The evidence that prolonged austerity has failed is now overwhelming. The economy is experiencing the slowest and feeblest recovery from slump on record, and the longest depression since 1873. The double-dip recession is extending into a long contraction with no plausible scenario of growth in sight. Manufacturing, which initially rallied in 2010, then slipped slowly over the next year, has now begun a precipitous fall, with the PMI index down a catastrophic 7 points in the last quarter. Companies which have hitherto wisely opted to retain their workforces intact as far as feasible in the hope of an upturn, are now likely to begin discarding workers on a large scale on the grounds that the cost of keeping them under-employed is now becoming prohibitive. Unemployment, which had reached the very high level of 2.7 million but then eased slightly down to 2.6 million, is likely over this next year on unaltered policies – to pass the crfitical 3 million mark. The question is: how can this insanity be stopped?
There are a number of options, but all almost certain to blocked. The most obvious and best one is that the government decides in the face of utterly compelling evidence to change course and go for Plan B. It is however a racing certainty that they won’t, partly because of politicians’ vanity and fear of loss of face, but mainly because the Tory ideologues (with Osborne to the fore) are determined to carry through to the end what they have been itching to do ever since the 1950s – to abolish the welfare state and shrink the public sector to minimalist proportions, and they see the cutbacks after the financial crash as their one-and-only chance to go for broke.
A second option is to use the next tranche of quantitative easing, which is clearly now in the offing, not by putting the £50bn or so into the banking system where once again it will be swallowed up by the banks in consolidating their fragile balance sheets rather than in lending to industry, but by directly investing in house-building and improving national infrastructure that is sorely needed. But the government won’t do this either because of their ideological fixation that all recovery must be driven by the private sector and using the public sector for this purpose is anathema.
The third option is taxing the ultra-rich to raise the funds to launch this jobs and growth strategy. But the government rules that out too: Tories would never tax the ultra-rich (their class) in that way, and again the public sector as the instigator of growth is simply out of bounds.
Then there is the option of riots. The victims of the bankers’ ramp, the mass of the population including the middle class but particularly the poorest sections of society, may decide that enough is enough and lead a rebellion – the indignados of London and the other big cities. It may happen.
The only other option is a national referendum on whether there is popular consent to the continued pursuit of extremist and doomed policies. There is such a referendum, or recall, now being launched against the US Tea Party governor of Wisconsin for his abolition of collective bargaining rights and cutbacks in health and pension entitlements, which could quite possibly succeed in bringing him down. Luckily for Osborne there’s no such option available here – yet.