Thursday, October 21, 2010

It's the end of the world (as we know it)

One of the depressing things I found about researching a doctorate is that the clear, simple, broadbrush messages and patterns that you can discern when you start begin to blur, dissipate and smudge as you dig deeper into the evidence.  The person who can give you a simple, straightforward and lucid description of pretty much anything is either a towering genius or, far more likely, mostly ignorant of what he’s talking about.  As a prime example of the latter, lets turn (once again) to Johann Hari. Hari has, of course, decided that the cuts announced in the CSR yesterday are the end of civilisation as we know it, and is not to be swayed by the inconvenience of facts.

When was the last time Britain's public spending was slashed by more than 20 per cent? Not in my mother's lifetime. Not even in my grandmother's lifetime.

Anyone spot the blinder in this line? Yes – it’s that public spending, far from being slashed by 20%, is actually being cut by the rather more modest 4% over 4 years.

No, it was in 1918, when a Conservative-Liberal coalition said the best response to a global economic crisis was to rapidly pay off this country's debts. The result? Unemployment soared from 6 per cent to 19 per cent…

Who thinks that the demobilisation of 3 million men might have had an impact on unemployment? In fact, Hari has all this arse about tit. Public spending diminished dramatically after the end of the First World War because, um, the First World War had ended. When by far the largest single component of public spending ceases to be, the effect is likely to be a diminution of that spending. If Hari wasn’t such an arsehead about numbers, he’d know that public spending fell even more sharply after the Second World War – by 35% from 1945 to 1949. In the style of Johnny Cochrane, if 35% is bigger than 4%, then Johann Hari is an idiot.

That's why virtually every country in the world reacted to the Great Crash of 2008 – caused entirely by deregulated bankers –

I would love to know what regulation, specifically, Hari believes was removed from the financial sector, that caused the Credit Crunch. Because my guess, based on reading Hari for a while, is that his knowledge of the financial sector is rather less profound than his knowledge of history.

To pluck a random example, one of the richest corporations in Britain, Vodafone, had an outstanding tax bill of £6bn – but Osborne simply cancelled it this year. If he had made them pay, he could have prevented nearly all the cuts to all the welfare recipients in Britain.

And this is what I meant earlier about the best and most powerful arguments being based on ignorance. The Vodafone case has been rumbling on in the courts for over a decade now and relates to a technical dispute over a Luxembourgeois subsidiary and the Controlled Foreign Companies tax system that the late and unlamented Labour Government made such a monumental horlicks of during their time in office. Rather than continue to pursue a legal case with no guarantee of any recovery at all in the long term, and no possibility of any recovery in the short term, HMRC has decided to settle this and similar long-standing disputes now (Vodafone settled for £1.25bn), and clarify the law so that there are fewer such disputes in the future.

Which all means that in that first sentence, both major elements are incorrect. It wasn’t an outstanding tax bill, and Osborne didn’t cancel it. If he (or any previous Chancellor) could have made them pay, then he undoubtedly would have done so – unfortunately there’s this pesky thing called the rule of law.

You can’t fault Hari’s emotional engagement, but I do wish he’d read a little more.


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