Saturday, 9 March 2013

The Economist backs Cable, but it's no lurch to the left!

Cable looks to the heavens for inspiration
In a further sign that Cameron and Osborne are losing economic credibility even among their own side ahead of the 2013 Budget, The Economist's editorial has come out in favour of Vince Cable's proposals which he outlined in the New Statesman earlier this week.

Although more clearly articulated, Cable's proposals and modest critique of Osborne's strategy are actually more right wing than what the two Eds' Labour Party is calling for. Call it 'austerity-lite-lite'. Vince has since been feted by many, including now the journal "read by more of the world's political and business leaders than any other magazine".

The Economist backs the case for extra borrowing, made by Cable:
"All in all, the present evidence does indeed – with qualifications – point to some weakness of domestic demand and a low risk of expansionary policies spilling over into significant domestically generated inflation."
As the editorial points out, "between 2009-10 and 2011-12 public-sector net investment plunged from £48.5 billion to £28 billion" a large part of the reason for the appalling construction figures.

However, like Cable, The Economist also advocates that some "expansionary policies" i.e. public investment, should be funded by cuts to pensioner benefits and that perennial punchbag, welfare. The Economist also supports Cable's call to remove the ringfence around NHS funding.

This highlights how Cable is still very much on the Orange Book wing of the Liberal Democrats. Austerity is failing, the markets are unhappy, and what Cable and The Economist reflect is the capitalist class scrabbling around for an ideologically compatible solution to the enduring slump.

The fact that the right is divided, and Cameron and Osborne increasingly isolated, is reason for joy, but Labour and the trade union movement should not be taking sides in this internecine squabble.

Instead the struggle goes on to stop austerity in its tracks - not simply find another route for it to get to the same destination.

The left should take some encouragement however that its analysis is being proved right and that the right is having to adopt some of our proposals. In the case of The Economist both for more borrowing to invest, and - surprisingly - for a Land Value Tax:
"One reason why companies sit on development land is because they do not pay taxes until the offices and warehouses are built. It would be much better to tax the land value: that would make hoarding expensive and force owners to sell to someone who can use the site. Once in use, the site value and the tax would rise—creating a virtuous circle, as the revenues pay for better infrastructure, making land more valuable."

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