by Martin Odoni

The old sitcom Yes, (Prime) Minister can be dangerous when taken completely seriously, but it has a habit of hitting nails squarely on heads more often than not. One sequence in the first season of its incarnation at 10 Downing Street offered a very fair and necessary warning about the dangers of accepting the results of opinion polls completely at face value. It is not necessarily that the pollsters will alter the answers. The far greater danger is their tendency to massage the questions, framing them in such a way as to push the person being asked into a particular mindset.

Take these two questions which are both attempting to assess whether the Welfare State is a good or bad institution; –

Is it good that vulnerable, sick or poorly-educated people receive financial support from those in society with a significant share of the wealth, or born to greater privilege?

Is it acceptable that feckless, idle layabouts are constantly subsidised in their workless lifestyles by hardworking, aspirational people who make a genuine attempt to get on in life?

The first question is clearly framed in such a way as to draw a sympathetic response. It emphasises the vulnerability of those who depend on welfare, and the possibility that many of their problems are not of their own making, while also highlighting the possibility that many who are well-off may be where they are by accident-of-birth, and therefore have done little or nothing to merit their wealth. Whereas the second question is clearly designed to draw a lot of dismissive answers, by presuming that a predominance of work-shyness and indolence are the main causes of poverty, and that industriousness and aspiration are the main causes of wealth and success.

We need to keep this in mind when reading the average poll in the Daily Mail or the Sun, as they are among the worst newspapers in the country for having a very ‘anti-pauper’ outlook, and so would prefer an ‘anti-pauper’ answer. As a result, they are liable to ask something akin to the second question while taking soundings in the street, but when publishing the results, to print something more in keeping with the first.

And yes, it is entirely likely that the Mirror and even the Guardian will resort to transposed versions of the same trick when polling the public on the same issue.

Polling when done by newspapers, in short, is often just a dirty trick. (More on this subject is discussed in episode 2 of To Play The King, approx 14 minutes in – paid subscription.)

However, what this assessment does not allow for, which I think may happen quite often, is inadvertent massage-of-questions. This suggestion of mine could cause the odd doubtful look, but I do think ordinary, bungling human nature is as capable of making a mistake when wording an opinion poll as it is when wording anyhting else. (TYPO DELIBERATE – just to make the point in reverse.) Opinion poll questions are vulnerable to lack of nuance, after all, and so are human minds.

This possibility came to my thoughts today when studying the results of an opinion poll conducted independently, Jon Cruddas tells us, of the Labour Party’s higher echelons, in a bid to find out why Labour lost the General Election in May. The findings are interesting, and the first conclusion drawn is that the defeat was not a result of the party being perceived as ‘Tory-lite‘. Instead, it was perceived as being ‘Anti-Austerity’, and this was seen by many in the public as irresponsible.

Now, this conclusion may indeed be an accurate reflection of public perceptions, and I do not wish to take up time here assessing whether the perception itself is true (it is not), or whether being pro-Austerity is the same as being ‘financially responsible’ (it most definitely is not). Instead I want a closer look at the question asked in the poll that led to this conclusion. It reads; –

Agree or Disagree: We must live within our means so cutting the deficit is the top priority.’

Now, the question itself is somewhat leading, and presents two slightly separate concepts as one. But also, the interpretation of the answer by the Labour researchers leaps to an assumption.

Firstly, the very term live within our means is an economically-meaningless platitude, much loved by Conservative Party ‘toom-tabards‘ when trying to justify cutting spending that is perceived as not benefiting the well-off. In reality, our ‘means’ are limited by the amount of real resources that are available, not by the amount of money the Government owes, and also in reality, there is no danger of insolvency. But as most people-in-the-street appear to have no grasp of these details, we can forgive the term being used in the question.

But secondly and more importantly, cutting the public deficit and favouring Austerity appear, by the way the answer has been interpreted, to be treated as one and the same. Of course they are not the same, and so the opinion poll has been worded as a false dilemma – in effect, it accepts that if the deficit is too high, we must either cut spending or face the consequences of excessive debt.

