Marking out the battlefield – the dangers of focusing on the double dip

26 06 2010

The government’s emergency Budget brought plenty of opposition from trade unions, charities and anyone with at least an O-Level in Economics, but the public reaction was broadly positive.

This is no great surprise, as the coalition is in a honeymoon period and the outgoing Labour government is (justifiably) associated with the economic crisis.

Opponents of the broader cuts agenda are warning that it will push Britain back into recession, and whilst you can find an economist to say pretty much whatever you want to hear, there’s no mistaking the uncertainty over whether the government can magic an export-led economic recovery as it says it will. If it fails, Britain’s economy is headed for trouble.

Perhaps emboldened by the government’s close-your-eyes-and-think-of-Thatcher economic policy, the broad political Left is pushing its line very hard – the cuts will lead to a double dip recession. The economy will stop growing, however anaemically, and start shrinking again.

Maybe this will happen. It is perfectly possible that cutting public spending, squeezing benefits and raising taxes while Britain’s main trading partners in Europe undergo a sovereign debt crisis, will suck whatever life there is from Britain’s economy.

But maybe, just maybe, it won’t happen. Maybe the molly-coddled financial sector will expand enough to carry Britain’s official economic growth. Maybe companies will experience a ‘jobless recovery’ that leaves no dent on unemployment figures but keeps Britain’s growth figures just about in the black. Maybe Britain’s economy will tread water – anaemic growth, but no double dip.

Will the government be able to hail this as a success? Come 2015, assuming the coalition holds together, will George Osborne be able to hail a Tory Economic Miracle – massive public spending cuts that didn’t drag Britain back into recession?

The answer is yes – if we let them.

A big problem with reporting on the economy has been the tendency to focus obsessively on headline growth figures, inflation, and the stock market. Never mind the gap between rich and poor, or unemployment, or poverty levels – as long as AstraZeneca is up 1.04%, the economy must be doing fine.

If the anti-cuts movement bases its economic argument solely around the ‘double dip’ – and much of the rhetoric so far has been focused in this direction – it makes itself a hostage to fortune.

For example, if the government’s cuts programme leads to a large rise in unemployment, regional recessions in the North, and a rise in poverty, Osborne will still be able to claim victory – just as long as London’s rejuvenated financial sector can generate pre-crunch profit margins to drag the headline growth rate above zero.

This is the danger of focusing on the double dip. If it is allowed to become the sole measure of the government’s economic policy, then growth – no matter how anaemic, no matter how concentrated in the hands of the wealthy – will be enough to ‘vindicate’ the cuts agenda in the eyes of the media, and by extension sections of the public.

Instead, the anti-cuts movement must frame its opposition to the cuts agenda around five measures:

  • national economic growth – the ‘double dip’
  • regional economic growth – the danger of regional recessions
  • poverty levels
  • wage levels
  • unemployment

Amid the uncoordinated response to the Budget and the cuts announced already, all of these have been mentioned at some point or other – though higher wages, surely the most obvious ‘incentive’ for the unemployed to work, are barely mentioned at all.

But most of the focus has been on national growth and the ‘double dip’. While important and packed with enough alliteration to set journalists’ hearts aflutter, this is perhaps the furthest removed of all the tests I have listed from the living conditions of the poorest in society – it is the one that can be most easily secured by a revival of the superrich.

So let’s ensure we insist the government is held to account on all five of these tests, not just headline growth figures. It will be difficult to stop the early cuts, but the evidence from these may help prevent further cuts if we get the terms of the debate right at the outset.

And if the government does manage to pull off its entire cuts agenda with no negative impact on national or regional growth, poverty levels, wage levels or unemployment, I promise I will go and stand in the corner and think about what I’ve done. But I don’t see it happening.

The government shows little concern for poverty and unemployment. We must ensure the war is fought on our terms, not theirs.

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One response

29 06 2010
Ben

The point about regional recessions and the regional effects of the cuts being concealed by headline figures is an important one.The regional effect of the housing benefit and local housing allowance cut-or change in measurement- is likely to price people out of london if landlords do not lower their prices.We could see a city with jobs but nowhere affordable to live.

Benefits have been “priced into” peoples lives and into things such as landlord behaviour.What the coalition has done may push more housing into middle income ownership and away from the poor and force those up against it into arrears and into court.A double dip recession is neither here nor there to these peoples. What we need is a workforce with decent homes.

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