By Ryan Gallagher
Britain’s Tory-led government has presided over a self-inflicted double-dip recession. If Q1 2013 GDP data proves to be negative then this government will have driven Britain into a historic triple-dip recession.
Why would Britain’s “natural party of government” risk such levels of unpopular austerity, that it seriously jeopardises their chances for the 2015 election?
The austerity policies of the current Parliament are driven by ideological attacks on the working class and the disabled that, at their core, chiefly reflect City interests. While these very policies have caused a further wasting of Britain’s productive capacity and living standards, Osborne and co. still expected the British economy to return to growth.
In 2011 Barack Obama expected the US Congress to pass a stimulus bill which would be prodigious enough to create liquidity in the US economy (and the world’s economy with it), increasing jobs, tax receipts and higher growth. Bills of this nature are historically common place, having been passed with bipartisan support in the administrations of George W Bush, Ronald Reagan, Richard Nixon and further back still.
Few however would have expected the hard right-wing intransigence of the contemporary US Republican Party. After the ‘tea party’ fringe of the US Congress had brought the US government near to default, a stimulus bill was passed. This bill was a shadowy essence of what Obama wanted or what the world expected. The amount of spending was comparatively small to the Keynesian stimuli practiced by US governments in the past.
The implications for Britain and the electoral fortunes of the Tory Party were grasped by few in Britain’s staunchly Conservative-supporting media. There was going to be no free ride.
In the early 1980s Britain suffered under another Tory government that squandered economic capacity, cut government services and laid waste to people’s lives. In a vicious cycle of government cuts, high unemployment and business going bust Britain looked far from recovery.
Then Margaret Thatcher, to her fortune, was able to benefit from a political deal thousands of miles away in Washington DC.
The Reagan government and US Congress agreed to stimulate the US (and hence world economy) through massive tax-cuts and a programme of rearmament. Previous monetarist-inspired cuts were reversed and the US Federal Reserve pumped dollars into the world economy.
With an albeit diminished manufacturing-base and the benefit of Labour’s 1970s investment in computer technology, Britain managed to export its way out of recession on the back of US dollar growth. Maggie didn’t lift a finger to achieve this, not that it stopped her taking credit for it.
The lessons of this were not lost on David Cameron and George Osborne. While Gordon Brown was happy to borrow to stimulate the British economy (think cuts in VAT, “cash for clunkers”) as part of an international effort with the US to increase demand in the world economy, this new Tory-led government had other ideas.
If the US government is going to do the heavy lifting of gigantic stimulus bills, then why can’t Britain just ride on the back of US borrowing like the 1980s? It was just too tempting for our coalition of millionaires to resist.
In 2011, Cameron and Osborne rebuffed Obama’s lobbying for an international effort to stimulate the world economy. This wasn’t 2009 anymore and the Tories weren’t going to give Obama the backing which Brown had done.
Surely now the Tories just had to rub their hands and wait while they cut spending, hold down wages and pay down the deficit on the back of a massive US stimulus.
Faced with a return to growth and an elimination of the deficit, a grateful British public would be expected to return Cameron’s Tories in 2015. The Tories could claim to have undone “the damage done by Labour”. Piece of cake.
But without a massive Keynesian intervention in the US economy, Britain instead reaps the whirlwind of endogenous and Eurozone austerity. Cameron and Osborne’s gamble failed and the British people are angry. The politics of austerity have been shown to have been a massive failure but the most vulnerable pay the human price. The vicious circle of cuts, unemployment, and businesses going bust continues unabated.
It might be tempting to see Keynesian economics as the answer. Indeed the talk of Keynesian stimulus amongst Labour Party politicos is a marked improvement on Blairite neoliberalism. But Keynesianism itself is but a sticking plaster over the inhuman, exploitative and ecologically-disastrous economic system that is capitalism.
The answer to capitalism is not a reformed capitalism. Wherever the left has sought to reform capitalism, capitalism and its agents of power have always pushed back. Examples of this can be seen throughout the world.
In Britain, the 1945-1951 reformist socialist achievements of the Labour Party have been slowly undermined by Tories, as well as right-wing social democrats and ‘Third Way’ neoliberals within the Labour Party. In Sweden, right-wing conservatives have spent the last twenty years undermining the Scandinavian social model. Similar trends can be identified in Canada, Australia and Western Europe.
The failure to displace capitalism with genuine democratic control over the economy has allowed the hard-won gains of working people to be wrestled back into the hands of the ultra-rich. This has been done by careful use of the state to subsidise big business and big finance at the expense of workers and small producers. Elsewhere the state strikes beyond its borders to engage in neoimperialist endeavours which impoverish the Third World, enriching big finance.
This system cannot be reformed.