On 11 September 1929 the Wall Street Journal quoted Mark Twain for its thought of the day: “Don’t part with your illusions; when they are gone you may still exist, but you have ceased to live.” Whatever that day’s subeditors thought they were doing, their choice now sounds as falsely confident as a rambler about to step off a ledge.
Markets were already in turmoil, America was sinking into economic depression and running through the daily news was a thin, high note of hysteria. Still, Irving Fisher and the other wise men foresaw only the slightest of setbacks, and the brokers couldn’t take the cash fast enough. As John Kenneth Galbraith writes in his classic, The Great Crash 1929: “The end had come, but it was not yet in sight”.
Just six weeks later shares nosedived, countless families had their life savings destroyed, and an entire ruling class was stripped of its illusions. It took another 25 years, the Great Depression, the New Deal and a world war before stocks regained their 1929 levels.
Look around today: the political class of 2016 is stuffed with people firmly clinging on to their illusions. Come Brexit, come Trump, come possible break-up of Europe: no lessons will be learned, barely an inch will be deviated from the ordained course.
For some, the best pose is an uncomprehending defiance. Taking a break from tending to his £27m property portfolio, Tony Blair tells the New Statesman, “I can’t come into front-line politics. There’s just too much hostility.” Thus does the patron saint of exasperation inform his ex-voters: it’s not me, it’s you.
Others are smart enough at least to pay lip service to the new times. A couple of months ago George Osborne told the Financial Times how much he’d learned from Brexit: “There’s a pretty profound sense out there that the system’s not working for people, and instead of telling people, ‘Shut up, you’ve never had it so good,’ you’ve got to respond to that … I want to use this time out of office to try and understand it better.”
Trouble is, lip service doesn’t pay so well. Days after that interview, the recently ejected chancellor began a speaking tour of America. In just a month, it was revealed last week, he raked in £320,400. Osborne made more from five speeches (nearly all to the finance industry, naturally, and putting in what his parliamentary register records as a total of 13 and a half hours’ work)than the average British worker will earn in over 11 years.
And for those still running the show, the solution appears to be: keep those blinkers on. Take last week’s autumn statement, which made clear that Britain is now heading for at least one lost decade. It predicted an earnings squeeze for the average Briton as bad as any in the past 70 years, and public debt climbing to Spanish levels. Listening to Philip Hammond, the chancellor, reeling off those numbers, I was reminded of what Keynes described in the 1930s as “the long dragging conditions of semi-slump”.
Faced with all this, what did the new chancellor do? Cling with white knuckles to his illusions. First, the illusion that austerity works. When Osborne set out in 2010 his programme of spending cuts, wage freezes and privatisations, his pledge was that the entire thing would be over within one parliament. Then it was extended to two parliaments. His successor will soften that austerity, as predicted in the Guardian last month, but he will extend it into three parliaments, or up to 15 years. If a general election is held in 2020, the big question put to party leaders by the Today programme and others will be exactly the same as in 2010: what will you cut?
Hammond’s second illusion is that some loose change chucked at roads, transport and other things marked “infrastructure” amounts to a growth strategy. The £23bn giveaway that made all the headlines is to be spent over five years: that makes it the equivalent of roughly 50 pence for every £100 of public spending.
This is dumb centrism and failed austerity, inflicted on a now mutinous public that is palpably sick of both. It fits perfectly and disastrously with the Theresa May modus operandi, which can be summed up as: Cameroonism with a very quick paint job. The ruinously expensive Hinkley Point plant is paused just long enough to annoy the Chinese, then given the green light. The administration that talks about workers sitting on company boards then pours buckets of cold water on the idea. A public that votes to take back control and give more money to the blessed NHS then sees 200 NHS and care services handed over to the billionaire tax exile Richard Branson.
Even the tired old “global race” is back, this time as “match fit”. Most of all, there is the same taking from the poor to give to the rich. Hammond confirmed last week that he would jack up the higher-rate tax threshold for high earners. By the time it’s fully implemented, the policy will cost £1.9bn a year. That will lose the government about 15 times what the new benefit cap saves, which will leave about a quarter of a million children facing homelessness. Taxes on big business will plunge ever lower, even as every year inflation eats into benefits for working families.
Journalists remind us that the prime minister is a vicar’s daughter. Looking at her policies, I can only imagine her favourite Bible verse to be Matthew 25:29: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.”
Austerity isn’t inevitable or even advisable, as the IMF, OECD and all the rest will tell you. But as the political economist Mark Blyth writes in a new paper: “We all benefit from better fiscal policy, but some very powerful folks – those who have made off with 90% of everything for the past 30 years and are already doing very nicely with private financing initiatives, speculation against government debts, the outsourcing of jobs, and the chasing down of bankrupts both large and small – benefit less. That they can veto good policy is down to the politics of fiscal policy, not the economics.” What’s lacking isn’t brain power, but muscle power.
Put another way, Britain has no means of countering the elite’s illusions, of reining in the delusions. Thatcher claimed There Is No Alternative, then tried to make that true by destroying any alternative. First through strikes then with privatisations, the trade unions were crushed. When council housing was flogged off, so went the fiercely independent tenants’ associations. The BBC was put for ever on the back foot. And the parliamentary Labour party led Europe’s social democrats into quavering irrelevance.
But doing the same thing over and over is a merely a collective death wish made policy. If half a decade of austerity heaped on top of decades of inequality produced Brexit, what will be unleashed by 15 years of it? The elite will not part with their illusions. But their illusions may be wrenched from them.
