George Osborne was presumably aiming at himself and his friends, when he vowed “to speak truth to power and wealth” at the Tory party conference this week, but dare he speak economic truth to the rest of us? – simultaneously published on Left Foot Forward >
On the narrowest of bases, he might still claim he spoke “truth” to the weak and powerless when in the House of Commons debate on the economy on August 11th he made this challenge:
“Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year?”
It was a ‘brave’ claim when he made it, and it’s looking even ‘braver’ – and more disingenuous – now.
Following very recent revisions to US and UK data on GDP for the first half of 2011, the position is as follows, broken down into different quarters:
Q1 +0.4% (revised down from the previous +0.5)
Q2 +0.1% (revised down from the previous +0.2)
Q2 +0.325% (revised up from 0.25%)
So by the triumphant margin of 0.075%, taking the period in total isolation, Osborne just scrapes home. But this ignores the fact the UK quarter 1 figure of +0.4% followed the disastrous Q4 figure of -0.5%, compared to US Q4 growth of more than +0.5%.
Without this Q4 quirk, his tenuous case would collapse.
For when we compare the US and UK over the last three quarters (including Q4 2010), we find that the US grew by 1%, whilst the UK grew not at all. A difference of one per cent in favour of the US economy.
And over the 12 months to the end of June, i.e. the lifespan of the coalition government, the US rate of growth is likewise 1.0% greater than in the UK (US 1.6%, UK 0.6%).
Taking the last 18 months, we get the following medium-term picture:
2011 first half +0.4%
18 months +3.4%
2011 first half +0.5%
18 months +1.9%
In other words, the US economy has grown by 1.0% more than the UK over the last 12 months, and 1.5% more over the last 18 months, to end June 2011.
The US has many problems, but it has applied some meaningful, if now fading, stimulus.
So if George Osborne really does wish to speak truth, to power and wealth, and to the rest of us, let him own up – it is simply not true the UK’s austerity-based economy has grown faster than the USA’s. On the contrary, coalition government policies have led us deeper and deeper into the mire of unemployment, bankruptcies and economic stagnation.
6 thoughts on “Osborne: Speaking truth to wealth and power? Really?”
Strikes me the $64k question is what makes Osborne and his ilk think that austerity is desirable. My guess is that they think stimulus means more national debt. But as Keynes and Milton Friedman pointed out, deficits can perfectly well accumulate as extra monetary base rather than more debt.
The knee jerk reaction of economic illiterates to the above point is that money printing causes inflation. And the answer to the latter point is that extra money will not cause inflation other than via extra demand, and the latter is what we want.
I honestly think the problem and solution are that simple. But I might have missed something.
No you have not….so we have to keep banging the drum. But first we have to deal with the mindset of Mr. Trichet: that public money has to be reserved for bailing out the bankers!
I wonder if you saw George Monbiot’s excellent article on “Debunking Economics” in the Guardian yesterday?
This clarifies the technical details, and concentrates on the underlying political realities. It emphasises that central bankers in the West are currently firing all their ammunition at the wrong target. He also rises the prospect of a jubilee for private debt, which chimes in well with your campaign of a decade ago!
Joe…I did…he had been to listen to Steve Keen whom we at PRIME economics had hosted the week before……And yes, it’s great hearing the word Jubilee again!
One can’t take the view that Osbourne is uninformed or wrong. He has boatloads of data and educated people steering him about the place. The political gamble is that austerity (and all the pain in creates) provides the basis for a smaller state over time and diminishes soclial mobilty. The right, or the free marketers, or whatever you call ‘them’ think this is ultimately better for everyone on the longer term.
So, in a sense, the proof of austerity being painful is irrelevant for George. It’s liek trying to convince someone not to get a crap tattoo by showing them pictures of badly drawn bugs bunnies on wrinkly skin – don’t matter, my tattoo’s gonna look great.
And as long as there is a defacit mantra to justify the need for pain (isn’t is amazing how that is a completely normalised narrative in the mainstream media now, “we done bad, we spent money and now we goddha pay”) the measures will continue. Another three years before the election, plenty of time to ‘shrink and liberate’ – especially if the defacit reduces.
You miss the fact that Osborne & ilk are saying “TAXES MUST EQUAL GOV’t SPENDING” this is just plain nonsense. It’s ideology has long since been discredited.