBut if the longest recession of modern times is actually coming to an end, of course the Chancellor of the Exchequer, George Osborne, is claiming the credit. So what did he do? He slashed welfare and public services and put a huge number of people out of work, bringing unemployment to its highest level in decades.

Now, you might ask, how is that supposed to help the economy? So would I. High unemployment does tend to reduce inflation, given that it makes those in work more insecure and less likely to demand higher wages. But that wasn’t Osborne’s argument.

What he and his party colleagues concentrated on was government spending and government debt. One outcome of the financial collapse was that the previous government “bailed out” failed institutions using large amounts of borrowed money. This made the government’s debt much larger than it had been previously, although far from being the largest it had ever been. Osborne set the reduction of that debt as one of his priorities.

The other aim was to balance the government budget. Under the previous government, expenditure had always exceeded income: result — misery. Well, not exactly. Few British governments have ever had a budget surplus, and never for an extended period. Still, Osborne set budget balance as his other target.

How well has he done? Poorly. D-minus. To Osborne’s surprise, cutting public expenditure and putting people out of work causes government income to fall. (Less income tax, less sales tax, less corporation tax, etc.) The government budget has remained stubbornly in deficit, and the debt has increased more rapidly than before. By the time he comes up for election, Osborne’s “success” will see the debt rise by about £450 billion, or over 10% more than under the previous government, which he often criticizes as profligate.

There is only one conclusion: the Chancellor is incompetent. That’s hardly surprising, since he and his colleagues couldn’t organize a piss-up in a brewery. (The vendor would charge them double for installing catapults.) You might think that surely, a man would have to be at least minimally competent to have such an important government role, but I’ll make a prediction and the truth will out.

When George Osborne decides to leave politics, will he get a well-paid job somewhere else? Of course he will. He has many friends in business and finance (especially bankers). But will it be a real job, where he has to manage, make decisions and actually be in charge? Of course not. They may be a bunch of bankers, but they’re not stupid. Osborne will get the kind of job where he only has to turn up a few times a month to discuss “strategy”. It would be crazy to let him run things.


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