The academic case for austerity crumbles… but it won't change anything
So, it turns out that one of the main academic papers used to justify the government’s massive cuts is wrong. I mean, not in the ‘some academics think it’s wrong, others think it’s right, it’s all really complex’ type way. In the ‘they forgot to copy and paste the right formula all the way down the excel spread sheet, and so their data is totally skewed’ type wrong.
The paper is the one which argues that, if you have more than a 90% debt:GDP ratio as a government, then you’re likely to have lower growth. Turns out, they got their data totally wrong. Oops. Economists the world over have gone crazy.
Danny Blanchflower, anti-cuts economist, has said on twitter that he spent his evening going through George Osborne’s speeches finding references to this paper. Apparently there are lots and lots. Paul Krugman (Nobel prize winning, other anti-austerity economist) describes it as 1/2 of the intellectual edifice of austerity. (The other half is already discredited by IMF data, he says).
So, just to spell it out, the main argument that cutting spending would help the economy grow (if that’s your aim) turns out to have been based on someone failing to use excel properly. So the main argument justifying the massive cuts to public spending ruining the lives of huge swathes of the human population the world over is based on a copy-paste error.
But here’s the scary thing. This doesn’t matter at all. Or, at least, it barely matters at all. Even with that one paper, there was never a strong case for vast cuts to public spending. The reason for austerity wasn’t to save the economy, it was to transform it into one run even more by the very rich, for the very rich.
And, in those terms, austerity is working brilliantly. The very rich have, in the last couple of years, all over the world, got much, much richer.
So, whilst it’s fun to learn that the right-wing economic argument de jour is farcically flawed, the joke isn’t on them. It’s on us. Because those of us who have always argued against cuts are obviously right. But we’re still losing. And that’s because history isn’t determined by who wins an intellectual debate. It’s determined by who has the power.
So, over the next few months, watch as George Osborne ignores that his intellectual justification has disappeared in a data error, and continues to use his control of the economy to hand wealth to the wealthy and power to the powerful.
A whopping, humiliating data error is important for academic debate. But in the many factors which determine how the world is run, the facts play only a very small role.