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Wednesday, August 02, 2017

George Osborne comes to France



Macron is combining the failed approaches of George Bush and George Osborne. But he’s so cute! And Le Monde is following behind, ever the faithful chien de garde. What is the dog’s task? It is to skip the first order of argument – does a country with a growing population really need to cut its spending, or increase it?. And in what areas?  Just assume that we don’t need this discussion, and all bien-pensants are agreed we have to cut spending. Then it is just a matter of going around in a circle, greeting all complaints with the remark, well, we have to cut spending you know.

For example – a few weeks ago, one of Le Monde’s Macron-archs was considering the petty complaints of petty people on the cultural front about cuts to their funding by the gov. He came up with a brilliant justification – it would be unfair not to cut the funding for the arts when everything else is being cut! The brilliance of this is that it skips right over whether the arts need to be cut or need, on the contrary, to be reinvested in, and makes it a matter of everybody has to take the bitter medicine. Of course, that excludes the cuts to the taxes of those in the top 10 percent income bracket, but lets not talk about that now! Let’s pretend that a budget is not about what the people need the government to do on all fronts, and is about nameless “waste” and a deficit that will go down magically as the government withdraws from services to the people.

We will ignore that the public deficit has so far grown in countries like the UK who have adopted the policy of blind cuts.

But one thing that we can surely assert with confidence, although  only cankish lefty economists will talk about this, is the opposite of the “crowding out” thesis. You know that latter thesis. It is that public investment “crowds out” private, so that too much government spending leads to weak investment in the private sphere, and hence unemployment and all the rest of it. The inverse of this thesis, then, should be that the retreat of the state from borrowing leads to the increase of private borrowing. While the first thesis is probably wrong – see Mariana Mazzucato’s The Entrepreneurial State for a rebuttal – the second thesis is almost certainly correct. In every Anglo Saxon country where Macronist style policies have been put in place, private debt skyrockets. For good reason – the state’s withdrawal undermines the lifestyles of the middle class, which are then repaired through use of a “reformed” credit market. Basically, it is jetfuel thrown on the business cycle. Eventually everything explodes.  
However, it is not just the boom and bust cycle of reactionary economics, ably mapped by Naomi Klein, that I am on about here. It is the fact that blind cuts by the state lead to a startling but little remarked  form of inflation. These cuts invariably open up holes in the country’s various infrastructures – physical, educational, healthcare, etc. These holes have a huge cost to the users of these infrastructures.
Take, for example, roads. In the U.S., as has become notorious, the neglect of the highways, byways and bridges has now become a common fact of everyday life. What this means is not just an increase in commuting time, as more people are in cars on less cared for roads – it also stresses every vehicle that uses the road. Just as an improvement in a machine is functioned into the inflation rate as a negative – bringing down inflation – so, to, every deterioration in the infrastructure stressing machines can be figured in as a positive – an inflator. Just because the state and economists don’t like to follow through on the logic of their principles doesn’t mean this isn’t so. It is especially so on things like healthcare and education.
The principle that we decide on cuts on high, because we are principled liberals, and we apply them blindly, is a recipe for disaster. Macron is a lucky son of a bitch, and I think his disaster of an economic policy is not going to effect France immediately, given the ongoing upswing in the business cycle. But the accumulation of austerity driven policies will strike hard once the cycle goes down again. Which can happen fast.

But don’t look to the chiens de garde for information or analysis on this topic.  They are too busy howling their appreciation of our new Jupiter.

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