Whether we think the present deficit really is too high or otherwise, it simply does not follow that an excessive deficit can be brought down by spending cuts, and spending cuts alone. In fact, spending increases that are targeted intelligently can cause the deficit to shrink more reliably, by fiscal multiplication feedbacks e.g. hiring more public sector workers can lead to more productivity, as well as higher income tax receipts and Value Added Tax through the workers’ subsequent personal activity. There is no indication whatever in Cruddas’ assessment that this point-of-view has even been considered in the poll, let alone been asked of those questioned. For instance, the poll could have asked a supplementary question to the one above, something akin to this; –

‘If you agree with the above, do you think that reducing the deficit is best achieved through a) spending cuts, or b) targeted investment?’

But no, there is no indication that such a question has been asked, and the way the majority answer is assessed by Cruddas seems to assume that this is already part of the previous question.

That is maddening, not only because it might lead to Labour getting the wrong idea about why they lost the Election, but also because it might have been a useful way of testing just how economically-literate people around the country really are. My suspicion is that this is a genuine mistake, and not just Blairite confirmation bias against the rise of Jeremy Corbyn, at least not consciously, for the simple reason that a great many people in the Labour Party appear to be no more economically-literate than the general public, an impression that is scary enough in itself.

One thing I can say about the poll result is that it both confirms and denies my recent suggestions at the same time. It clearly underlines, as I have pointed out before, that Labour’s only hope of getting back into power any time soon is to destroy the myths of what caused the Credit Crunch seven years ago, if they are to win back public trust on running the Economy. It also seems to indicate that a move to the left, as I have called for, is not going to be received well by the public, although that depends on there being a public prejudice that leftism-and-anti-Austerity-equal-bad-economics, something that the poll does not really check.

Whatever the case, I would suggest they needed to word the poll more carefully and comprehensively if they wanted a reliable answer.

by Martin Odoni

One of the things about Godwin’s Law is that it is only supposed to apply to discussions that take place over the Internet. It asserts that the longer a discussion lasts, the higher the chances of someone mentioning Nazi Germany, usually as an insulting comparison to a debating opponent. (In truth, this is something of a redundant point when looked at broadly. Think about it – the longer a discussion lasts, the higher the chances are of anything being mentioned.)

But invocation of the Nazis does very much happen in spoken-word discussions too, and not always as an insult. Sometimes it happens as a result of history-paranoia. This can be seen particularly among the lunatic fringe of the Far Right in the USA; the likes of Glenn Beck and Louie Gohmert play the ‘Nazi card’ almost as a matter of reflex. If you are in the mood for a good laugh, by the way, see what Lewis Black made of Beck five years ago.

Trying to compare the behaviour of modern people to the behaviour of the Nazis is therefore something of a lazy hot-button. But the phenomenon sometimes takes a subtler, but no less insidious, appearance. It is the ‘warning from history’, not about behaving like the Nazis, but about behaving in a way that opens the door to the Nazis. One of the most frequent forms this takes is the ‘Beware-The-Mistakes-Of-The-1920’s’ argument.

This refers to the aftermath of World War I, in which the German Empire was given exclusive blame for the War starting*, and the brief history of the Weimar Republic that followed. The warning focuses on how the phenomenon of ‘Hyperinflation’ supposedly killed it off. (This common understanding of it was given voice in the revived TV series Yes, Prime Minister two years ago, when Jim Hacker declared that the Germans are “terrified of runaway inflation because that’s what destroyed the Weimar Republic and brought them Hitler”.)

This is a commonly-held view, and is often held up as one of the great lessons of the early Twentieth Century – that ‘Hyperinflation’, as it is sometimes called, must be avoided, even at the expense of all other aims.

It is not entirely without foundation. There was indeed a bewildering period of out-of-control inflation in the Weimar Republic in the early-1920’s, and it led to terrible hardship for its people. The notorious ‘Reparations’ that the British and French Governments had imposed on Germany in the Treaty Of Versailles required regular payments of vast quantities of money and raw materials, more than the fledgling Republic, itself still struggling to recover from the War, could afford.

