Labour now seems to be united behind a strong, intelligent and genuinely centre-left leader – someone not stained by the triangulation of the Tony Blair and Gordon Brown years. Ed Miliband has already shown his strengths with his insightful criticism of the coalition’s spending cuts. His description of the Government’s plans as an “irresponsible gamble” was sharp, brave and necessary. His suggestion that it should be “putting in place a plan to reduce the deficit but also protect growth and jobs” represents a reassuring voice of reason from the opposition benches.
Right-wing columnists have been quick to pounce. The Daily Telegraph’s Jeff Randall expressed his disbelief at how “the most striking aspect of the all-too-predictable howls of anguish over George Osborne’s austerity measures is their lack of context, as though the calamitous economic backdrop doesn’t exist”.
Randall managed to get just about everything wrong in one sentence. Criticism of the cuts does not ignore the economic backdrop. The criticism concerns the economic conditions we face. It isn’t Ed Miliband’s scepticism that is out of context, but the Tory cuts which fly in the face of the economic reality.
Despite endorsement from the right, fiscal consolidation should be the lowest priority in a time of economic downturn. It is spending that is most needed to stimulate growth, demand and job creation.
Worryingly, Britain’s approach to the economic crisis seems to be more drastic than anyone else’s. Last month, Anthony Faiola, head of the Washington Post’s London bureau, described the coalition’s plans as “a global experiment: can a major nation drastically slash government spending without derailing its economic recovery?”
In a special report for the Demos think tank, journalist and economist Robert Kuttner outlines how “the austerity argument defies economic logic”. As a result of the downturn, the economy is performing far below capacity. We need to realise that “to break the vicious circle of high unemployment, depressed consumer demand, weak business investment and damaged banks, government should be doing more, not less.”
This analysis is particularly salient when applied to the state of employment and consumer demand in Britain. Chief Secretary to the Treasury Danny Alexander inadvertently disclosed the full extent of public sector redundancies – an estimated 500,000. Right-wingers may rejoice, but Kuttner shows why the austerity strategy is seriously misguided.
He points out that: “It will be much easier to restore budget discipline when workers are earning wages and paying taxes, not drawing unemployment checks.”
Also, cutting spending and public sector jobs will jeopardise consumer demand on which economic recovery and job creation are predicated. Rather than reducing the deficit, cutting spending could endanger fiscal consolidation in the long term.
In the same Demos report, Greg Anrig of the Century Foundation points out that putting more people back to work and encouraging growth is likely to improve the fiscal outlook rather than weaken it. History supports this view. It was Franklin Delano Roosevelt’s New Deal in the United States and Clement Attlee’s reforms in Britain that brought the two countries out of the abyss of post-Second World War decline.
Comparisons between this country and its European neighbours are also enlightening. Germany is outperforming Britain and America in its growth and exports as a result of its superior public investment and social system.
Even some on the right have acknowledged the paradox in the Government’s approach to recovery. Last month, the Daily Telegraph reported: “The Government’s plans to return Britain to growth have been dealt a severe blow after it emerged that household spending fell in October at its fastest pace since January while debt levels are on the rise for the first time in nine months.”
More than 25 per cent of the participants in the survey that formed the basis of that said their household financial situation had become worse since September, while 7 per cent said they had experienced an improvement.
How can David Cameron expect Britain to be “back open for business” when his Government’s policies are demonstrably anti-growth and anti-recovery?
But there is a wider paradox in political developments since the financial meltdown of 2007. Since unrestrained free-market capitalism and unquestioned servility to business interests that caused the recession in the first place, some may find it puzzling that right-wing parties should be in the political ascendancy in most Western countries.
Still, support for spending cuts in Britain and America is not as great as the conservative media would have us believe. In a CBS News/New York Times poll earlier this year only 5 per cent of participants regarded the deficit as the most important problem facing the US. Even Rupert Murdoch’s Fox News had 15 per cent most worried by the deficit and 47 per cent most concerned by jobs.
The data for this is country also encouraging. A Populus poll for The Times last month put the Tories behind Labour for the first time in a long time. It also found that 58 per cent thought the effects of the cuts would be unfair, while a majority thought the coalition is cutting more than it needs to. Similarly, only a third thought the Government is doing enough to protect the most vulnerable members of society. It seems that opinion may be swinging Ed Miliband’s way.
