Yes, according to Richard Murphy. He is bold enough to make the case that the new coalition government's economic policy will drive up unemployment at such a rate that it will be thrown into crisis within 18 months. Time will tell if Murphy is right, but his call for the left to develop 'strong, evidence based, economic policies’ is spot on.
The debate over how to tackle the economic crisis is still confined to very narrow parameters. The Tories and Lib Dems have brought their policies into line with each other. And Labour, while not as eager to attack public spending, essentially only differs over the timing of the attack.
All the parties accept the necessity of drastic cuts to public spending to reduce the budget deficit. Yet, as Seamus Milne points out, 'the burden of financing Britain's debt is significantly less than that of the United States, France and Japan, while UK debt as a proportion of national income remains far smaller than many of its competitors'.
This cuts package is ideologically driven; intended to make working people pay for an economic crisis not of their making. Or, as Richard Murphy puts it, “a work of wishful thinking presented by a bunch of fantasists dedicated to the destruction of state services in the UK.”
The Lib Dems have already abandoned their pre-election promise to oppose such cuts in the first year of government. The new Business Secretary Vince Cable, a man rapidly shredding his progressive reputation, explained why in an interview on Newsnight earlier this week. George Irvin explains that Cable wants these cuts ' to reassure international financial markets…The Lib-Dem coalition, just as Labour before them, are deeply frightened that the international financial markets could attack sterling, sending the City into a tailspin.' Get used to this argument; we are going to hear a lot more of it.
George Irvin's retort is refreshing: Why should we be subjected to blackmail from the very markets that plunged us into this mess in the first place – the ones bailed out at huge expense by public money? Irvin says, ‘Bringing international financial markets under control is no longer a simple question of regulation, admirable though current EU thinking may be...Sooner or later, the banking system will need to be brought under public control...That involves two things. First, the main banks must be fully nationalised. Secondly, casino banking must not merely be regulated, but parts of it - starting with hedge funds - must be banned.'
Irvin is right to say that this is a 'tall order' right now. But the point is simple; if we control the banks we can direct them to invest to revive the economy. And, as we already two of the largest banks, the government should be doing that now.
It is easy to dismiss such calls as pie-in-the-sky. But who knows what the political situation will be when the full impact of the cuts starts to bite? Already the £6.25bn cuts planned will axe 10,000 university places. The Chartered Institute for Personnel Development estimates they could mean 50,000 job losses this year alone. This is only the tip of an iceberg. The June Budget and September Spending Review will all see much larger cuts, up to £60bn in total over the next few years. As reality dawns, what passes for current economic 'common sense' may be subject to intense pressure. In the meantime, there is a political battle to be waged. Neo-liberal solutions are not the answer to an economic crisis rooted in failed neo-liberal models.