With American politicians already jockeying for position ahead of an election that's more than a year and a half away, one could be forgiven for missing, amid saturation coverage of 2016, that Great Britain has its own important election coming up in a mere six weeks. In his New York Times column today, Nobel Prize-winning economist Paul Krugman examines the state of the Sceptered Isle's pre-election economic debate -- and his assessment is decidedly grim.
Hit hard by the Great Recession, British voters in 2010 ousted the Labor government of Prime Minister Gordon Brown, sending Conservative leader David Cameron to No. 10 Downing Street. Cameron and his Chancellor of the Exchequer, George Osborne, immediately set about reducing Britain's budget deficit, which had spiked since the recession, as is typical in economic downturns. As Krugman notes, Britain's debt and deficits had been at remarkably low levels before the crisis, and inflation had been consistently kept in check, but the Conservative government peddled the narrative that Britain had grown too profligate, and was at risk of becoming another Greece. Absent a harsh austerity regime, catastrophe awaited.
Much as American media outlets frequently parrot the claims of deficit scolds, Krugman observes that much of the British media credulously accepted the austerians' narrative as the gospel truth. And with interest rates low and economic growth on the uptick, haven't Cameron and Osborne's spending cuts worked? Far from it, Krugman argues:
Yes, British interest rates have stayed low. So have almost everyone else’s. For example, French borrowing costs are at their lowest level in history. Even debt-crisis countries like Italy and Spain can borrow at lower rates than Britain pays.
What about growth? When the current British government came to power in 2010, it imposed harsh austerity — and the British economy, which had been recovering from the 2008 slump, soon began slumping again. In response, Prime Minister David Cameron’s government backed off, putting plans for further austerity on hold (but without admitting that it was doing any such thing). And growth resumed.
If this counts as a policy success, why not try repeatedly hitting yourself in the face for a few minutes? After all, it will feel great when you stop.
While Tory claims about the virtues of austerity may lack empirical basis, the Conservatives may nevertheless reap the benefits of a recovery that occurred despite, not because of, austerity. Though Ed Milliband's Labor Party once boasted a healthy edge over the Tories, Conservatives are now virtually tied with Labor in the polls, and another five years of Prime Minister Cameron is far from inconceivable.