When Germany fell behind in its payments in 1923, French and Belgian forces invaded and occupied the region of the Ruhr, Germany’s industrial heartland. With the Germans unable to muster remotely enough troops to defend their borders, they were swiftly strong-armed into resuming payments, even though the Weimar Government did not have enough capital in its reserves to do so. It therefore resorted to the only option it had available; it simply printed vast quantities of new Deutschmarks and shipped them straight to the French and British Governments. The Ruhr’s industries were largely idle due to the ongoing occupation – the Government had even ordered the workers in the region to go on a general strike in protest against the invasion – and were thus not producing many saleable goods. Therefore, the range and the amount of goods that could be purchased with the German currency were both getting very small, making it a less useful form of money, and thus less valuable. And with so many extra marks now in free circulation, having been freshly printed by the Government, the ease with which they could be obtained encouraged markets to put prices up, knowing that at least some potential customers would have enough marks to meet the cost. Prices going up, by definition, meant that the value of the money was going down even further, as purchasing the same item one day required more money than it had the previous day.

The value of the German currency was receding so rapidly in fact that people soon found that prices were climbing many times per day. This caused public panic, and motivated tides of ‘rush-buying’; many Germans were desperate to buy as many goods as they could as quickly as possible, fearing that if they waited more than a couple of hours, the prices would go up again and the money they had in their pockets would no longer be enough.

But of course, when everybody is buying goods in a panic, that means general demand is going up. At a time when the country’s manufacturing industry was limping, there was no chance that supply could ever meet such a surge in demand. Goods on German markets rapidly became scarcer and scarcer, which in turn made them more valuable, and this again caused prices that could be charged for them to go up even faster. Soon, no purchase was possible for any goods worth less than thousands of marks. So in response – if nothing else it might have reduced the amount of paper being used – the German Government issued fresh notes with extra zeroes added to the ends of the sums e.g. a 100 mark note could be replaced with a 100,000 mark note. But this just made it easier for people to possess and carry tens of thousands, or even hundreds of thousands of marks in their pockets, and to spend them quickly, and therefore made it likely that prices would go up still faster.

The international outlook for the mark was no better. Foreign goods cost more and more to import, as there were so few German goods even being manufactured, let alone being made available for export, that foreign traders saw very little use in possessing marks in any quantity – thus an importer had to offer gigantic sums just to bring in a few basic items.

The Hyperinflation was a dizzying, disastrous cycle that rendered the Deutschmark worthless in less than two years. To illustrate; for most of 1922, an ordinary loaf of bread would have cost about 160 marks. By September the following year, it cost 1,500,000 marks. And just two months after that, it cost an unimaginable two hundred billion marks.

Most of the stories you have probably heard about the Weimar Hyperinflation are true. Widescale starvation, people unable to afford fuel or clothing, money often being carted around in wheelbarrows just to buy small quantities of food, paper actually becoming far, far less valuable when turned into banknotes than it had been when it was blank, basketsful of money being left in the street and only the baskets being stolen by passers-by, the money just being tipped all over the pavement.

In this light, it becomes understandable that people in Germany ended up rejecting democracy and adopted authoritarianism in the years ahead. The Republic had, after all, been the country’s first real experience of liberal democracy, and after just five years Germany was in the grip of destitution, starvation, poverty – a total catastrophe. Thus an uprising of extremism is entirely predictable, yes?

There is just one problem with this interpretation of the time. It is completely untrue.

It involves directly and immediately linking two events that in reality were over half-a-decade apart, and ignoring everything that happened in between times. And a lot of very significant events did happen in between times. There was no inevitability whatever during Hyperinflation that an extremist right-wing Government would take over, and for some years after 1923, the possibility became very much more, not less, remote.

Adolf Hitler and the National Socialist German Workers’ (‘Nazi’) Party did attempt an uprising in Bavaria late in 1923, but the so-called ‘Beer-Hall Putsch’ was an abject failure, not least because it had very little support. Hitler spent nine months in prison for it, and the odds at that stage were that that would be the last history would know of him.

