Across Europe voters – the people – are reacting against the harsh measures their leaders have decreed are essential for their economic survival. Elections in France and Greece have not shown simply that people have stuck their heads in the sand and refused to face the inevitable, as some commentators have suggested. People voted against commitments made on their behalf to a Eurozone austerity death spiral, in which low or no growth leads to more spending cuts and so flirtation with recession. It should not surprise us that the scale of the promised cuts has left Balkan voters baulking, but at a deeper level people are delivering a verdict on the prevailing economic orthodoxy which has so captured the hearts and minds of those in power.
This is where the debate about austerity versus growth has arrived. We see it in the UK too. The Tory-Lib Dem government is cutting too far and too fast, as Labour maintains. Moreover, the majority of the cuts have yet to come; last year the government focused on cutting capital spending but this year current spending will be targeted. By reining back government spending before the economy has time to recover the return to growth has been threatened. Indeed, we have yet to really see a recovery, beyond the growth which ran out of momentum after the general election. However, the debate about our economic future cannot simply sit here while we argue about just how much austerity we need and how we can promote growth (though it would be nice if the government actually did something about growth).
The financial crisis was born in large part by inequality in the US with a super-elite at one end of the scale and at the other people on low incomes who became increasingly indebted until that debt blew apart the global financial system. The crisis did not begin in the UK but at the end we were beginning to mirror the US experience. We live now with legacy of a rising inequality of incomes which began in the 1980s and which Labour struggled, sometimes successfully, to resist. If we want to sound credible on economic policy, and if we want to speak with integrity, we need to say how the economy should be different in future. It is not enough to be credible with bond market investors, though they need to be convinced that our economics is sound. It is not enough to rely on having a better growth plan. To be credible with people we need to show how things really will be different in future. When the economy does recover, will it simply be a wounded pre-2008 version or something better?
When banks were sucked into whirlpools of their own creation during the financial crisis, even City people realised that the system needed to be changed. That mood seems to have changed but wise heads in the financial sector still worry. The Occupy demonstrations were a surprise only because of their small scale and delayed arrival. Some people have buried their heads in the sand, however. The belated shareholder revolt against excessive executive pay has highlighted again divisions in our country. Some remuneration committee chairs seem to believe the real problem is with society, rather than the vast awards they give to their colleagues, paid from pension fund members’ shareholders funds.
Our market economy needs to work better, and work for everyone. In this aim Labour can even join forces with the genuine ‘big society’ believers ignored by David Cameron. A general rule is that things go wrong when relationships have broken down somewhere. Better, deeper, relationships lead us in the right direction. Shareholders could have deeper relationships with companies, company directors with employees, residents with their local councils, and so on. On a macro scale, government could have a better relationship with the people it serves, and foremost on economic policy.
The mood we see growing across Europe suggests the financial crisis both exposed and exacerbated a breakdown in relationships. The Christian Socialist thinker RH Tawney believed democracy was unstable unless it ran throughout society. For that to happen, special privilege had to be eliminated and economic power had to be dispersed. Not bad aims for today.
This article was first published on the Progress website on 10 May 2012, the day of the Christian Socialist Movement's annual Tawney Dialogue.
Progress, 10 May 2012, 16/05/2012
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