Economic Bloodletting

In older times bloodletting was a common medical practice. A doctor would treat a poorly patient by pumping out a few glugs of blood in the hope that it would cure them. The patient would then decline a bit and the doctor would say, “It’s more serious than we thought!” And he’d pump out some more blood. The patient would then get even worse and this bizarre cycle would continue, often until the patient died, at which point the doctor would say, “Well we did our best but they were clearly beyond saving.”

In 2010, the coalition government inherited a poorly economy. (Can you see where I am going with this?) They decided that what it needed was less spending. Less spending they claimed, would have the economy back on its feet in no time.

They predicted that with some much needed spending cuts, economic growth in 2011 would be 2.6%. Then a couple of months later with an even more sickly economy they predicted that with some more spending cuts, 2011 would enjoy economic growth of 2.3%.

November 2010 came though and the patient had deteriorated. 2011 economic growth was now predicted at 2.1% – despite economic bloodletting things were looking bleak. What this patient really needed was… bloodletting.

By March 2011 they had downgraded the annual growth from 2.1% to 1.7% but maintained that the patient’s only hope was spending cuts.

By November, the annual growth prediction was downgraded to 0.9%. We’ll soon see what the real figure was but it is clear that like the quacks of ancient times, the government is unwilling to recognise that there is any link between the treatment and the illness.

Some will disagree that this policy had anything to do with the worsening economy. What is indisputable however, is that the government’s policy of austerity has not led to the economic benefits that they predicted it would.

So let’s think about an alternative policy. Another option is that when the economy is weak we should pursue policies that encourage economic growth and employment. When unemployment rises, there are two immediate consequences. Tax revenues drop and government spending on benefits increases. Then public spending decreases because fewer people have money to spend, and those in employment save more because they are worried about rising unemployment. When public spending decreases, the economy weakens further, the whole thing becomes self-perpetuating and if unchecked we end up where we are today in an economic depression.

The government would say that you can’t spend your way out of recession. They say it all they time. It’s entirely incorrect though – government spending increases economic growth. So a better way of doing things might be to increase spending during a recession and then cut it back once the economy had recovered, employment had gone back up and tax revenues had gone back up. You could also supplement this with some taxes on the wealthy. So we have found a policy that is better than the government’s. Great! Let’s get ’em!

Oh, hold on. Where’s the opposition gone?

Oh dear.

The Labour party it seems, have decided not to take a stance against the spending cuts. Well, I think they have decided that. If I’m honest I’m not absolutely sure. For the past 18 months they have sort of said that they oppose them but have never really laid out a clear alternative. Now Ed Balls has decided that they would not commit to reversing spending cuts whilst maintaining that the government is cutting “too fast and too hard”.

Well I am confused. If they think we are cutting “too hard” but wouldn’t change the policy of cutting exactly this hard then what exactly are they proposing? Labour seems to have moved from a bit wishy-washy to some bizarre conflict of agreeing with government policies whilst saying they are bad.

If I were Ed Miliband, every time David Cameron said during PM’s Questions, “you can’t spend your way out of recession!” I would stand up and read bits out of a first year Macroeconomics text book to him.

And it doesn’t stop at economic policy. Opposition to the government’s proposed health care reforms have come more from doctors than they have from the Labour party despite the government’s argument being shown to be based on completely false statistics. We have a Secretary of State for Education who thinks we should fire more teachers for poor performance. If I were in opposition I think my criteria for firing secretaries of state would include trying to spend £60m on a boat for the Queen and £400,000 on personally inscribed bibles.

In my frustrated state, I am quickly running out of parties to vote for:

  • The Conservatives –  Implementing poor policies with no end in sight
  • The Labour Party – Unable to convey an alternative
  • The Lib Dems – Presumably I don’t need to explain
  • UKIP – Xenophobic
  • BNP – Racist
  • Green Party – In no way prepared for government but might have to look at them now

Ed Miliband’s time is running out to provide coherent opposition to what is going on. He was a good politician in government but for whatever reason he has been positively ineffective in opposition. A recent poll said that the UK public trusted the coalition more on economic policy than they did the Labour Party. I am in no way surprised by this. While I think the coalition policy is bad, it is at least coherent and clearly communicated. Rather than think of a better one, Labour seems to have given up and said, “That’s popular, let’s say that too!”

And say it they did. In a completely incoherent way.

The Conservatives might be poor when it comes to forming policies to gain economic growth, put people into jobs, or improve education and the NHS but never underestimate their brilliance when it comes to making a crap policy sound like common sense.

It is a fragile brilliance though and as their dumb marketing machine rolls forward we can see quite a few gaping holes at which to aim our wrath. I really do believe that a few carefully placed, well-argued policies could derail the whole thing but sadly I see no sign of them on the horizon.

And so, I am making one last, desperate, heartfelt plea:

Could the real opposition please stand up?

RedEaredRabbit

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About RedEaredRabbit
My name is RedEaredRabbit, King of Kings. Look on my works ye Mighty and despair.

7 Responses to Economic Bloodletting

  1. AJ says:

    I’m feeling exactly the same way in terms of having no desire to vote for any of the major parties at the moment. I think a lot of people are. It can only benefit the smaller parties.

  2. biltawulf says:

    I don’t know much about affairs of state and what have you, nor should I given my lowly Northern upbringing, but I do have a few friends in to Bloodletting and they sound like they have a lot more fun doing it than your people do.

  3. Bailey says:

    Sadly, the Green party are quite anti-science, so I’m afraid I can’t give them my vote either. Options are thin on the ground.

  4. Huw Sayer says:

    Quite agree – a good start would be to invest in bigger, better, faster, longer roads – particularly linking east-west regions of the country – as I’ve been suggesting for a number of years.

    We could sell 50-year or even 100-year infrastructure bonds today and lock in an historically low yield of around 2% – massively accelerating the pay-back time on any major infrastructure project – (see also my ramblings here: http://huwsayer.wordpress.com/2011/11/13/keep-on-dualling-to-keep-the-economy-trucking/ )

    So please don’t vote green – not only do they appear to be, as Bailey says, anti-science but they also appear to be more incoherent and anti-growth than any of the other parties.

    And please don’t tell me that cars are bad.

    The car is the great democratiser – it has given some of the poorest in society the wealth of kings (the power of 1400 horses used to be reserved for royalty – now it’s available to anyone driving a small family hatch-back) – more importantly it has given them freedom to travel where and when they please, without being dependent on the whimsical timetables of the state.

    Roads make the economy more efficient, more flexible, more dynamic – build roads and build them now.

  5. Huw Sayer says:

    PS: The IMF (that’s the International Monetary Fund – not the Immediate Money for France funds as some suppose) agrees with you.

    They said as much in a recent report on Greece – basically austerity is self-defeating if it cuts growth and increases the debt burden. Nevertheless, for some strange reason, they insisted the Greeks carried on with their course of self-immolation.

  6. Beautifully articulated argument. I completely agree. At least in Scotland we have a more coherent alternative in the SNP (apart from their irrelevant and bonkers desire for independence). Milliband and Balls are crushingly uninspired. The Lib Dems have made themselves unelectable for – what – a generation? More? Quite why anyone would have voted for the Toeies again after Thatcher dismantled British society by fostering the MASSIVE selfishness and greed that lead to the banking crisis is bewildering.

    I find it difficult to trust any of them when they seem to crave power so much that they will sacrifice ideology for the sake of popularity. It makes me question what they want the power FOR?

  7. Pingback: Depression and Optimism « RedEaredRabbit

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