In September, Gustav Streseman became the new Chancellor of the Republic, and he introduced a new raft of policies that pulled the country out of its rut with impressive speed. He ended the strike and ordered a fullscale return to work in the Ruhr. He also formally abandoned the old mark as a currency, and introduced a brand new version called the Rentenmark, which was immediately given a very high, stable starting value through the backing of US gold. This quickly brought the Hyperinflation screeching to a halt. But at least as important, the following year, employing fine political skills Streseman managed to negotiate a new, more realistic arrangement with Britain, France and the USA for the payment of Reparations. Taking proposals from the American diplomat Charles Dawes, a framework was drawn up that reduced the total that had to be paid from the wildly-punitive two billion pounds demanded at Versailles to a much more reasonable fifty million pounds. Streseman also managed to secure a loan of two hundred million dollars from the USA, to inject into the ailing German industries.

(This had the bizarre upshot that the USA was sending money to Germany, so that Germany could produce enough industry to make payments to Britain and France, so that Britain and France could pay back war-loans owed to… the USA. Yes, I know, I think it sounds as potty as you doubtless think too. But it did work for a while.)

With German manufacturing back on its feet, the loans from the USA providing much-needed support, and a strong, restored national currency, the Weimar Republic in fact spent most of the rest of the 1920’s doing very nicely indeed. New factories were built rapidly, high employment rates were re-established, and a cultural revival, especially in Berlin, made Germany seem one of the most elegant and refined nations in Europe once more.

So you see, the years 1924-1929, far from being a period of ‘Nazification’, were a period of real prosperity in Germany. The period was even referred to as the ‘Golden Age Of Weimar’. If you had told a German trader in, say, 1928, that the now-flourishing Republic would cease to exist within five years and be replaced by a military dictatorship, he would probably have given you a sad look and told you how much he pitied you your pessimistic outlook. The very notion of Hitler and his extreme ideas being the way forward would have seemed absurd, and he and his Nazi followers were viewed as rather silly and embarrassing cranks. (In fact, the Nazi Party had very nearly gone bankrupt that very year.)

What could possibly go so wrong from this position as to bring Hitler to power?

Well, there was one drawback to the Dawes Plan; the fate of the big economies of Western/Central Europe were now heavily-locked into the fate of the US economy, because Britain, France and Germany all owed large amounts of money to the US banks. While the American economy remained in the rudest of health, this would not be a problem, as it meant the banks could be as patient about receiving the repayments from Europe as conditions required.

The problem was that, of course, the US economy was not to remain in the rudest of health. Instead, in 1929, it was to enter the most unhealthy condition in its history. When the London Stock Exchange crashed in September, in response to the notorious Clarence Hatry scandal – a fraud involving millions of pounds-worth of fake share certificates – the news filtered through to Wall Street, causing panic, especially among bankers who were still owed money by the British Government. Related holdings suddenly looked very unpromising, and stocks started being sold off at ‘cut-the-losses’ prices. All foreign investments now looking distinctly unsafe, and average stock-prices started to go down.

After weeks of nervous instability, it was at the end of October that the US economy finally choked in a crazed spree of panicked any-cost selling. On 29th October 1929, over sixteen million shares were sold off at rock-bottom prices in a desperate bid by investors to separate themselves from what they now believed were worthless stocks, and just to get anything they could in exchange for them.

The Wall Street Crash had shifted the very geography of world economics. All of a sudden, the stockmarket was flooded with goods that were of no apparent value. Banks that had lent to the investors who had purchased the stocks now found that repayments halted. Many investors who had taken advantage of easy credit that had previously been made available now could not pay it back. Other people who held shares that were now worthless could no longer afford to buy general, even day-to-day goods, and so all across the US economy, business spiralled downwards. Goods could not even be sold at the price of manufacture, and many retailers either folded, or turned to banks in a desperate bid for emergency loans. The banks did not have enough capital available to support the number of loans being requested. All they could do, therefore, was to call in debts already owed to them. Including foreign debts.

Britain, already reeling from the smaller crash on the London Stock Exchange, now found the creditors who had sent loans during the War were demanding their money back. France faced similar demands, and so both countries, in need of money quickly, now decided to call a halt to the Dawes Plan and to make a demand of their own – that Germany resume paying full Reparations.

The German position was not helped by the fact that Streseman had died shortly before the Wall Street Crash. He had warned not long before of the danger to the German economy if the American loans were recalled: “If the short-term credits are called in, a large section of our economy could collapse.” Now, just as they had lost his leadership, the German Government received a demand for renewed Reparation payments, and a ninety-day notice for the first repayment of the 1924 loan from the USA.

