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This isn’t the end of austerity – it’s a new age of cruelty economics

Consensus seems to have shifted, but austerity is far from over. The chancellor has committed us to yet more years of misery while the rich get richer, writes Richard Seymour.

December 1, 2017
8 min read

After seven years of sadism, Tory MPs are finally uttering the safe word. Several cabinet ministers have pleaded for the chancellor to end the public sector pay cap. Nick Boles, a  cabinet minister and former austerity fanboy, argues for a strategy of investment and wage increases. Surely this would prompt the minister to listen, to relent?

Gone are the days when George Osborne, with pup-like enthusiasm, harnessed popular sadism for his austerity project. With Labour a shell-shocked shambles, barely daring to air a grievance, let alone mount an opposition, the Tories could do what they wanted provided they punished someone for the pain of the credit crunch. And so, Gideon giddily dished it out to single mothers, the disabled, pampered public sector workers, rent-payers and local government. Public sector workers were a potentially tougher opponent, but union leaders calculated that they didn’t have the clout for a real fight, and that they wouldn’t get a much better deal from a Labour government.

In fact, Osbornite austerity was more subtle than it pretended to be. For all that the chancellor gleefully brandished the axe, he also built in targeted incentives. Loading the costs onto the poorest, most reviled and least politically mobilised, he also looked after homeowners, and small businesses. Protecting the City and property oligarchs, he also protected middle income earners dependent on debt and speculation for part of their income.

It wasn’t about creating a small state. When Osborne quit last year, the state was 42% of GDP, compared to 41% in 2007, and 36% in 1999. Under the rubric of shrinking the state, the Tories transformed it. They opened public services to privileged sectors of capital. The Treasury became more entwined with the City. The shift from welfare to workfare was accelerated. Higher education was commodified. Most of these reforms were not about saving money. They were about modernising the state further along neoliberal lines, however dysfunctionally.

Those bullish, Bullingdon days of austerity capitalism had already reached their zenith when the Tories won a majority in the 2015 general election. Two events signalled the collapse of the Osbornite centre from that point. From the left, the landslide election of Jeremy Corbyn as Labour leader, and the immediate windfall of an ideologically uncompromising opposition to austerity. From the right, the narrow vote for Brexit, enabled by an odd class coalition between the Tory-voting Southerners and rustbelt workers.

The latter, though immediately more of a crisis for Labour, has turned out to be something of a monkey’s paw for the Conservative Party, forcing open a huge strategic dilemma about the future of British capitalism. If austerity protected the City’s dominance, Brexit would likely entail the break-up of the financial centre, with parts of it moving to Paris and elsewhere. And with the end to free trade with the European Union came slower growth. In this context, continuing austerity would be self-sabotage. Osborne’s last act as chancellor, following the Brexit blitz, was to declare an end to his “fiscal rule” and admit that the budget would not be in surplus by the end of the parliament.

And yet, what other plan did the Tories have? Some unavailing pipe-dreams about striking a series of money-spinning deals with the Commonwealth aside, the only alternative to come forward thus far has been to turn to bargain basement capitalism, with huge corporate tax cuts, shredded regulations and rock bottom pay as competitive advantages against Europe.

 

So, with the gravity of a Victorian undertaker, Philip Hammond has attempted to conserve Osborne’s agenda and aimed for a soft Brexit. Initially, it seemed he had come to bury Osborne, rather than praise him. The “budgetary rules” were over, he announced. But over the last year, he has proved to be Continuity Osborne. And notwithstanding May’s nationalist pitch to working class voters, the Conservative manifesto in 2017 was conventionally austerian. Even as Tory insider research warned them that anger over austerity would cost them, they reposed their faith in the old verities: someone like Corbyn could only be a disaster, and the abstractions of nationalism would always mean more than the concrete experiences of class.

One would think that the election result would change things. But that would be to imply that the Tories have a coherent strategy other than clinging on at this point. It was assumed by reporters that his begrudging genuflections to public opinion were hinting at an end to austerity, but the substance of what he said made it clear that no such thing was happening. Hammond continued to bang the tired old drum, bashing Corbyn’s policies as “Marxist”. And while cabinet colleagues pleaded for a public sector pay rise, Hammond stuck firm to his position that they are overpaid.  

And so, we come to the November budget. In a budget that announced very little, Hammond quietly preserved the major austerity measures in place, including £12bn welfare cuts. He concealed a long-term cut in NHS spending, exacerbating a major fiscal crisis for most NHS Trusts and emergency hospitals, behind £2.8bn extra funding offered for frontline services. The budget did nothing on public sector pay, which means that it continues to be cut in real terms. It nothing on VAT and other regressive taxes. It did next-to-nothing on education, and offered a miserly sum of £125m to mitigate soaring rents for those at the very bottom. The ‘living wage’ was moderately increased, but remains well below the actual living wage. It made the usual hollow noises on tax evasion, pledged a couple of billion for research and development, which will in all likelihood be used to fund investments that already have taken place. The chancellor has pledged to fund the building of 300,000 new homes a year by the mid-2020s, but will do nothing to reform the housing market, so the problem of too few affordable homes will persist.

Continuity Osbornism, in this situation, means crisis. The OBR’s figures show that the UK will not come close to 2% GDP growth over the next three years. Productivity is flatlining. There is no chance of a balanced budget by the mid-2020s. The Institute of Fiscal studies expects the national debt not to return to pre-crisis share of national income until “well past the 2060s.” The living standards crisis goes on: according to the Resolution Foundation, pay is now not expected to recover to its pre-crisis peak until 2025, “a full 17 years after the pay squeeze began.

The lack of ambition is almost comical. A major, once-in-a-lifetime strategic challenge for British capitalism, requiring major reforms, and this hopeless cushion is the best the chancellor could do. A life-threatening, generational challenge for the Conservative Party, and he offers young railcards for 26-30 year olds. Any competent right-technocrat could have taken the Nick Boles line, and implemented a Tory version of Corbyn’s agenda. It would require borrowing to invest, raising pay, boosting manufacturing, and reforming the housing market – even at some cost to core Tory voters.

Historically, as the major party of British capitalism, the Conservatives have always been able to see out a crisis by stealing the enemy’s clothes. Now, stuck between failed austerians and fantasy Brexiteers, their stalemate is astonishing. And potentially lethal.


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