The Tories' "long term economic plan" ignores the long term, and involves no planning.
One of the deep ironies of this election is that the Tory mantra describes exactly what they haven't got. For more than a year now, barely a sentence has passed George Osborne's lips without the words “long term economic plan” erupting forth. In practice, though, he doesn't really have a plan for the British economy, and in so far as he does, it's not at all long term.
Basically, if you take them at their word (though, why on earth would we do that?) their plan is to cut the state back and let the market decide. To put it another way, their plan is not to have a plan. The only thing in the above graphic which implies any state intervention is education. But in reality, they plan to cut funding for schools in real terms.
This isn't surprising. Conventional neoliberal economics dictates that the state ought not to have a plan. It's Osborne's ideological dogma that he should leave such things to the chaos of the market. The only thing that's odd is that rather than make the case for that, he's arguing for the opposite: he's repeating and repeating and repeating that he has something which he is politically committed to not having.
In a sense, it's a sort of triangulation. Economic planning used to be the preserve of the left. To have a Conservative Chancellor bang this particular rhetorical drum tells us that this language has now been so abandoned by the mainstream left that it can be stolen. If Labour actually had a genuine long term economic plan, then people would look at Osborne's proposals and laugh.
There's a deep irony in this. Because in practice, we do need some sort of long term economic plan now more than ever. On Monday night, at his book launch, economist and Labour donor (and also, I should add, openDemocracy donor) John Mills presented some stark statistics about the utter failure of the British economy to cope with the realities of the modern world.
Some of the story is familiar: we've had a trade deficit since 1983. We've only kept our heads above the water by on the one hand selling half our assets overseas – everything from football clubs to ports, railways to, increasingly, hospitals – and on the other by inflating the prices of what's left: the homes we live in. Manufacturing as a percentage of our economy has collapsed, and we've become more and more reliant on the city and its housing bubble for our imagined wealth. John's proposed solution will be familiar to regular readers of openDemocracy, but beyond these pages, is rarely discussed in contemporary politics. He says we should devalue the pound. He argues, convincingly, I think, that our goods are priced out of the world: people can't afford to buy stuff made in Britain, because it costs too much.
But at the launch of his new book making that case, one thing seemed abundantly clear. No matter how many compelling statistics he presented, this isn't going to happen, for a simple reason. An overpriced pound is good for one group of people: the City. And ultimately, neither Osborne nor Balls is willing to incur their wrath. There is an unspoken long term plan for the British economy, agreed by all three establishment parties, and it's essentially to let London's financial district run the show.
Ultimately, what Mills' argument tells us is not so much what needs to be done to fix the British economy but that even relatively minor tweaks – the sorts of changes which used to be commonplace in the global economy – are practically impossible so long as the City of London holds such sway in the Westminster village.
This is very worrying indeed. Because, in practice, I would argue that Mills' proposal, while probably necessary, isn't nearly sufficient. A long term economic plan needs to face up to a whole series of extraordinary challenges, on top of the already significant problem of the trade deficit:
- A huge portion of growth in the last century – arguably a majority of it - has been a product of women more actively entering the monetised workforce. This leaves significant questions about what societies ought to do about domestic labour: from care work to cleaning houses. Britain, with one of the highest gender pay gaps in Europe, needs urgent answers to these questions.
- At the start of the film 'A Life Less
Ordinary', Ewan Mcgregor loses his job as a cleaner because he's been
replaced by a robot hoover. This phenomenon (or versions of it) is
more and more common: whether it's self-service check-outs or robots
building cars. The question of what to do about this is nothing new –
from the Luddites to Oscar Wilde's “the
Soul of Man Under Socialism” to John Menard Keynes' “Economic
Possibilities for our Grandchildren”, it's been posed
frequently over the years. But modern technology combined with a
stall in productivity in the West means such questions are more
pertinent than ever.
- Inequality is soaring as most growth goes to those who own assets (homes and shares) rather than in wages to workers.
- The climate is changing fast, and other natural resources are being used up at speeds significantly quicker than their replacements rates. We urgently need not just a long term economic plan, but also a short term one, to resolve this crisis.
- As a result of this, the world needs to face up to what more and more people are calling the “carbon bubble”: oil company valuations on the stock market are dependent on them being able to burn everything they have in their reserves. The existence of the stock market (and most of human civilisation) depends on them not being able to use those reserves. When that bubble bursts, the global economy will likely go with it.
- The housing bubble cannot continue to grow. Political parties who have committed to significant house building programmes need to understand that this may well lead to a fall in house prices and a collapse in the economy. Long term, this would be lancing a boil. But unless there are tissues at the ready, it could get messy.
- Nine of the ten poorest areas in Northern Europe are in the UK – and so is the richest. As well as income inequality, Britain has huge regional inequalities that it has to face up to. Any sensible plan for the British economy would address that.
- More and more people are suffering
from insecurity – short term or zero hour contracts, having to move
for work, 'self employment' on terrible terms, etc.
- While the media focusses on government debt, the real challenge in Britain is that personal debt has quadrupled since 1990. Largely a product of the soaring house prices which make it look like the British economy is recovering, in practice, we really just have bigger mortgages than we used to. Unless the government has a serious plan to deal with this crisis, the idea that it is tackling debt is laughable.
- Political stagnation: as highlighted above with reference to the value of the pound, it seems clear that Westminster has been captured sufficiently by the vested interests of the City of London that it is unable to seriously discuss any proposals to rebalance the British economy away from finance and deal with any of the above problems. This means that any long term economic plan will depend on serious political and constitutional change. We don't have the dramatic gridlock of Washington DC, but we do have a noxious consensus slowly poisoning our economy.
What would a government need to do to deal with these questions? That's for another day. But until politicians start to engage with them, the idea that they have anything approaching a viable long term economic plan is laughable.
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