Crippling taxes now had to be raised to start the repayments, at a time when frightened American investors were withdrawing their capital from the country. Many German businesses folded under the strain of consequent lost revenues and an increased tax burden, and with that, unemployment began to rise. With every worker who lost his job, money was lost to those businesses he had previously purchased goods from, and so those businesses faced the strain of paying increased amounts while selling fewer and fewer goods. The only solution for many of them was to lay off staff to reduce the wage-bill, repeating the cycle.

A new economic downward spiral had set in, and by September 1930, unemployment had leapt from about one-point-two million a year earlier to over three million. Over the next couple of years, the jobless total would race past six million. With huge numbers of increasingly-desperate people out-of-work, and resentful of what they saw as foreigners taking their misfortune out on Germany once again, extremism was on the up – the Nazis took over one hundred-and-forty seats in the 1930 Reichstag Election – and the rise of Adolf Hitler and The Third Reich was finally under way.

The interesting aspect of this part of the story though is that there was no particular Hyperinflation of the rentenmark. Inevitably, with the value of US gold declining, there had been significant inflation of the mark, but nothing remotely resembling what was seen in 1923. Now it is probably fair to suggest that the terrifying memory of Hyperinflation might have played a psychological role in the growing radicalisation of the German working class in the early-1930’s, but that was about as much a part as the phenomenon had to play in Hitler’s accession. In reality, the Hyperinflation problem had been solved by 1925, and since then the country had gone through a boom period. What really caused the collapse of the Weimar Republic was a financial over-dependence on one country that was suddenly having trouble just supporting itself. The ‘trigger’ was not Hyperinflation at all, but the Wall Street Crash. (And the Crash was, in a manner of speaking, the reverse phenomenon; a collapse in stockmarket prices is a form of rapid deflation, as the same amount of money is able to buy more goods as time passes – if only anybody had wanted them.)

The worry of the “Hyperinflation-gave-the-world-Hitler!!!!” scare-story is that it still plays a substantial role in economic thought even today. Now, I am certainly not trying to make light of Hyperinflation as a phenomenon, it is horrendously damaging when it happens and causes unthinkable misery and hardship. But that is a problem in itself. There should be no need to add a horn-headed demon at the foot of the path, with warnings of “Hyperinflation will lead to Nazism” or some other such Godwin’s Law mimickry. It quite emphatically did not lead to any such thing in Germany – the Beer Hall Putsch failed completely. But the myth causes many a mind at the Exchequer to think that any amount of inflation is undesirable, and to imagine that it is the one danger, above all others, that must be guarded against at any cost. Hence George Osborne’s smug pride in recent very low inflation figures, even though inflation this low is, as Alex Little has recently explained, no less a problem than high inflation. And let us keep in mind that the Wall Street Crash had a deflation element to it.

In the interest of preventing inflation, lock-stock-and-barrel, neoliberal ideology argues that there should always be a substantial standing army of the unemployed, as the more that the working classes are competing with each other, the less able they will be to band together to bargain for better wages (the questionable assumption being that improved wages are what causes inflation). This school-of-thought fails to consider that it was in fact precisely when unemployment – not inflation – was spiralling out-of-control in the Weimar Republic that large numbers of dispossessed workers started turning to extremist political parties and rejecting classic liberal democracy. Surely therefore, neoliberalism has learned exactly the wrong lesson from history, and encourages the very folly that fuelled the extremism it supposedly wants to avoid i.e. over-dependence of the British economy on the USA, and high unemployment?

Surely if we wish to take the real lessons from inter-war-period Germany, we have to accept that large-scale unemployment (and probably starvation-wage employment as well) is the true danger that we need to avoid at all costs. With the Government’s constant figure-fiddling to get around that issue, they could well be sleepwalking into precisely the terrible danger that the Friedmanite handbook tells them it will prevent.

Indeed, that may well be a key factor in the rise of Far Right groups in Britain such as the UK Independence Party. Far be it from me to trigger Godwin’s Law, but by consciously telling ourselves not to, we are in fact behaving in the way that once opened the door to the Nazis.


