Well, many of you will have seen the budget and Balls’ response which began with a good deal of stuttering, widely reported by no explanation. If anyone has a hypothesis about why Balls began his retort by effectively stuttering, I would be glad to know. Even though he recovered after a few minutes, his response wasn’t very effective.

The primary reason for that I would argue for his ineffectiveness is that Balls, and Ed as well, has no well developed alternative to articulate. Effectively, he and others in the Labour Party assume as true the neoliberal economic theories that underpin Osborne’s major policies, though he slightly modified them in this statement. Policies guided by neoliberal economic principles have failed not only this time but every time they have been tried, either in western countries or in developing countries. This is fundamentally because they have no empirical relationship to the real world. They only work in toy economies.

They look correct to some people because the Keynesian position has been distorted and Keynes didn’t quite get all of it right. After the publication of the General Theory, he was already thinking about how to revise it. The theory should really be called the Keynes-Kalecki theory, as in a review of the General Theory the year following its publication, Kalecki corrected errors in Keynes’ theory of effective demand.

QE, which King is so fond of, is ineffective re job creation because it directs funds to banks who either hoard it or use it to pay down their toxic balance sheets. Osborne almost seemed to realize this when he proposed infrastructure projects. However, it looked a bit too little too late. And he doesn’t yet seem to have bitten the bullet. Besides, the money that has been put into the various QEs undertaken by certain sovereign governments is not enough to even make a dent in the banks’ toxic balance sheets, so great are their debts. Basically, it is money thrown away.

An interview with Robert Choate showed that Choate, while not being able to criticize Osborne due his present position, showed that he knows that credit ratings are meaningless for sovereign states with their own currency and that government doesn’t have to borrow, unless it decides to because the relevant interest rate is low. As for the basic interest rate, it can be kept low in perpetuity. Taxes should be used to control inflation by inhibiting spending and to direct spending into certain areas, as well as legitimating the sovereign currency. They should never be thought of as a basis for government spending, because government doesn’t need taxes to back their spending, something Choate knows only too well.  When pressed by Paxman in the interview, to explain his hints, he only said that we will have to wait to find out in his memoirs. However, no one, even Paxman, later picked up on Choate’s hints in the interview about what he really thinks of Osborne’s policies.

To rely on exports when every other country with whom you would do business is experiencing the same difficulty is incredibly stupid and shows that Osborne doesn’t quite know what he is doing. His comments about those on welfare were exceedingly ignorant. The stupidity of his position is that people who aren’t working don’t really want to would only be true were there jobs to go to. The basic fact is that there are fewer jobs than there are people looking for them. The jobs have to be there first to justify his basic assumptions about people’s motivations. History does not support Osborne’s ignorant comments.
In fact, Osborne’s social policies and comments directed to those on benefits, who are obviously not well off, is redolent of the ideas of the late 19th and early 20th century social Darwinists. For those of you interested in the way in which evolutionary biological ideas creep into discussions of the nature of human society, it may be of interest to those who do not read in this area that Darwin did not subscribe to the view of unbridled competition even for the Primates. It follows mutatis mutandis that Darwin’s view of chimpanzees applies to human social groupings. This view of unbridled competition may have seemed self evident in the late 19th and early 20th centuries, but seems rather dated now. Yet, the idea refuses to die. A number of Osborne’s social policies could have come right out of early 20th century social Darwinist tracts. One of social Darwinism’s greatest critics was Lester Ward. Alas, no commentator has yet made this connection. It seems so obvious to me. Am I missing something?

Now, one problem with the post by Pilkington is that it is rather technical. And it is a piece on the political economy of the financial sector rather than economics per se. That should make it easier to read, but for some it might not. Basically his message is that by putting the money back into banks, it acts as a feeder mechanism for financial speculation, which is what needs to be toned down rather than reinforced.

I have also included a piece from the Independent by David Blanchflower. His position is that Slasher Osborne’s jobs policies are guided, not by empirical evidence, but by ideology. We all know this, but is is salutary to see figures from the Department of Works and Pensions that reinforce this view. It is impossible to believe that millions of people are scroungers. It defies rational consideration.

Here are the links:

Blanchflower: http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-ideology-rules-the-coalitions-jobs-policies-8374461.html

Pilkington: http://www.nakedcapitalism.com/2012/12/philip-pilkington-monetary-policy-and-metaphysics-how-economists-try-to-naturalise-terrible-policies-and-disappear-into-their-own-theories.html

Post contributed by Larry Brownstein