For many years I’ve been observing that Polly Toynbee doesn’t seem to be quite up with the basics of economics. Nowt has changed just recently. She’s still not grasped that current government spending is higher, as a proportion of the economy, than it ever was under her one-eyed Viking, Gordon Brown. Well, OK, many don’t understand that given all the screaming about austerity but a columnist in a national newspaper should be able to grasp the basics still, no?
Well, no, she can’t:
Bravo! Well done, Britain! It’s “a remarkable national effort,” gloats chief architect George Osborne, “we got there in the end”. Making his spring statement, chancellor Philip Hammond may allow himself a funereal glimmer of an almost smile. The current account deficit has been starved down to its 2% target. So easy! Any dieter determined to lose weight can just lop off their legs and, hey presto, the scales will say they made it. Swallowing tape-worms or emetic poisons will do it too. Easy if you ignore collateral damage, human suffering, irrecoverable losses and economic paralysis. Easy if your aim is ideological state-shrinkage.
Wherever you look, you see the harm. Some can be fixed: leaking school buildings, closed libraries, neglected parks and playgrounds. But too much is beyond repair. You can’t summon up the skills and deep experience of all the teachers, nurses, doctors, administrators and technicians who have not been trained and hired to fill the gaps. Hard to replace those who have burned out under unbearable pressure. What of the million public servants gone, as Whitehall frantically tries to hire lost expertise to cope with Brexit?
If someone had lopped vast sums off public spending perhaps she’d have a point. But they haven’t and she hasn’t. Here’s the truth:
As you can see, government spending as a proportion of GDP is currently, still that is, higher than any year of Gordon Brown’s Chancellorship.
It is possible to argue, as people like Simon Wren Lewis does, that spending should have been much higher during the slump, to the point that we’d be richer now and therefore able to spend more even if less as a portion. No, I don’t think that argument is right but it is possible to make it. Do note that along with that argument comes a very special meaning of “austerity.” Austerity is any level of government spending which does not head off that recession. If we’d been spending 60% of GDP through government and unemployment had still risen then that would have been austerity. No, that’s not my argument, that is SWL’s.
But even that still leaves Polly wrong, doesn’t it? We’ve not cut government spending in cash terms, we’ve not cut it in inflation adjusted terms since Gordon Brown’s day and we’ve not even cut it as a portion of GDP since Gordon Brown’s day. What we have done is exactly what Keynesian economics says we should do – blow out the deficit in the bad times then pull it back in as recovery occurs. Hey, maybe recovery isn’t complete but we’re most certainly not in the depths of a recession, are we?
But then Polly and economics:
Is this recovery? The chancellor is pleased his receipts will improve by £7bn-£11bn, higher than expected. Good for him. But until most people feel any extra coins in their pockets, it may count for little.
The Chancellor’s receipts going up is rather the definition of people having fewer coins in their pockets, isn’t it?