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The Cam&Os Show: Dependable Dave and Honest George
delivering on their promise to ruin the economy.
Cameron, Osborne, pray for rain*
[*In 1948, the baseball Boston Braves won the National League title with only two competent pitchers, Warren Spahn and Johnny Sain. Baseball is not played in the rain. Thus was born one of most famous US sports jingles, "Spahn, Sain, pray for rain".]
It is rare for a politician to deliver on a major promise to the public, especially when achieving it is exceedingly difficult. In Britain this distinction has been gained by not one, but two politicians simultaneously. David Cameroon and George Osborne promised us a difficult and painful recovery. They have delivered it beyond our expectations, no recovery at all. To give credit where it is due, they did have help from a royal wedding, the tsunami in Japan, and, of course, sunshine (I am not making this sunshine effect up, see Office for National Statistics (ONS), http://www.statistics.gov.uk/cci/nugget.asp?id=192). To their misfortune, the third quarter has so far been quite rainy, sugggesting favorable natural conditions for recovery to counter their best efforts.
The headlines on Tuesday (26 July) were unkind and misleading, distorting and minimizing the achievements of Cam&Os. These claimed that the economy had increased by a robust 0.2 percent (The Guardian should be singled out for this mendacious slander). The ONS was crystal clear in demonstrating the true scale of the achievement, and I quote (bold in original), "Total production output decreased 1.4 per cent in the second quarter of 2011, compared with a decrease of 0.1 per cent in the previous quarter" (same source as above).
All of the relevant indicators sang the praises of the Cam&Os achievements: manufacturing down 0.3 percent; mining and quarrying by minus 6.6; electricity, gas, and water sub-zero by 3.2 percent; and agriculture, forestry and fishing minus 1.3. The public sector at least did not undermine the ruination by making things better ("flat-lining" at 0.0%). Failing to hold up the side was the financial sector, whose robust growth resulted in expansion of services of a full 0.5%. But, hey, the financial sector does not produce anything, and if it find ways of making a profit when production is falling is that Cam&Os's fault?
The Achievement in Perspective
You may be dismissive of the Cam&Os achievements because you think most countries are falling into economic ruin, so why should they get praise? This is completely false, though few of supporters or critics point out just how impressive the Cam&Os ruination of the UK is by global comparison. It would not be fair to make comparisons to China, India, Brazil and other countries where the governments are making no effort to ruin their economies (doing quite the contrary!). I compare the UK to three countries where the governments are also doing a credible job to prevent growth, the USA, France and Germany.
The graphic below shows that the efforts of these governments have been pathetic by comparison to Cam&Os. All have recovered to the previous peak GDP (in 2008), and will have a hard job of it achieving a credible degree of stagnation this year, much less decline. It could even be argued that one, Germany, is in the throes of recovery. In contrast, Cam&Os can point to an economy that under their management remains four percentage points below its peak in early 2008; that has enjoyed declining per capita income for three consecutive quarters; and with perseverance will stay below the 2008 level for the life of this parliament.
This Coalition is not for growing
Index of quarterly GDP, UK, USA, France & Germany, 2008-2011
Dealing with the Deficit
Cam&Os have repeatedly warned the British public of the economic disaster that would result should the fiscal deficit not be reduced. I can confidently conclude that they are performing well on that front, with the deficit very likely to increase under their watch. These lads are not ones to things by half.
The graphic shows a clear relationship between the UK overall public sector deficit and the rate of GDP growth (for the statistically inclined, the box provides relevant details). This a relationship easily derived with a bit of algebra, at which Cam&Os, being Oxbridge lads, might not be conversant.
Increases in the growth rate raise tax revenue as household and business incomes rise. Higher growth also reduces components of public transfers, such as unemployment payments. The collapse of growth during 2008-10 brought the deficit from the range of +4 to -4 previously to minus double digits. Now, if Cam&Os can successfully drive the growth rate back down to minus five percent or below, catastrophe is within their grasp. Though it would be unprecedented, they are fully capable of it and on track to do so.
UK annual Overall Public Sector Deficit and GPD growth, 1998-2010
Source: OECD standardized statistics.
An Alternative to the Cam&Os Madness
Along with Michael Burke and George Irvin, I have recently written an e-pamphlet demonstrating among other things that the UK deficit is not, in fact, very large when properly understood (A Brighter Vision for Britain). This implies that the quixotic deficit cutting of the Coalition government is not only criminal in its human impact, but also unnecessary.
In a brilliant short story by Gabriel Garcia Marquez, "There Are No Thieves In This Town", the rather hapless subject of the story is caught in his act of theft. In one of those last lines for which Garcia Marquez is so famous, the thief is told, "you are worse than a criminal, you are a fool". David Cameroon and George Osborne's mismanagement of the UK economy qualifies them for both distinctions.
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