Forget the bluster, the spin, the deflection of blame. Forget the bleat that “there is no money”. Forget the “fake metrics“. Forget “the plan to ensure we keep Britain safe from the sovereign debt crisis“.
This Autumn Statement represents a welcome, if still inadequate, u-turn.
Underlying all the carrots and sticks is the Treasury’s frank admission of error, the Bank of England’s £75 billion (with a promise of more to come), and a frantic volte-face.
Of course, the Chancellor has had to disguise his about-turn by dressing it up as austerity, but he has dramatically relaxed fiscal consolidation — even though public finances are, by his own admission, in far worse condition than they were just six months ago.
The Autumn Statement goes some way to acknowledging the cause of the rise in government debt and of turmoil in markets, noting that there was in the UK “the greatest expansion in debt of all the world’s major economies over the last decade” and that “the full scale and persistence of that impact is slowly becoming clearer.”
But while Treasury orthodoxy is finally “becoming clearer” about the scale of the crisis — one deepened by synchronised austerity — the Chancellor seems unable to learn the lessons and fully reverse course. While acknowledging that “the financial sector has acted as a drag on growth,” the Chancellor today promised to ensure Britain “remains the home of global banks and that London is the world’s pre-eminent financial centre“.
In other words, the government is committed to subsidising, bailing out and rewarding the City of London — at grave cost to public sector workers, pensioners and private firms. Their analysis, reactions and policies to this crisis remain profoundly inadequate.
For make no mistake, we stand at a pivotal moment in world history, and today our politicians and economic authorities are revealed to be disgracefully ill-prepared for it.
We remind them again: Britain is not facing a sovereign debt crisis. This is not a eurozone crisis. It is a private banking crisis: the catastrophic unravelling of the private, liberalised financial system. Governments, including our own, are not the cause of turmoil: they are victims of the turmoil in private financial markets — in the City of London, “home to global banks”.
The unregulated financial sector has lent recklessly and expensively for some thirty years to itself, to firms and to households. As a result, private indebtedness — as both the Autumn Statement and the McKinsey Global Institute carefully document — is at its highest as a share of income ever in history.
The unfolding and related crisis of sovereign debt is a consequence; the result of four years of futile attempts by western governments to maintain, compensate and support this bankrupt system. Osborne, in his statement today, persists in his backing of this failed order.
As rising unemployment, falling incomes and despair begins to crush western societies; as “indignants” in Britain, Europe and the US lead protests against more cuts in pay and pensions and are brutally assaulted by police for their pains, we are confronted by a frightening reality.
Our leaders and their advisers simply cannot absorb the lessons of the crisis. As a result they have abrogated any responsibility to lead. Instead, they struggle manfully to maintain and uphold the old, catastrophic financial system — and are incapable of constructing a new, global order.
The resulting policy vacuum is frightening. No wonder the Polish foreign minister warns of “a crisis of apocalyptic proportions”.
Ann Pettifor is executive director of Advocacy International and a fellow of the New Economics Foundation
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