It was Albert Einstein who termed madness as pursing the same course over and over again and to expect different results. For this government to stubbornly continue its chosen policy of austerity would signify rank madness.
The false economy of austerity is clear, even to Nick Clegg who appeared to have an epiphany in a recent interview. The Deputy Prime Minister commented: “I think we’ve all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible.” These comments are what Labour calls the government’s first admission of a mistake on the economy. Mayor of London Boris Johnson also reacted to this latest economic headache by calling on Chancellor George Osborne to “junk the rhetoric” of austerity.
A failure to do so as Jim O’Neill, the chairman of Goldman Sachs Asset Management identifies would risk a lost decade for the British economy with low growth and increasing public debt. This recent pressure for a change of course is not new; Osborne’s academic supporters have long since abandoned him. In August 2012, David Newbery, professor of economics at Cambridge University made the response to Osborne’s failing fiscal plan by stating “We need growth, and that requires investment. In a recession bordering on a depression, public investment in infrastructure that has a high pay-off even in good times must make sense.”
With a triple dip recession forecast and weakness throughout the economy, Chris Williamson, chief economist at Markit rightly views Britain’s AAA credit rating as under threat. The coalition’s justification for austerity has rested upon on fiscal credibility, and should Britain’s credit rating be downgraded, the Conservative-led omnishambles will again become apparent. The government’s decision to pursue fiscal credibility holds an element of myth.
The announcement that the economy shrank by 0.3% hardened the forecast from the National Institute for Economic and Social Research that Great Britain will enter a triple dip recession; signalling the longest recovery from a financial crisis in history. The economy has flatlined throughout this Parliament with Conservative-led policies resulting in the increase of the nation’s debts. The consequences of austerity have caused the national debt to rise from 55.3% of GDP to 70.7% of GDP. Similarly, Greece has experienced five rounds of austerity, only for the national debt to soar, rendering the country insolvent.
Construction, the indicator of an economy’s health, has been sluggish and in many quarters regressed. Osborne’s failed economic strategy has prompted him to extend the years of austerity beyond 2015. Despite holding a bachelor of arts degree in modern history, the chancellor has failed to learn the lessons of the Great Depression.
The likelihood of Great Britain entering into a triple-dip recession, after two and a half years of a flatlining economy should at least prompt a serious rethink of the government’s deficit reduction plan. George Osborne’s plan A has failed embarrassingly, now a plan for jobs and growth through investment is a necessity.
Britain is not “broke”, but there are hundreds of millions of pounds residing within big companies who have been discouraged from investing through poor growth figures. Osborne, rebuked by the IMF’s Chief Economist over his deficit reduction plan, has to consider a change of course.
In part, Osborne should shore up the stagnating public sector which as economist Richard Murphy identifies is the base of an economy. Even if the Osborne is for turning, the austerity has already scarred the economy and British society.