Pain, No Gain: the Austerity Scam

Bowery men waiting for bread in bread line, New York City, Bain Collection

Bowery men waiting for bread in bread line, New York City, Bain Collection

On the eve of the Autumn Statement, PRIME is pleased to publish “Pain, No Gain: the Austerity Scam” by John Weeks (Emeritus Professor of Economics, SOAS, University of London) which explains just why the deficit is not a problem – indeed is a necessary part of the solution – for the UK economy.

Gavyn Davies wrote last week in the Financial Times:

“All parties explicitly support balancing the current budget in the next parliament. Deficit spending is clearly still deemed to be politically untenable in the UK.”

Alas, “all parties” are wrong. An emphasis on “cutting the deficit” via reductions in government expenditure as the core of policy may provide useful cover for those whose real agenda is the political one of reducing the size and role of the state, but it is not a sensible or effective economic policy. It should certainly not feature as the central policy for any party with a social democratic mission.  And the Coalition Government’s austerity strategy has paradoxically – yet logically – failed to reduce the deficit as a percentage of GDP as planned, with a gap of some £50 billion between what was planned in 2010 for the current year, and what is now the case.

As Professor Weeks puts it,

“Chancellor Osborne cannot blame Labour for his woes. They are self-inflicted. The public sector balance remains deep in the red because of the stagnation of public revenue over the four years of Coalition government. The chart shows that the Brown government left Mr Osborne an improving budget balance, because the UK economy was in the early stage of recovery.

This nascent recovery that Labour bequeathed the Coalition demonstrates the old saying, ‘no good deed goes unpunished’. Far from building on hesitant improvement, the Coalition government embarked on recession generating budget cuts. These failed miserably in their aim of deficit reduction, and Mr Osborne attributes his failure in great part to what Labour bequeathed to him in May 2010. The truth is the reverse.”

Click here to download the publication.

And you can now listen to John Weeks discuss the austerity scam in his recent interview on Share Radio.

PS Update 4th December – a very nice endorsement received from Michael Meacher MP:

John Weeks has done an important service in demystifying the myths and misrepresentations that have been constantly propagated about the deficit.   With clarity and argumentative force he sets out the real record which tells a very different story from the canards which have drastically misled public opinion.   Those who want to know the truth, and that should include members of the Cabinet, should be required to read this pamphlet”.

And – dare we add – maybe some in the Shadow Cabinet too?