The Null Device
The International Monetary Fund has, once again, warned Britain's government to ease back on its austerity policy, or risk driving Britain into a triple-dip recession. The government has replied with a statement defending its approach.
Meanwhile, researchers have found serious flaws in an economics paper used to justify austerity policies and the prioritisation of cutting debt at all costs. The paper, Growth In A Time Of Debt, which argues that high public debt stifles economic growth, and which has been a favourite of neoliberals and small-state libertarians, was found to have flaws including selective inclusion of data, unusual weighting of years studied, and a coding flaw in an Excel spreadsheet; when corrected, the data produced does not yield the same conclusions:
This error is needed to get the results they published, and it would go a long way to explaining why it has been impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.So, if it does turn out that austerity policies are based on a spreadsheet error, does that mean that we can expect a contrite George Osborne to quickly change course? Of course not; the revelation that austerity is based on junk economics will have no more effect than what we've already known, such that Britain's current public debt is historically quite modest, because austerity never was purely about economic pragmatism, but rather about principle; the principle being “this money does not belong to you”, with the explanation being “because we say so”. Which is why, for example, the government has £10m to give Margaret Thatcher a state funeral in all but name (“we can afford it”), whilst cutting £11.6 from the arts budget, closing public libraries and slashing benefits. The principle is why the government has introduced a “bedroom tax”, cutting the benefits of those deemed to have a spare bedroom, despite the lack of suitably cramped accommodation they could move to (especially in economically depressed areas in the north). There is no economic benefit from this, but it has the moral benefit in the eyes of the Tories and the Daily Mail-reading public of punishing the unworthy poor. And punishing freeloaders is a good in itself, worth doing even if it costs us to do so.
Even if there was no recession, if government coffers were flush with cash, spending money on the public good would be immoral. In Australia, where the economy escaped the recession and is carried aloft on a mining boom, there still is no money for public infrastructure, to the point where recent secondary education reforms had to be funded by massive cuts to the university sector. There is plenty of money, but it belongs not to the little people, but the mining oligarchs, whose sense of property rights does not extend to them rejecting billions of dollars of diesel fuel subsidies paid for by the taxpayer. Needless to say, there is no money for things like modern internet infrastructure or public transport, to say nothing of things like the high-speed railway line between Melbourne and Sydney (the two endpoints of the second busiest passenger air route in the world) for which studies have recently been published. Where there is money left over, it is handed back as tax rebates to middle-class households in outer suburban electorates, where it can do the most good electorally for the government.
The libertarian myth that the economically prudent state is the minimal “nightwatchman state”–enforcing contract law, punishing freeloaders and otherwise keeping its hands off—doesn't bear out in reality, where prior investment and planning are often more prudent than leaving things to the wisdom of the free market. We have seen this in the United States' health care system, where costs are several times higher than in the supposedly inefficient socialised health care systems of socialist Europe (which is not counting externalities, from lower life expectancies and more chronic illnesses to people staying in less than ideal jobs out of fear of losing their health insurance), and in previous attempts to reduce public spending by cutting welfare (at least when the sainted Margaret Thatcher did so in the 1980s). Anyone who has had to commute in a city organised according to laissez-faire let-them-drive-cars principles, at least once it gets beyond a certain level of density, will know that it doesn't work; which is why even neoliberal London and New York spend billions on public transport facilities, which are used with almost Scandinavian egalitarianism by everybody from beggars to bankers. And, in a decade's time, it's not unlikely that the gutting of Britain's social infrastructure will end up costing more, as more people fall through the cracks; some will be picked up by a swelling prison system, as happens across the Atlantic, while others will subsist in dismal conditions, out of sight and out of mind of the people who matter.