* I am of the view that, while it is grossly wrong and unfair that Germany took all of the blame for the First World War, the reckless policies adopted by Kaiser Wilhelm II probably were the chief, most immediate cause of the conflict. Written evidence shows that the Habsburg Emperor of Austria-Hungary, Francis-Joseph I, did not move to avenge the assassination of the Arch-Duke Franz Ferdinand until the Kaiser’s Government pushed him into declaring war on Serbia. Furthermore, when Germany and Austria were faced with a consequent invasion by the Russian Empire, Wilhelm ordered a pre-emptive invasion of France, who, in spite of their alliances, still might have stayed out of the War if left alone. The Kaiser also endorsed the scheme to make the invasion via Belgium, which was a clear violation of a Belgian neutrality agreement that the German provinces had signed up to in the previous century, and which made British intervention pretty much unavoidable. At every trigger-point of conflict, the German Empire was one of the key players driving events, and in ways that violated treaties and International Law.

by Martin Odoni

Sorry for forgetting to get all excited over the last year or so, but it hasn’t been easy to. We’ve been told repeatedly over that time how the thrifty ingenuity of the Conservative Party has rescued and revived the British economy. We have had some growth in the economy since the summer in 2013, I suppose, but somehow, looking at it just doesn’t get me going.

But then, what I can never quite grasp is why the Tories expect everyone to have an orgasm about it. I mean, when have somewhat positive economic performance figures ever had that kind of effect on people?

Still, having said that, have you read the romantic tale of the year, about our delectable heroine, Edith Connie Mee? You haven’t? Well boy, are you missing out! Here’s an excerpt from the – mysteriously-not-bestselling – novel E. Connie Mee’s Diary; –

She stepped into the soft, candle-lit accounting office, the promise of indiscretion ever hanging above the balance-sheet print-outs. Then Gideon put his strong, masculine hand on her arm, well-practised and toned by the writer’s block brought on from endless filling in stationery-requisition reports in triplicate, and then with a romantic flourish, he leaned close and whispered a few sweet annual-debt-divided-by-quarters-and-recalculated-deficits-as-percentages-of-GDP in her ear… and then he… OH YES!!! YES-YES-YES!!! He nibbled seductively on her disability benefits, biting away just enough for her to really feel it. He ran his nimble fingers over her welfare-history file, uncladding all her papers and letting the folder drop to the floor between them. Then, he brought her to the height of ecstasy with the revelation that increased commercial sales from private borrowing had resulted in the satisfying elongation of the activity column of the graph for the year by three per cent! OHHHHHHH!!!!

“Oh Gideon,” she simpered, “Gideon! This has never happened to me before!!!!”

Well actually, that last sentence may even be true. George Osborne getting good performance figures out of the economy is something that has probably never happened to any of us before. And, in terms of figures that will give us something to get excited about on a personal level, no, we are still waiting.

Now, the BBC are reporting that the lukewarm economic ‘recovery’ of the last year-and-a-bit is already slowing down, which is not really a surprise given how unbalanced it is. It might improve again before too long if we’re lucky, but even so, the growth for this year was expected to be the aforementioned three per cent, but has already been downgraded by a significant margin, to two-point-six per cent (thus invalidating projected figures from the OBR that were only published at the beginning of this month). Certainly a long way from recessionary news, but still, a bit of a rushed, damp, premature withdrawal from the recent throes of heated economic passion.

Let’s get back to that book though! About two-and-a-quarter, rather short, paragraphs later…

“Oh dear, Gideon, was that it?” Connie asked, disappointed. “Never mind. We can try again next Parliamentary term.”

“I’m sorry, Connie, I’m not sure I can get my voting slip into your ballot box again that soon…”

It would seem that Tory economics really are a little like reputed Tory sex-lives. A lot of tedious, clumsy foreplay that reduces stimulation much more than it increases it, a much-delayed enlargement finally getting half-into-effect, a brief burst of boisterous, boastful bragging, and other even less eloquent grunting noises as the Tory imagines he has everything ‘turned-on’, and then the whole process just completely runs out of steam much too early for all the people left flat on their back to get any pleasure or benefit out of it.

Oh well, that’s Tory economic recoveries for you. It never feels like they last longer than ninety seconds.

