Last week’s US jobs data and today’s call in the Observer Newspaper from leading economists for a Plan B prompts me to share a few personal observations.
George Osborne’s Plan A has, by and large, been successful for large UK businesses: FTSE100 executives pay continues to climb and financial sector bonuses abound. Large businesses are sitting on vast cash reserves, have access to enormous borrowings (unlike small firms), and are continuing to run extremely lean, having outsourced and off-shored many non-essential jobs (this is especially significant in the US, where male employment opportunities in manufacturing and construction have effectively disappeared in a ten year decline).
The Plan A losers list is rather longer:
- Record numbers of young people are excluded from the jobs market and risk having their futures’ blighted
- Older workers who have been made redundant struggle to secure their economic futures without gainful employment
- Record numbers of public sector workers lose their jobs as the economic squeeze tightens
- Older retired people are seeing savings eroded with inflation and probably suffer most from public services cuts
- Current and future generations are facing pensions’ time-bombs, with prospects of inadequate income to cover their outgoings, forcing them into debt or to sell their homes, or economic dependency on family or state
- Small businesses struggle against economic uncertainty and the big banks who have deprived them of finance
Plan A assumed Public Sector efficiencies, Private Sector growth and did not envision serious inflation in commodity prices. By and large, Public Sector funding cuts have led to reduction in front-line service, quality levels and capital investment for the future. Private sector growth has so far been a damp squib. Myopic policies from the Cabinet Office have deprived the economy of expertise to deliver enduring transformation, like professional interims. The Yin and Yang of the Conservatives and Liberals has so far stifled effective reform.
Fear of being treated like Greece, Ireland, Spain, Portugal and Iceland seems to be driving economic policy, where the neoliberal conservative policies of the IMF/ECB are causing vast hardship to the weaker members of society in these countries. For me, the only recent glimmer of common sense came from the Der Spiegel, when they proposed a Marshall Plan for Greece.
In my judgement Plan A was always too severe and should have been stretched over a longer time period (as proposed by the Labour Party – indeed the Obama administration has favoured the latter approach).
To reduce the pain and improve the chances of economic success in Plan B, I would propose less focus on neoliberal remedies, and to see Keynesian solutions given a chance, like properly validated capital spending programmes that will benefit future generations.
There is an opportunity for Nick Clegg to take the moral high ground in the Yin Yang of Plan B.