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Minus 0.2 percent! Cameron can run but he can’t hide

Cameron’s seeking to explain away yesterday that the national economy was now shrinking by 0.2% in the last quarter of 2011 won’t wash. He blamed high inflation, Labour ‘mismanagement’ and the eurozone problems. High inflation is irrelevant to a contraction of national output which is clearly down to lack of demand because of squeezed incomes. So far from Labour mismanagement being the cause, it was Labour relaunching growth in the first half of 2010 after the deep slump of 2008-9 that produced an economy growing at more than 1% a year in the second half of 2010, which Tory austerity managed first to flatline through the first half of 2011 and then actually to contract at the end of 2011. As for the eurozone crisis last summer, the UK economy was already falling into decline up to a year previously. Cameron’s points are all bogus.

Cameron-Osborne are desperate for growth, so what has happened to all their attempts to kickstart it? They chopped back the public sector because private sector jobs would rapidly step into the breach. In fact for every 13 jobs lost in the public sector, only 1 has been created in the private sector – for the very obvious reason (to all except perhaps them) that when demand is faling private companies are understandably reluctant to invest and take on more workers. Then the weak pound, already 25% devalued compared with 2 years ago and now having slipped further against the dollar from $1.6 to $1.55 over recent months, was supposed to prompt an export-led recovery. Amid the global slowdown it failed utterly to do so, such that the deficit in traded goods in 2011 may show very little improvement on the all-time worst record of a £100bn deficit in 2010.

Then Osborn was reduced to serving up himself what he had previously denounced against the Labour Government as “the final resort of governments when all else has failed”, namely quantitative easing to the tune of £75bn to jerk an inert and singking economy into life. It was his final resort, and it has failed totally. Then we were told in the March 2011 budget that the “march of the makers” was under way. Yet in the last quarter of 2011, only 6-9 months later, factory output fell by as much as 0.9% and constuction activity by 0.5%. The makers didn’t march: they retrenched with a loss of 395,000 jobs in manufacturing since the recession.

This is a catalogue of unmitigated failure. Government policy is finally reaching a dead end. Another round of QE is fabricating further useless money after other useless money. Counting on the eurozone to sort itself out sustainably after Merkel’s uncompromising obsession today with further austerity is whistling in the wind. The truth is, as many of us have been saying for years now, it’s jobs or bust.

One Comment

  1. P SPENCE says:

    Why are the ruling class in the UK and across Europe beholden to a neoliberal dogma which has so catastrophically failed? Because it serves their interests. Capitalism is a system based on the exploitation of workers by those who own private property and the means of production. To maintain the system of expoitation (profit) always requires sacrifice by workers: wages fall, work rate is intensified, benefits cut. Ultimately this is self defeating unless the profit system can expand into virgin territory: geographically, temporally ( the credit system), or technologically.

    The prospects for growth are presently unpromising. If debt is managed down over the next 5-10 years it does not follow that growth will return: the credit bubble of the noughties was a reflection of the system exhausting its self out in terms of a productive economy based on profit. Such bubbles serve simply to disposses the gullible and unlucky without generating wealth. Capital is in a sense eating its self: the main barrier to Capital becomes Capital itself and becomes terminal once it matures in to an all enveloping World system, as now seems the case. If correct, this must mean that the ruling class have increasingly limited room for manoeuvre and that their interests will be seen to conflict ever more with the majority who they must exploit. In the medium term their political position can only weaken and new Left movements come to the fore. Presently the Labour leadership have thrown their lot in with the neoliberals. This is a grave error.

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