How was it for you, everyone?

by Martin Odoni

You’ll have to bear with me as I write this. I have a sore neck. Probably from shaking my head so much. You see, yesterday George Osborne, Britain’s peerless mastermind of economic theory, delivered his final Autumn Statement of the current Parliamentary term. (Why he would be delivering an Autumn Statement as late as December would perhaps be an interesting question, but seeing it’s the work of a Chancellor of the Exchequer who doesn’t even know his 8-times table, or what is up and what is down, his lack of seasonal knowledge is probably the least of our worries. Missing a target as big as three months long is also, it has to be said, entirely consistent with his overall record.)

The detail of the statement was predictably full of self-congratulation for quarter-delivery on hopelessly optimistic promises made in 2010. The equally predictable attempts to make the recession of 2008-9 sound like a result of welfare spending and nothing to do with recklessness in the banking sector were also there. The mechanical references to a ‘long-term economic plan’ were there too, and as usual they appeared to mean, “Give me unlimited amounts of time, and when it finally goes right by accident, I can take the credit for it.” And of course, there were the usual, ridiculous cajolery tax-cuts for big business, in the hope that it will encourage them to hire more staff and invest more. (When will Governments learn to get that in the right order, by making business sector tax-cuts conditional?) So, more reward thrown at failure, and more punishment for people who had nothing to do with the financial meltdown in the first place. More of the same.

What was likely to be of more interest to most people was, given the proximity of the next General Election, the traditional ‘give-aways’ i.e. the shameless bribes that sitting Governments throw at the public in the hope it will give their vote-count a handy boost come May.  The BBC, always cautious about putting the boot in when it’s a Tory Chancellor, tried to get its audience excited about announced changes to Stamp Duty, which in truth are going to be of very limited use to most of the country in the foreseeable future with house prices so dreadfully inflated. Air passenger duty is to be removed from under-12s, which again seems to be only of help to people who can afford holidays overseas, and then only for so long as their children agree not to be teenagers or older. VAT for air ambulances and hospices is to be refunded – laudable at first glance, but again, not likely to affect that many people. So in truth, not much to get carried away about.

All that was left of particular note therefore were the projections from the Office Of Budget Responsibility (OBR, or, to give it a more accurate title, the International Monetary Fund Britannic Echo-cell), forecasting the performance of the economy over the next five-to-six years. Now, I have stated before that I have severe doubts that the OBR serves any useful function at all, but its forecasts seem more than ever before to be entirely dependent on a mixture of luck and just taking Osborne’s word for it. From studying the bullet-point ‘calculations’ listed in the Executive Summary on page 12, there seem to be rather a lot of dangerous assumptions being made. In particular, it is assumed “that monetary policy will be able to support demand to achieve the inflation target and that the economy will be sufficiently flexible that the private sector can absorb the labour shed by the public sector.” Why that should be assumed is not terribly clear, especially given the hurried rate at which public sector staff have been axed, so quickly that the private sector keeps experiencing loss of business with the axed workers before it can hire enough of them to ‘cushion’ the blow.

There are a number of quiet admissions throughout the text of the report that reforms over the course of the Parliament have not had as much effect as was originally expected. For instance, on page 21, it is conceded that changes to incapacity and disability benefits will have less effect than predicted back in March this year. Well so much for OBR assumptions then. But that is all the Office seems to have – assumptions.

But the really unsettling part of the OBR’s projections is the discussion of Britain’s expected trade deficit with rest of the world up to 2019. The trade deficit currently stands at just over 5% (page 86-87), and the OBR expects this to be reduced to between 2% and 3% before the end of the next Parliament. However, where they get that from is again unclear, and in fact this seems rather at odds with other details in the report. The growth figures for the rest of the world are only projected to keep rising at any real speed until the end of 2015, peaking at around 4%, and then stagnating for the remainder of the UK Parliament’s next term. In the Eurozone, the outlook is slow too, the peak being a mediocre 1.6% growth from 2016 to at least the end of that term. So, seeing that exports, by definition, are sold to the rest of the world, and the rest of the world’s growth is not set to accelerate for long, how is this ongoing reduction in the British trade deficit going to be achieved? The rest of the world needs rising growth for the predicted extra exports to be affordable; it’s tricky to buy more without more money to buy it with. The only other way the deficit-cut can be done is through a reduction in imports to Britain, but the projected figures on page 93 show very clearly that imports are expected to increase consistently.

