Policy Research in Macroeconomics

Osborne’s Critical but (thankfully) Unaccomplished Mission

U.S. Navy photo by Photographer's Mate 3rd Class Juan E. Diaz. (RELEASED)    via  Wikipedia

U.S. Navy photo by Photographer’s Mate 3rd Class Juan E. Diaz. (RELEASED)  via  Wikipedia

George Osborne’s speech yesterday in Cardiff showed signs of a politician feeling the pressure upon him.  His much vaunted (notably but certainly not only by himself) “success” in stewardship of the UK economy is starting to look false and tarnished… in the words of our recent EREP Review, “The Cracks Begin to Show”.  

So serious is the situation that he has had to develop a whole new metaphor; he – and therefore we – are now On A Critical but Unaccomplished Mission On Which All Our Futures Depend.

 Throughout 2015, the economy has steadily decelerated, and remains as unbalanced as ever, heavily dependent on the housing asset bubble he has done so much to stoke, and on growing personal indebtedness.  Yet the Chancellor seeks to place most of the blame for any problems or slowdown on foreigners:

“Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats from around the world…

We are only seven days into the New Year, and already we’ve had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia.

In just one week in December South Africa had three separate finance ministers…a stat no Chancellor likes to read about.”

Scary, scary stuff indeed.  And more:

“Commodity prices have fallen very significantly. Oil, which was over $120 a barrel in 2012, dipped below $35 earlier this week.

That is good for consumers and business customers here in Britain, bad news for the oil and gas industry, worrying for the creditors who have lent to it, and a massive problem for the countries that depend on it.  And all of it adds to the volatility and sense of uncertainty in the world.”

Yes it’s shivers down spine time… except all this is old hat, apart from oil sliding a few cents further.

Mr Osborne’s real fear, however, is that the untruth that ‘there is no alternative’ to his austerity-based economic policy is slowly being discredited – and the policy itself is starting to unravel as the data worsen.  After all, he has been Chancellor for 6 long years (very long years) yet the very thing he has fetishized – “the deficit” – remains steadfastly with us.  What is more, manufacturing stagnates while the trade and current accounts languish almost unchangingly in the depths of their own chronic deficits.  

So the Chancellor reckons it’s time to shift metaphor, to admonish us, to preach at us.  We are at risk, he complains, of complacency – to which “delivering the plan” is the only “antidote”.

As always, Mr Osborne wilfully fails to see that borrowing for investment in Britain’s future is not only necessary but cheap – borrowing for government is virtually interest-free at present, and the Bank of England’s Asset Purchase Facility has for several years helped to underpin this!  Even business interests such as the British Chamber of Commerce have argued in favour of borrowing for needed infrastructure improvements.  

Yet the Chancellor’s old vinyl record of insults against anyone who disagrees is stuck in its ancient groove:

“The biggest risk is that we all think that it’s “job done”. Many encourage this, irresponsibly suggesting that we can just go back to the bad old ways and spend beyond our means for evermore.

Though the year is only seven days old, already we hear their predictable calls for billions of pounds more debt-fuelled public spending…

Today I want to issue this warning: unless we finish the job of fixing the public finances, to get Britain back into the black by finally spending less than we borrow, all of the progress we have made together could still easily be reversed.

That’s why we’ve got to fix the roof while sun is shining.

The prize for us all if we do is that Britain could become the most prosperous of all the major nations in the world in the coming generation.”

Leave aside the absurd designation of borrowing for investment as “debt-fuelled” spending, we should linger on this last sentence… 

The Chancellor’s claim is indeed pretty staggering, indeed ludicrous, since the World Bank data on GDP per head of population (at purchasing power parity) show that the UK is at least 10% or more below 9 other “advanced” economies, i.e. Australia, Austria, Canada, Denmark, Germany, Netherlands, Norway, Sweden and the USA.  It would mean for example  – in the case of the USA – increasing GDP per head by about 50%, assuming the US rose only very modestly.  And in the case of Norway, we would need an increase of at least 60% per head.  And all of this would be down to just one thing – running a budget surplus.  It is a patently false and absurd claim to put forward in this way.

But Mr Osborne has also seen that it is time for him to change metaphors.  Although he offered, above, one more “fix the roof while the sun is shining”, he has already accepted that sun is an unreliable ally from now on.  So now we need a bigger and better concept, to give a more religious or military feel to the task ahead.

Ah yes, let’s have a “mission”. 

Mr Osborne used the word “mission” no fewer than six times in this single not-so-long speech.  He is a missionary, trying to indoctrinate us, the savage non-believers, with the True Gospel of the Eternal Small State with its Privatised Services.  A heaven in which each can choose his or her own water provider, or receive legal services in Tescos (yes, the speech also touches on such advances in human civilisation).  

At the same time, he is on a military mission,  courageously taking on the enemy. Here are his missionary verbal positions:

“Anyone who thinks it’s mission accomplished with the British economy is making a grave mistake.”
“This year, quite simply, the economy is mission critical.”
“So let me explain, first, how the economy is mission critical here in Wales.”
“Getting infrastructure decisions right in 2016 is mission critical.”
“So 2016 is not mission accomplished. But our future is very much in our hands.”
“This year is mission critical year.”

Now I do understand the desire not to be like George Bush in military garb announcing “mission accomplished” soon after the invasion of Iraq.  Or indeed of Prime Minister Cameron on Afghanistan who memorably said in 2013:

“I think the purpose of our mission was always to build an Afghanistan and Afghan security forces that were capable of maintaining a basic level of security so this country never again became a haven for terrorist training camps. That has been the most important part of the mission … The absolute driving part of the mission is the basic level of security so that it doesn’t become a haven for terror.” (My bold).

Yes, “mission” is a key word in the government’s armoury.  But “mission accomplished” and “mission critical” are two rather different uses of the term.  “Mission critical” means – as I look it up – that some part of a business system is essential to the whole business goal, e.g. a banking software system is essential to enable the bank to serve customers.  But that raises the question – what on earth does “the economy is mission critical” mean?  Let’s look again at what Mr Osborne says in context:

“Anyone who thinks it’s mission accomplished with the British economy is making a grave mistake.  

2016 is the year we can get down to work and make the lasting changes Britain so badly needs.  Or it’ll be the year we look back at as the beginning of the decline.

This year, quite simply, the economy is mission critical.  We have to finish the job.”

Yes, this year we have to make “the lasting changes”, or else we will look back on 2016 as “the year of the decline” – even though, in fact, 2015 was indeed also a “year of the decline”.  And when he says “the economy is mission critical”, we ask – critical to what? 

He does not say, for example, that more budget cuts are “mission critical” to a strong economy (if he did he would be wrong, but at least the argument would make sense).  No, he says, in effect,  it is the economy that is the political software, the “mission critical” to the true goal, encapsulated in the phrase “we have to finish the job”. The economy is the means to the end, not an end in itself.

And that goal, to which the economy is a means? He finally tells us – it is

“..what the Office for Budget Responsibility describes as the biggest reduction in government consumption outside demobilisation in over 100 years.”

“Reduction in government consumption” is the distorting, dissembling phrase the Chancellor adopts to mean drastically reducing government spending on public services and support for the poorest in our community.  That is the true purport of George Osborne’s description of the economy as “mission critical”.

And of course, we must not forget there is also a personal “mission critical”, with the retirement of David Cameron due in 2 or 3 years… a stalling, failing economy is not, how shall we say, an ideal springboard for accomplishing that most essential future mission.  The job is indeed far from finished. But Mr Osborne’s plan is destined to fail.

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