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A year on from Occupy and austerity is foundering

It’s one year since Occupy took over the churchyard at St Paul’s. Thwarted from their original plan to take Paternoster Square – opposite the London Stock Exchange, privately-owned – by its closure and surrounding with police, the Cathedral steps next door were turned into an impromptu forum. Over the next few months, Occupy, haphazardly and with no grand strategy in sight, managed to break through the omerta surrounding Britain’s financial services.

Bankers had been reviled since the crisis broke, turning overnight from Mr Mainwarings to Fred the Shreds. But no criticism to the bankers’ system had taken hold. A Coalition government, grudgingly placed into power on the back of two great myths – that public spending caused the debt crisis; that austerity would rescue us from it – had been allowed almost free reign to spread both, via a complaisant media. Oppositional voices were forced to the sidelines, despite the paucity of credible theoretical analysis or empirical evidence to support the Coalition’s policy.

Occupy didn’t shift this apparent consensus overnight. It was committed to the principle of plurality, and its activists largely deliberately avoided offering systemic alternatives. But it at least began to force open an argument about possible alternatives, and about the role of the City in public life – not least within the Church of England itself. It provided a platform in which anti-system and anti-austerity voices could make themselves heard.

Those who argued at the time, and had argued since the crisis broke, that austerity was itself a contributor to crisis should today feel vindicated. As widely reported, the IMF has rolled back its earlier enthusiastic support for austerity measures. Jonathan Portes from NIESR has some of the details on his blog; in summary, where it once thought the impact of spending cuts (the “fiscal multiplier”) would be muted, the IMF has revised its estimates to suggest that each £1 taken cut in government spending most likely leads to more – perhaps much more - than a £1 decline in activity across the rest of the economy.

If this expected impact increases, the government’s own predictions of a quick return to normality are sunk. As Duncan Weldon has shown, after digging through those forecasts, they depend critically on the IMF’s estimate of this multiplier. Increase the multiplier, and the negative impact of the government’s austerity programme overwhelms whatever recovery we might want to forecast elsewhere.

These are not radical claims about the world. The IMF is not a seething hotbed of anti-capitalists. These are sober estimates of a widely-used economic concept. And yet the Coalition’s plans still fall apart: if the real evidence of the last two years wasn’t enough, with shrinking activity and rising unemployment, the intellectual foundations of austerity – such as they were – are being kicked away.

The cuts consensus is being undermined, perhaps fatally. The Coalition is weak, and in these circumstances the Trade Union Congress’ anti-austerity demonstration this Saturday could not be better timed. Hundreds of thousands on the streets of London against the barbarous lunacy of austerity will apply direct political pressure to government: the first few steps in creating a movement for a real economic alternative. It’s a year since Occupy. And a glorious opportunity to turn its critique into political action.

 

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