Cameronomics are irredeemable

Has he learnt nothing?

A very unimpressive speech from David Cameron this morning and sad confirmation of the fact that the Tory leader wasn’t just saying all that nonsense about the economy before the election because he thought it would help him get elected – he actually believes it. 

Take this: “The global financial markets are no longer focussing simply on the financial position of the banks. They want to know that the governments that have supported the banks over the last 18 months are taking the actions to bring their own finances under control”. Well if that’s the case why can the UK borrow for 10 years at 3.48 per cent? The deficit clearly needs to come down over time. But where is the logic in, as Martin Wolf has brilliantly put it in “giving the markets what we think they may want in future – even though they show little sign of insisting on it now” ?

Cameron blames three unsustainable things for Britain’s boom and bust: our reliance on financial services, immigration and government spending.  But he makes no mention of private borrowing. His own Chancellor admitted in the February Mais lecture that “private sector debt was the cause of this crisis”. Cameron is going backwards.

Then there’s “while the private sector was shrinking, the public sector was continuing its inexorable expansion”. Giles Wilkes thy blog shoulds’t be living at this hour! As the Freethinking Economist pointed out on numerous occasions, the primary cause of the expansion of the public sector’s share of GDP after 2007 was the fact that the private sector got dramatically smaller and GDP growth expectations collapsed. There was no “inexorable expansion” of state spending and the discretionary fiscal stimulus was tiny  - the public sector simply did not cut itself back in tandem with the private sector. And thank goodness that it didn’t because that would have simply made the recession deeper.

The horror goes on:

“They argued that more spending would support the economy, conveniently forgetting that if you start with a large structural deficit, ramping up spending even further is likely to undermine confidence and investment, not encourage it”. Where is the evidence that levels of public spending are undermining business confidence?

“So while the cutbacks that are coming are unavoidable now they could have been avoided if the previous government had spent wisely instead of showering the public sector with cash at a time when everyone else in the country was tightening their belt”. So Keynes was entirely wrong. In a slump governments should tighten their belts too.

Cameron says, of deficit reduction, “We are not doing this because we want to, driven by theory or ideology”. But what he does not realise is that through his slanted analysis of the causes of the recession and his trashing of everything the last government did to counter it, “driven by ideology” is exactly what he reveals himself to be.

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