{"id":6656,"date":"2019-09-20T09:32:47","date_gmt":"2019-09-20T09:32:47","guid":{"rendered":"https:\/\/progressiveeconomyforum.com\/development\/?p=6656"},"modified":"2019-09-20T09:38:13","modified_gmt":"2019-09-20T09:38:13","slug":"what-if-camerons-austerity-had-been-harder-and-faster","status":"publish","type":"post","link":"https:\/\/progressiveeconomyforum.com\/development\/blog\/what-if-camerons-austerity-had-been-harder-and-faster\/","title":{"rendered":"What if Cameron\u2019s austerity had been \u201charder and faster\u201d?"},"content":{"rendered":"\n

David Cameron\u2019s recent\ndescription of the government\u2019s management of the Brexit process could equally\nwell have been applied to his <\/em>government\u2019s\nprogramme of austerity, which started in 2010 \u2013 and for most of us, is still\nrumbling on. <\/p>\n\n\n\n

After almost a decade\nof austerity, during which growth has sputtered, poverty has risen and reliance\non food banks has ballooned, the fiscal deficit is now almost gone. Something\nto celebrate? Well, it might have been, had public debt not continued to\nincrease significantly. This is because the only way to reduce public debt is to\nrun a significant and sustained fiscal surplus. And there is still no sign of\nthat.<\/p>\n\n\n\n

But Cameron has form when it comes to confusing a fiscal deficit with national debt. Back in 2013, Andrew Dilnot, then head of the UK Statistics Authority, found it necessary to publicly rebuke<\/a> him for claiming that his government was \u201cpaying down Britain\u2019s debts\u201d.<\/gwmw> At the time of course, national debt<\/gwmw> was still rising strongly. <\/p>\n\n\n\n

Nonetheless, Cameron now claims that things might have gone better, had he implemented his austerity plan \u201cfaster and harder<\/a>\u201d, during the “window of permission” following the 2010 election. Is he right? <\/p>\n\n\n\n

In my new book, Austerity<\/a><\/em>, the case study of the UK following the 2008 financial crisis strongly suggests otherwise. The period following that crisis is now often referred to as the \u201cGreat Recession\u201d \u2013 the definition of recession being two or more successive quarters of zero or negative GDP growth. We all know that recessions usually result in higher unemployment-related social costs, as well as reduced government tax receipts. This double whammy means that an increased fiscal deficit \u2013 and therefore public debt \u2013 is pretty much inevitable during a recession. Especially if you\u2019ve also just spent billions bailing out the banks. <\/p>\n\n\n\n

Cameron\u2019s programme of austerity was therefore misguided in the first place. Since it only targeted government spending, it simply reduced the size of the economy further. The idea that a contraction in public spending could be more than replaced by private investment and enterprise \u2013 so-called \u201cexpansionary fiscal contraction\u201d \u2013 is at best highly controversial. In our new book, Rethinking Britain: Policy Ideas for the Many<\/a><\/em>, we describe is as \u201cthe economic equivalent of Big Foot; some economists claim to have seen it, but none have been able to prove that it actually exists\u201d. A forlorn hope then. <\/p>\n\n\n\n

Cameron\u2019s austerity was\nimplemented when the economy was slowly beginning to grow; but the recovery was\nnot yet strong enough to withstand its dampening effects. Policy should instead\nhave focused on encouraging growth, which would, in turn, have reduced social\ncosts and increased tax revenues \u2013 both of which help to reduce the fiscal deficit\nand \u2013 if a sustained surplus is created \u2013 public debt as well. But with a\nfragile economy, like the UK\u2019s in 2010, austerity inhibited growth, with\npredictable results; and growth has never been stellar since. But even so, make\nno mistake: It isn\u2019t austerity that reduced the deficit; it\u2019s what little\ngrowth we\u2019ve had. Imagine where we could have been by now had policy priorities\nin 2010 focused on encouraging growth, rather than killing it off.<\/p>\n\n\n\n

And what are the likely\neffects of \u201charder and faster\u201d austerity? Deeper and more abrupt cuts in\ngovernment spending would have shrunk the economy more drastically and immediately\n\u2013 producing a deeper recession in the process. This, in turn, would have\nincreased social costs and reduced tax receipts \u201charder and faster\u201d as well.\nThe knock-on effect would have been a sharp rise in both the government\u2019s deficit\nand debt. And it is very hard to see where the growth to lift the economy out\nof such a deep recession would have come from, without some kind of stimulus.\nIn other words, in economic terms, the result of \u201charder and faster\u201d austerity would\nprobably have been even more unhelpful than what actually happened.<\/p>\n\n\n\n

In social terms, the probable effect of deeper and more immediate cuts is harder to assess. Cameron\u2019s austerity programme has \u2013 in spite of claims to the contrary \u2013 resulted in growing poverty<\/a> and inequality<\/a>, increased homelessness<\/a>, worsening crime and reduced public services. And this has contributed to a sharp increase in the number of people who have had enough of austerity. Since many of these people were looking for some means of getting back at Cameron\u2019s government, offering them the vote on EU membership in the middle of his austerity programme, was clearly a high-risk strategy as well. All of this has resulted in a radically changed political configuration in Britain. <\/p>\n\n\n\n

It\u2019s hard to see what\u2019s\nso great about eliminating the fiscal deficit, if in the process public debt\nhas vastly increased and social outcomes for most have sharply deteriorated.\nNot only has austerity not worked, it\u2019s done immense damage to Britain. We\u2019ve\nhad nearly ten years of austerity, and over three years of Brexit wrangling,\nwith apparently no end in sight for either. Surely, developing policies to fix\nthe all too obvious problems in our economy and society, would be far more\nproductive that crowing about a reduced deficit? <\/p>\n\n\n\n

The only crumb of comfort in all this is that given Cameron\u2019s recent comments about wishing he\u2019d imposed austerity \u201charder and faster\u201d in 2010, things might have turned out much worse.<\/p>\n\n\n\n

Photo credit: Flickr\/Medill DC<\/a><\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"

The idea that a contraction in public spending could be more than replaced by private investment and enterprise \u2013 so-called \u201cexpansionary fiscal contraction\u201d \u2013 is at best highly controversial.<\/p>\n","protected":false},"author":11,"featured_media":6658,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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