Deconstructing Austerity II. Jobs

Aside from fallacious claims about reducing the national debt, the Conservatives' second claim to economic success--the creation of millions of private sector jobs--is also requires exploration. The well-rehearsed argument goes that massive cuts to public spending are not problematic since the private sector will take up the slack and create jobs to replace those lost in the public sector. There are several sleights of hand say that require unpicking in this part of the austerity narrative.

First it is important to note that the statistics tell us something about the quantity of jobs but nothing about the quality of those jobs, an argument made cogently by the TUC. A job as a nurse or an administrator in a public-sector setting is likely to be a unionised job with a nationally negotiated rate of pay and decent terms and conditions. The sort of job being generated in the private sector is much more likely to be an unskilled, poor-quality job with low pay. These jobs will do nothing to help with the standard-of-living crisis and will also not contribute to rebuilding a flourishing economy even in conventional terms.

The political narrative behind these arguments about the substitution of private for public jobs is the inability of the public sector to create wealth: an important part of the Conservative attack on the public sector (and devastatingly critiqued in an earlier blog!). So it is important to realise that many of the 'new' private sector jobs are actually simply redefined public-sector jobs. My job is a good example. Two years ago I worked in the public sector but now I work in the private sector. Because universities were privatised and are no longer funded from taxation, my job is now one that creates value whereas previously I was a parasite on the taxpayer. The same also applies to those who work in privatised sections of the health service or in services that are increasingly being outsourced from public sector employers such as schools and hospitals. (The Guardian has carried out some preliminary work unpicking this tissue of statistical manipulation.)

Finally, we need to ask what is a job? The data are most often used by Tories in claiming credit for this economic miracle are aggregated data based on everything that counts as a job. Incredibly even people working on zero-hours contracts are included in these figures as are those who are on any type of work scheme. So you don't actually have to be working to be counted in the government's jobs figures. Any government spokesman who presents data on increases in jobs without relating these two full-time equivalent jobs is, if not a liar, at least being very economical with the truth.

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Deconstructing Austerity I. Money

The narrative of austerity as proposed by Osborne and his cronies is that our huge national debt is the responsibility of feckless Labour politicians and their uncontrolled spending. An examination of the data from the Debt Management Office shows clearly that this is nonsense (this is shown in the graphic and discussed in more detail in my paper 'Who Owes Whom?'). The many billions that were spent as an emergency to prop up failing banks and prevent the financial system from crashing are the real explanation for the huge increase in the public debt. Osborne is a liar by omission because he will not discuss whether he would seriously have refused to invest this money and allow cashpoints to seize up.

 

The reality is that under Osborne far more money has been poured into preventing the cardiac arrest of the economy that results from a lack of circulating money. This is the money created through quantitative easing and the difference between it and what was spent by Darling during the crisis is that the QE money was direct credit creation whereas the money spent by Darling was generated through the sale of bonds and hence features in our national debt.

Since 2009 £375 billion has been created directly by the Bank of England and poured into financial institutions. They have greedily hoovered up this money and paid it to shareholders as well as improving their balance sheet position. They have barely loaned any of it to businesses or invested it in the economy, although the government could have used it for such direct investment, as I argued at the time. This explains why the wealthy and those with interests in finance are flourishing while the rest of us are suffering austerity. The £80 billion created for Funding for Lending has similarly not resulted in an increase in debt and has also been kidnapped by the banks rather than being fed into the real economy.

The Treasury bonds that were bought during the quantitative easing programme are still sitting inside the Bank of England presumably with a big label saying 'do not touch'. If they were to be cancelled, which they could be since they are IOUs issued on our behalf, nearly a third of our national debt would be wiped out in an instant. What a marvellous way of reducing the burden of austerity - or not depending on your political objectives.

These are political choices and hence the narrative of austerity politics that there is no alternative is simply a lie. Darling could have created money directly to save the banks; Osborne could create money directly now for investment in a renewable energy transition. Darling's unwillingness to resort to direct credit creation in the early days is hard to fathom and perhaps resulted from a failure of understanding. Osborne's refusal now to engage in any type of monetary policy that would assist the real economy is a consequence of his desire to use the financial crisis to achieve his long-term policy goal of destroying the public sector.

Almost without challenge Osborne portrays himself as the saviour of the economy while Cameron claims deceitfully to have reduced the debt. The national debt is of course still increasing (see the Spectator graphic) and while the deficit is slightly decreasing we're way off Osborne's original projections. However, this is all smoke and mirrors since the Conservatives have no intention and no desire of reducing the national debt: it's far too useful to them politically.

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