We’ve written before about how misguided a program of economic austerity is, and in particular how the fantasy of expansionary austerity doesn’t work in the real world. In both the UK and NZ recently elected tory governments have doomed their countries to years of austerity and cuts, and in both cases the results have been dismal. Now it looks like the Cameron’s government has woken up:
£140bn kiss of life for Britain
Chancellor and Bank of England in ‘panic’ bid to hand small firms and house-buyers cheap loans – but will this gamble kick-start the economy?
- Banks will be loaned money on condition they pass it on in the form of cheaper loans and mortgages
- Huge sum represents 1/5 of all Government spending
- Scheme aimed at limiting impact of ‘Eurozone debt storm’ which is blamed for raising the cost of lending
- Government will soon announce another initiative to underwrite tens of billions of pounds on spending on housing and infrastructure
So much for austerity. I’m no economist, but the package looks panicky and poorly designed to me. Housing and infrastructure is good – where is the education (reverse the cuts!), where is the research and development? Where is the green, sustainable investment? The main moves seem destined to just feed another housing bubble, surely we know by now where that ends. The UK Labour Party weighs in:
Throwing money at banks won’t solve economic crisis, Ed Balls says
Shadow chancellor says banking stimulus package announced by Osborne and King fails to address lack of confidence
Ed Balls has warned that an emergency multibillion-pound package to inject lending into the British economy still fails to address the lack of economic confidence and demand. … He said the measures announced on Thursday night at the Mansion House in London by the chancellor, George Osborne, and the bank’s governor, Mervyn King, should have been implemented two years ago and would not work if businesses were not investing.
So is it too little too late? Probably. But credit to Cameron’s government, they recognised (eventually) that austerity wasn’t working, they’ve ditched it, and they haven’t dithered with half measures. The impact of this package will be watched by the world.
Compare and contrast with our local Nats. They’ve given up on their economic programme too. You can see it in Bill English’s admission that (summarised) “The desired rebalancing of New Zealand’s economy has not been as sufficient as the government would like” and “the government expected its 2010 tax switch to be beneficial following a 5-7 year period” (yeah right). You can see it in John Key’s reaction to the Reserve Bank’s assessment, based on better data, that the economy will not grow as predicted in the budget, and we won’t achieve surplus by 2014/15. Key said “There is nothing different we would want to do at this time”. A total failure of leadership.
Austerity has failed in both the UK and NZ. But at least Cameron’s Conservatives have the wit to realise it, and the courage to act. Key and the Nats are capable of nothing but looking on as the economy spirals slowly down the gurgler…