In other words, the OBR’s predictions sound like they are being made up.

This means that overseas trade is not going to improve British GDP enough. And with public sector spending poised to be slashed even more brutally in the next Parliament – about 60% of the cuts planned still lie in the future should the Tories get in again – we now need to ask where the increased growth can come from to fulfil the other optimistic prediction of the report; that the deficit will be gone by 2018 and the economy will be in surplus.

NB: I shan’t go into much detail here about how running an economy in surplus is a very risky exercise, but to put it briefly, it almost invariably causes economic slowdowns, even recessions, because even the strongest of private sectors will always have some market product that does not get consumed. A public sector deficit is merely the state’s way of making sure enough of this ‘slack’ is still consumed to prevent a profit shortfall big enough to cause widescale job-loss. If there is a surplus instead, that usually means there are a lot of private sector goods and services going unsold, making a lot of private sector workers look superfluous and expensive to their employers.)

Every time I look at it, the conclusion I come to is that, thanks to the wage repression that the Government has allowed, and even encouraged, the aim is to bring the rest of the growth about through more increases in private borrowing, in place of public sector borrowing. In many ways, it is a repeat of one of the uglier patterns of Tony Blair’s stewardship of the country. Average wages under New Labour only rose by about 14%, but the cost of living roughly doubled during that time, and so many people had to take out loans to cover the growing gap between the amounts they were earning and the amounts they needed to spend to keep things ticking over. The loans meant that the private sector could keep selling to the public and continue making solid profits, at least for a while. The problem was, without a large enough rise in their salaries, many of the people who had taken out the loans simply didn’t have enough to keep covering the repayments forever, and when enough of them defaulted at once, the Banking Sector suddenly choked and the 2008 Financial Crisis arrived.

Moronically, and with the OBR cheerleading them on, the current Government has now engineered an even more extreme repeat run of the same folly. Average earnings during the course of this Parliament have actually gone down, and many people are in zero-hours, insecure, temporary work. Once again, many are finding that supplementing their meagre incomes with loans is the only way to get themselves out of immediate danger. The problem is that, with wages not growing perceptibly for anyone outside the rich few, when these loans are due to be paid back again, once more, they will not be able to afford it. The average ‘household deficit’, for want of a better name, during the Labour years was about 1.5%, and see what that led to. According to the calculations of Alex Little on the ALittleEcon blog, the average ‘household deficit’ required for what the OBR currently anticipates would have to be about 3%! If it couldn’t work the first time around for half that proportion, how can it possibly work this time around?

The only possible path to avoiding 2008 Mk-II therefore is a pretty rapid and sharp rise in income for people on the bottom rung of the working ladder. The quickest way of achieving that would appear to be a substantial increase in the Minimum Wage. Such an increase would also increase the spending power of millions of people, increasing aggregate demand and thus increasing profits all across the private sector, thus largely paying for itself. But Osborne, of course, will never do that. He is convinced that increasing the Minimum Wage puts large numbers of people out of work and discourages employers from hiring. The fact that, for instance, Australia has one of the highest Minimum Wage structures anywhere on Earth, was only modestly affected by the world recession, and retains consistently high employment levels, might well put the lie to that. Osborne could even sweeten the pill a bit for businesses by offering them conditional tax-cuts in return for hiring more staff. But Osborne, of course, will never do that either. He is convinced that any Government interference in the private sector “hampers efficiency” (seldom defined).

Strange that, interfering in the actions of companies supposedly makes them less efficient. Interfering with employees and making them work for starvation wages supposedly makes them more efficient. With his clear intimation that more Austerity is all he has to offer most of us if he is still Chancellor by next summer, we can be sure that he will stand by his convictions, come-what-may.

Oh Gideon, Gideon, Gideon, what are we going to do with you? The more objects in your path you bump into, the more stubbornly you insist on walking in the same straight line. I wouldn’t mind, only you are dragging the rest of the country with you. Sooner or later, we are all going to… crash.