Unless progressives stop ceding the ground on austerity, the Tories will always capitalise on economic fear
Elections do not happen in a vacuum. Political pundits and seasoned campaigners can sit around regretting the use of a particular slogan or the flop of a particular photo opportunity, but the real issue is cultural; meaningful understanding of what happens in an election comes from examining the complex unity of social feelings and ideas that conditioned the choices that people made at that crucial, lonely, moment in the ballot booth.
It would seem that the over-arching feeling was one of fear: a deep-rooted apprehension about the economy. The financial crisis still casts a shadow over our sense of confidence and well-being, and we continue to feel the concrete reality of an anaemic economy. There are few people who feel like there is adequate understanding of why the financial crisis happened in the first place, and fewer still who feel confident in the regulatory measures that have been introduced to avoid it happening again.
This has lead to a sense of impotence, which has been channelled in an unhelpful but understandable way. In place of tackling the problematic processes of finance-dominated capitalism - which is a huge, global question without definitive answers - we have taken to obsessing about various proxies of the health of our domestic economy. The main proxies have been the indicators of in-year budget deficits and the liability side of the national balance sheet. These have played a role in telling a story that can be easily understood: the country is not living within its budget; national debt is holding us back. This story has the advantage of being easy to understand, and as a consequence - in this time of uncertainty - has enormous power. The rhetoric of austerity rises above every other political concern, so that even those who fear for the NHS, for the state of crumbling school buildings and for businesses struggling under shoddy infrastructure, at the last moment choose what they understand to be the only viable, sensible option to avoid economic disaster. They buy into the argument that wealth and income taxes are somehow “anti-business”; that government expenditure is anti-business; that a confident, healthy, educated, housed and well-paid workforce is anti-business.
The tragedy is that while the story about deficits and debts is easy to understand, it is totally misguided. A reasonably balanced budget is a sign of a healthy economy, but you cannot manipulate that sign in order to achieve a healthy economy. A causal understanding of the determinants of budget deficits demonstrates that, ironically, attempts to shrink budget deficits through cutting government expenditure only serve to increase those deficits when they hold back employment and pay across the economy. This is because government expenditure is an effective lever when it comes to determining the health of the economy. The IMF and the OBR both underestimated this power of government expenditure on the economy when they underestimated the negative multiplier effect of cutting capital expenditure at the beginning of the last parliament, and they both have since acknowledged this fact. On the revenue side, it is natural for welfare expenditure to go up in a recession and down once economic health is restored. Again, the direction of causation runs from economic health to indicators of that health, such as lower spending on unemployment benefit.
It is a sign of the power of the rhetoric of austerity that clear empirical evidence showing its failure can be deflected and buried. It is another sign of the power of the rhetoric of austerity - and it is the final irony - that the politicians who preach it the most do not practise what they preach. Osborne got nowhere close to the fiscal consolidation that he claimed necessary for our country, judging, correctly, that such action would devastate the economy. He drew – and draws - on the logic of austerity as a cover for the wreaking of a public sector to which he is ideologically opposed. Last time round Osborne could hide his duplicity behind the fig-leaf argument of Liberal Democrats scuppering his true desires. What will happen this time is anybody's guess.
When the economy is not strong, the last thing people need is further economic vandalism and social division. But until we effectively challenge the rhetoric of austerity, it will always be the conservatives who win in times of economic fear. You cannot persuade people of the flaws of the inner logic of austerity by offering “austerity-lite” or “diet-austerity”. This simply concedes the very premise that requires logically demolishing once and for all.
Cllr Jennifer Churchill is Liberal Democrat Finance Spokesperson, LB Richmond upon Thames. She is currently undertaking a Phd in economics at SOAS, university of London