Being serious about the economy isn’t the same thing as giving treats to business

6 May

In a political context being serious about education isn’t assumed to be the same thing as giving teachers a pay rise. Being serious about health isn’t taken to be the same thing as making doctors’ lives easier. And yet in Britain and the US ‘being serious about the economy’ has become synonymous with doing things that will be in the most straightforward way nice for the business community, i.e. cutting taxes and regulation. No doubt life will be easier for big businesses in the UK if we end up with another Conservative led government after the election tomorrow. But, as any parent knows, getting what you want isn’t the same as getting what’s good for you.

There are two striking facts about the UK economy in recent times:

  1. Unemployment fell during the recession, against all expectations
  2. Productivity has stagnated even as the economy has begun to grow (Output per hour worked is 30% lower than in the US or Germany and 15% below where it would have been had we had continued on pre-crisis trend)

There is an obvious way of explaining both of these facts: a greater number of people are doing the same amount of work. There is an argument that increasing flexibility in the labour market has made our most recent recession less painful than previous recessions. But as the economy begins to grow it is essential that we tighten things up again, not only for the wellbeing of workers but also for the sake of a sustainable economic growth. GDP growth without productivity growth is impossible in the long term. There is zero chance you’ll get this from the Conservatives.

Thinking more broadly, the thirty five year Thatcher-Reagan free market experiment has not proved to be good for the economy. Cutting taxes and regulation has not lead to higher growth levels than those enjoyed in the thirty years after the war. Instead it has dramatically increased not only inequality but also economic instability, culminating in the global meltdown of 2008. It is time to rethink this failed economic model. There is zero chance you’ll get this from the Conservatives.

I will give George Osborne credit for one crucial bit of economic insight. After severe cuts in the first two years of this parliament choked off economic growth, he realised that he would have to rein in austerity in order to allow growth to return in time for the election. But if given the chance to be chancellor again, front-loaded cuts will again slow the economy. There will be riots.

I am writing this because I have spoken to a number of friends in the last few weeks who are reluctant to vote either for the ‘nasty’ Tory party and for the ‘anti-business’ Labour party. And yet already the Conservative’s ‘long term economic plan’ is beginning to unravel. There has been no rebalancing of the economy towards manufacturing, with the result that since the Bank of England has taken action to deflate the government-stoked housing bubble growth has begun to slow.

I am voting Labour this election not just because I want there to be a welfare state and an NHS in five years’ time, but because another Tory-led government would be very bad indeed for the British economy.

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