If neo-liberalism is bust, what next?
March 6th, 2010This is a funny old election. Both the main political parties are focusing on one central issue (how far and how fast the budget deficit should be cut) when that is the wrong policy and the right policy is being rejected out of hand. At the same time what should clearly be the central focus of this election doesn’t even get a serious mention.
Cutting public spending, whether drastically or sensitively and straightaway or a bit later, is not the right policy when the ‘recovery’ is so precarious and particularly when the deep recession is mainly due, not to the bank bail-outs, but to the collapse in private investment. That investment, especially in housing and private transport equipment (buses, trains, cars, etc.), had already fallen spectacularly by 15% between the first quarter of 2007 and the second quarter of 2008, before the financial crash of September 2008. The banking failures, which then exacerbated the collapse in lending to businesses and homeowners from a healthy 20% a year growth at the start of 2007 to nil or negative two years later, compounded an already dramatic fall in private investment. (more…)
