George Osborne has long been in the City’s crosshairs, and criticism peaked last week when less than a quarter of a City panel believe he has the mettle to be Chancellor. Today, Osborne fights back in the FT, with a piece co-penned by Jeffrey Sachs. The pair set out an argument for immediate ‘frugality’, rather than ‘cuts’, and damn Brown’s economic policy as short-term politicking:
‘We are sceptical that a sustainable economic recovery can be based on either reinflating the sectors that have declined or believing future job creation can come simply from the public sector payroll.’
Two thirds of jobs created between 1997 and 2007 were in the public sector; a proportion that almost certainly increased thereafter, as the private sector is squeezed by the fiscal stimulus. Osborne is wary that the public sector could come to Labour’s rescue, and pledges that jibs will be protected and productive areas will receive investment. Notably, Osborne will protect science and technology budgets; the government gives no such assurances.
Osborne is clear that the recent crisis was a failure of regulation and vows that institutions are reformed so that prosperity is real and not the illusion cast by bubbles.
‘We must escape from economic management by quarterly indicators and the demands of the political cycle. Our problems, at the core, result from short-termism, in which governments have led and bankers chasing high bonuses have been only too keen to follow.’
Osborne is right. The survival of the tri-partite system is bizarre, and the notion that those industries and government practices that initiated collapse are the sole means to recovery is dangerously simplistic. He must continue to emphasise the differences between his medium-term strategy and Brown’s trigger-happy solutions.