Wednesday, 17 June 2015

Osborne The Reckless Failure

Michael Meacher writes:

It’s depressing that so many of the Leadership contestants seem to be colluding with Osborne’s deplorable policies instead of attacking them head-on.

The simplest measure of overall economic performance is real GDP per head: in the UK’s case it is still, 8 years on, no higher than at the start of 2007 and still below its pre-crisis peak.

At the end of last year UK real GDP per head was nearly 16% below where it would have been if the 1955-2007 trend had continued.

Even Osborne’s boasted ‘recovery’ hasn’t shrunk this gap.

This largely explains why living standards have remained so depressed.

Or take productivity: UK output per hour is still 1.7% lower than it had been in February 2008.

Such a long period of stagnation is unprecedented at least the 1800s. In the long run productivity determines standards of living.

What is needed is fast productivity growth to match employment growth, but that has been lamentably absent because of the lack of buoyant demand.

And it is that necessary element which has been crippled by prolonged austerity.

As a result productivity growth has been dire: according to the IMF, UK GDP per head is only 72% of US levels, and behind Germany’s 84% and even France’s 74%.

For all these reasons Osborne’s claim that the UK might be the most prosperous major economy in the world by 2030 is sheer fantasy, political bombast at its extreme.

Osborne’s big club against Labour is that he has succeeded in paying down the deficit. But beyond a small degree he hasn’t.

He boasted in 2010 he would have eliminated it by this year; in fact it’s still a whopping £92bn.

Worst of all – and this is the central argument against Osborne – the austerity policy allegedly designed to cut the deficit is misguided and downright wrong.

By far the most effective way to cut deficits is to resist recession and combine rapid economic growth with deficit reduction.

This not a theory: it has been repeatedly proven in practice.

The huge UK deficits after the Second World War (260% of GDP compared with 80% today) were easily subdued through rapid economic growth in the postwar years.

Bill Clinton in his 8 years as US President did something similar. He inherited George W Bush’s huge deficit and ended with none largely because of fast economic growth.

Again, the much-praised reduction of the Swedish budget deficit during 1994-8 was achieved in a period of fast growth of GDP.

In the US today, despite political deadlocks, the ratio of deficit to GDP has fallen due to economic growth.

Jeremy Corbyn needs to promulgate these truths loud and clear.

If he does, Osborne for the first time in 5 years will be held to account as the reckless failure he is.

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