Watch or read much of the economics coverage in Britain and you sometimes get the sense
that we’re entering the final round of a peculiar game. Let’s call it ‘Russian Roulette for Economists’. The rules are simple: teams of academics and economically-literate politicos line up on
either side of an issue and hurl abuse at one another. The winner will be declared when something significant changes in the macro-economic position of the UK.
The game was played when Britain entered the ERM (those who said it would be a disaster won). The current double dip debate is another example.
This time, the principal players on one side are the former Bank of England policymaker Professor David Blanchflower and the TUC general secretary Brendan Barber. On the other, is George Osborne.
Osborne¹s office, indeed the entire government, has spent months giving the impression that cuts of up to 25 per cent in some departments are vital if Britain is to rebuild its
international reputation and avoid a ‘double dip¹. The reduction of some welfare payments was just his most recent gambit. He has called those who object to his policy
Meanwhile, Professor Blanchflower argues, with characteristic donnish
circumspection, that cuts "will do terrible and probably irreversible damage to the British economy. I am now 100 per cent certain these actions will push us into double-dip recession."
He accuses those who disagree with him of "political opportunism". Further, the Professor’s opinions have since given succour to union bosses like Brendan Barber who warned this week
that, "The coalition obsession with slashing jobs and services to reduce national debt risks hurtling us into a dangerous double-dip."
Come 2011 we’ll know whether it is Blanchflower or the Chancellor who avoided the bullet. According to the rules of the game, if there is no double dip, it should be impossible for the Professor’s
reputation to recover. He will, indisputably, have provided little but political cover to Britain’s left. However, if there is a double-dip, the Chancellor’s reputation will be shot to pieces. His
cuts will have crashed the economy.
Game Over. Except, of course, the whole ‘game¹ just like the iffy economic forecasts made at TUC Congress is utterly bogus. I refer you to page 45 of the ‘Red Book’ issued
following Osborne’s first budget which contains some really important information: the Government’s total expenditure. In the last year of the Labour Government this figure reached £669
billion but, lo, as the table clearly shows, cash expenditure will rise consistently to £737 billion in 2014-15. And this, surely, makes a mockery of the Barber and Blanchflower’s line that
Tory policies will cause a ‘double-dip’.
If there is a real-terms cut, it is at best marginal. That makes Blanchflower seem silly, but Brendan Barber looks ridiculous.