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If we want to win elections we have to denounce austerity

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Part 1

“Never point out your own mistakes” seems like a good political maxim, so why should we ignore it on this occasion?

Of course, not everyone agrees that austerity was a mistake at all, and some say we should embrace our coalition record. That would be a monumental mistake. Trying to embrace austerity would be like Labour trying to embrace the Iraq war, it would be untenable.

Many people point out that all the major political parties were pushing austerity at the time: during the coalition Labour boasted that the government had, more or less, kept austerity to the levels Labour suggested. Clearly this wasn’t something the Liberal Democrats were solely responsible for. That doesn’t mean it wasn’t a mistake though or that no one knew it was a mistake at the time. While it’s true that many economists working for large banks were very clear that government debt was definitely the problem (and noticeably not the banks themselves!) academic economists took a rather different tack- their warnings were clear and broadly, as it turned out, correct. Even the IMF famously chided the coalition for being too reckless with austerity.

Estimates of GDP per household lost due to austerity in the UK vary with from some at £4000 per household and the Oxford economist Simon Wren-Lewis’ guess being more like £10,000 per household. There is no suggestion it did anything positive. (Simon Wren-Lewis’ book ‘The Lies We Were Told’ chronicles this beautifully. Also worth seeing is the recent report from the NEF featured in Bloomberg estimating the cost at £100 billion.) The famous academic paper (by Reinhart and Rogoff) that was used as political cover for austerity in 2010 turned out to be based on a simple maths error and was ultimately disgraced. Traditional macroeconomics won out- if interest rates go to zero, which they did, governments must either increase spending or hold back their own economies- we chose to hold back our economy.

It’s estimated that around 50,000 UK citizens died unnecessarily due to austerity during the coalition with more afterwards. Which is why it sticks in the throat a little when we’re told, and I’ve heard this a few times from more coalition supporting Lib Dems, that the coalition was “the best government since 1945!” I would gently point out that that the post-1945 era includes the Attlee government, which took on the ideas of Keynes and Beverage, both Liberal party members.

There are people who will still argue we had to worry about holders of UK debt panicking, even though as a country with its own currency UK bondholders are worried about inflation and Bank of England interest rates rather than default and so there was no real worry of UK debt exploding. Even if you don’t buy the economic argument, and I’ve only been able to lay out a small part of it here, austerity is now wildly unpopular and it is particularly unpopular amongst the young. This is only going to become more politically salient.

Of course it’s important to be “electable”- are we “a party of government or merely a party of protest?” being a common turn of phrase. We know that austerity is deeply unpopular. You may have noticed we lost a couple of seats in 2015 and our vote share dropped just a tad! So it’s not clear how supporting austerity makes us more electable, quite the reverse.

Then there’s the third argument- ideology. We are reminded that our party harks back to “a great Liberal tradition!” This misunderstands the Liberal tradition that the Liberal Democrats follow, not to mention the Social Democratic one, I’ll discuss why that’s the case in part 2.

* Stephen is Chair of Coventry Liberal Democrats and a Council Member for the Social Liberal Forum.


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