The same intellectual
retreat can be seen all over the western world and it shows that noble
intentions and half-decent ideas don't get you very far
The Greek crisis acted as a parable of
what happens when countries borrow too much. Photograph: Anne-Christine
Poujoulat/AFP/Getty Images
Remember all that talk about never letting a crisis go to waste?
All those frontbenchers – from across the political spectrum – who
swore that the banking crash would change economic policy for good?
Vince Cable and Alistair Darling traded their favourite bits of Keynes
and state intervention was firmly back in fashion. Well, you can rip up
those fine, fevered promises and stick them in the bin. That at least
is the big message out of last week's budget.
Oh, we all know what the papers reported: the granny tax, the kid gloves for the super-rich, and George Osborne's tin ear. But just as notable was what they didn't pick up: any meaningful dispute over the big picture. Labour's two Eds concentrated their attack on the chancellor for the fairness of his individual measures and kept schtum about the overall cuts strategy, of which they are only a small part.
The business lobby applauded the drop in corporation tax and the bungs for Grand Theft Auto and Richard Curtis (or, as they're officially known, relief for the British video games and film industries), but let the coalition off the hook on its promises to rebalance the economy.
How very different from Osborne's previous budgets. Over its first couple of years, Lib Dem wobbles and the European meltdown forced the coalition's austerity programme front and centre in political debate.
As for reform of Britain's listing economy, the strapline for last year's budget was that it would start "the march of the makers". Yet with the euro crisis temporarily on simmer, and the chancellor still clinging to his Plan A, the argument of ideas has gone all-but-silent.
Going by last week's squalls, what has replaced it is a giant scrap about who should lose most: OAPs or the young, the super-rich or welfare claimants.
As the cuts go deeper and further, and living standards remain depressed, this visceral battle of sectional interests will surely only escalate. Meanwhile, the political classes are busy getting back to business as usual. Last week's announcement of infrastructure privatisation suggests the new orthodoxy for Cameron and Osborne: when in doubt, Thatcherise it. As for the banks, where all this began, they are firmly back in charge. You know all about the bonuses, but even more telling is this underreported Treasury announcement from last week: the banks' miserliness with credit has forced Osborne to take £20bn of taxpayers' cash and use it for loans to small businesses. But wait for it: this money – your money – will be given to the same big banks to lend, with the minimum of public oversight. Take it from me: those last two sentences do not improve on rereading.
Blame Tory ideology, if you like, or Labour's failure to offer an alternative, but this is what those fervent avowals from MPs between 2008 and 2010 have given way to. As Old Whiskers might have said: all that is solid melts into hot air.
The same intellectual retreat can be seen throughout the Western world. John Quiggin, author of Zombie Economics, and political scientist Henry Farrell, have just published a fascinating paper charting how governments, central bankers and economists changed in the four years after Lehman's collapse from being "Keynesians in the fox hole" (as one Chicago academic put it) to merchants of austerity.
The tale Farrell and Quiggin tell is a simple, but compelling one. In autumn 2008, the policy-making establishment was in deep panic. The world they had constructed was collapsing around their ears, and ministers and economists had no idea how to respond. Amid this confusion, the long-marginalised followers of Keynes were able to win panicked international support for their economic-stimulus packages and reform of the financial sector. But no sooner had the global economy stabilised than governments and central bankers (led by Jean-Claude Trichet in the eurozone) returned to their old ways. They were urged on by the now-rescued and boisterous finance sector. And of course there was then the Greek crisis, offering a seemingly irresistible parable of what happened to countries that borrowed too much.
Never mind that the Greece story doesn't tell you much about any other country apart from Greece. Never mind that the principal argument of the Keynesians that you don't cut public spending amid a slump is as true now as in 2008. The conclusion one takes away from the past four years is that it wasn't the free-marketeers who were on the wrong side of history – it was all those good-hearted people punching the air and proclaiming the arrival of some progressive moment. The conclusion one takes away from Farrell and Quiggin's paper is that noble intentions and half-decent ideas don't take you very far. You need an adequate political vehicle, which Labour has plainly failed to provide, and some hard-headed analysis too.
