£325bn down the drain, still no growth

April 5th, 2012

It is maddening that the enormity of the real scandal in economic policy has been buried by the furore, justified as it certainly was, over Osborne giving away a £3bn tax cut to multi-millionaires paid for by a cut in tax allowances for 4 million pensioners.   That is certainly bad enough.   But it is far outweighed by the sheer magnitude of the ideological perversity – or wickedness, to use an old-fashioned word that is highly relevant in this context – of right-wing economic policy-making which is condemning both the UK and the Eurozone to years, or even perhaps decades, of avoidable austerity.   That policy is quantitative easing (QE), or its variant credit easing, in the UK and its Eurozone equivalent of long-term refinancing operations (LTRO).   What both these policies are based on is the idea that the way to get economies moving again is via monetary stimulus, if necessary on a colossal scale, rather than using government finance for direct investment in the economy and job creation.   The latter would be overwhelmingly more successful at generating jobs and stimulating growth, but is rejected because virulently right-wing governments in both the UK and Eurozone insist that economies must be exclusively private market-led and that the State should play no direct part in economic investment at all. (more…)