Thursday, December 15, 2011

Britain’s Grand Conservative Economic Policy is Fulfilling Expectations – Expectations That It Would Be Utter Failure

The Confidence Fairy Refuses to Visit

Economics is messy because it is almost impossible to conduct controlled experiments.  Introducing any economic policy into a system and trying to forecast results is difficult because factors other than economic policy will affect the outcome.  Trying to separate out the impact of the non-policy factors from the policy is the stuff that keeps researchers employed, often to little success.

Every now and then though it is possible to look at economic policy and see if it produced its intended results.  This occurs when the extraneous factors are minimized.  Such is the case in Britain, when after its election to power in 2010 a coalition government largely dominated by the Conservative party implemented a plan to cut Britain’s deficit and stimulate growth and employment.

The program, largely designed by Chancellor of the Exchequer George Osborne had these components.

  1. Slightly higher taxes on wealthy Britains.
  2. Massive cuts in public spending and public employment.

The logic was that as Britain’s budget deficit were reduced, the private sector would develop huge confidence in the economy and not only soak up employment of the hundreds of thousands of government employees that were fired, but also engage in hiring the current unemployed.  Economic growth, low unemployment, low inflation and low interest rates would all result.

UK unemployment
Not What The Conservatives Expected
What The Rest of Us Expected

So now enough time has passed that the results of the policy are becoming known.  The good news, Britain is experiencing low interest rates.  The bad news, none of the other policy goals are being met.  On the employment front the results are extremely bad.

Unemployment reached a 17-year high today after another 128,000 joined the jobless ranks, taking the total to 2.64 million.

A series of grim figures delivered a pre-Christmas blow to the Government, with youth and female unemployment showing big rises and the number of people claiming jobseeker's allowance increasing for the ninth month in a row . . .

Employment fell by 63,000 in the quarter to October to 29.11 million, while the number of people working in the public sector dipped below six million for the first time since 2003.

The unemployment rate is now 8.3%, up 0.4% on the quarter - the highest since 1996 - while the jobless total is now worse than at any time since 1994.

Unemployment among 16 to 24-year-olds increased by 54,000 to 1.03 million, the highest since records began in 1992.

The Office for National Statistics also reported that women's unemployment increased by 45,000 to 1.1 million, the highest figure since 1988.

The number of people out of work for longer than a year rose by 19,000 in the latest quarter to 868,000, the worst figure since 1996.
Jobseeker's allowance claimants increased by 3,000 last month to 1.6 million, the ninth consecutive monthly rise and the highest total since the start of 2010.

But wait, didn’t the private sector create jobs?  Yes it did

Private sector employment increased by 5,000 to 23.1 million.

Yes, a grand total of 5,000 jobs were created in the private sector.  So as long as everyone is willing to ignore the actual number, Conservatives can say that the plan to create private sector jobs is working.  And trust us, that is what they will say.  Being in government (regardless of party or philosophy) means never ever having to say you were wrong.

The Prime Minister's official spokesman told reporters at a daily Westminster briefing: "Obviously the figures show an unwelcome increase in unemployment, but they also show some signs that the labour market is stabilising.

"Clearly, firms' decisions on whether to hire new people are being affected by the general economic outlook and in particular by what is happening in the eurozone."

Yep, not our fault, things are looking better, don’t believe all those bad numbers. Nice going Conservatives, you took a bad situation and made it worse. Good show, tally ho chaps.

No comments:

Post a Comment