Still, there's always the next crisis. And the failure to reform the economy pretty much guarantees that another one will come along.
Oh, we all know what the papers reported: the granny tax, the kid gloves for the super-rich, and George Osborne's tin ear. But just as notable was what they didn't pick up: any meaningful dispute over the big picture. Labour's two Eds concentrated their attack on the chancellor for the fairness of his individual measures and kept schtum about the overall cuts strategy, of which they are only a small part.
The business lobby applauded the drop in corporation tax and the bungs for Grand Theft Auto and Richard Curtis (or, as they're officially known, relief for the British video games and film industries), but let the coalition off the hook on its promises to rebalance the economy.
How very different from Osborne's previous budgets. Over its first couple of years, Lib Dem wobbles and the European meltdown forced the coalition's austerity programme front and centre in political debate.
As for reform of Britain's listing economy, the strapline for last year's budget was that it would start "the march of the makers". Yet with the euro crisis temporarily on simmer, and the chancellor still clinging to his Plan A, the argument of ideas has gone all-but-silent.
Going by last week's squalls, what has replaced it is a giant scrap about who should lose most: OAPs or the young, the super-rich or welfare claimants.
As the cuts go deeper and further, and living standards remain depressed, this visceral battle of sectional interests will surely only escalate. Meanwhile, the political classes are busy getting back to business as usual. Last week's announcement of infrastructure privatisation suggests the new orthodoxy for Cameron and Osborne: when in doubt, Thatcherise it. As for the banks, where all this began, they are firmly back in charge. You know all about the bonuses, but even more telling is this underreported Treasury announcement from last week: the banks' miserliness with credit has forced Osborne to take £20bn of taxpayers' cash and use it for loans to small businesses. But wait for it: this money – your money – will be given to the same big banks to lend, with the minimum of public oversight. Take it from me: those last two sentences do not improve on rereading.
Blame Tory ideology, if you like, or Labour's failure to offer an alternative, but this is what those fervent avowals from MPs between 2008 and 2010 have given way to. As Old Whiskers might have said: all that is solid melts into hot air.
The same intellectual retreat can be seen throughout the Western world. John Quiggin, author of Zombie Economics, and political scientist Henry Farrell, have just published a fascinating paper charting how governments, central bankers and economists changed in the four years after Lehman's collapse from being "Keynesians in the fox hole" (as one Chicago academic put it) to merchants of austerity.
The tale Farrell and Quiggin tell is a simple, but compelling one. In autumn 2008, the policy-making establishment was in deep panic. The world they had constructed was collapsing around their ears, and ministers and economists had no idea how to respond. Amid this confusion, the long-marginalised followers of Keynes were able to win panicked international support for their economic-stimulus packages and reform of the financial sector. But no sooner had the global economy stabilised than governments and central bankers (led by Jean-Claude Trichet in the eurozone) returned to their old ways. They were urged on by the now-rescued and boisterous finance sector. And of course there was then the Greek crisis, offering a seemingly irresistible parable of what happened to countries that borrowed too much.
Never mind that the Greece story doesn't tell you much about any other country apart from Greece. Never mind that the principal argument of the Keynesians that you don't cut public spending amid a slump is as true now as in 2008. The conclusion one takes away from the past four years is that it wasn't the free-marketeers who were on the wrong side of history – it was all those good-hearted people punching the air and proclaiming the arrival of some progressive moment. The conclusion one takes away from Farrell and Quiggin's paper is that noble intentions and half-decent ideas don't take you very far. You need an adequate political vehicle, which Labour has plainly failed to provide, and some hard-headed analysis too.
Still, there's always the next crisis. And the failure to reform the economy pretty much guarantees that another one will come along.