Thanks to a massive economic crisis and the election of a Conservative led government, Britain is now the great testing ground for supply side economics. The coalition government has virtually no restraints in enacting its economic policy by virtue of the British political system that gives the government wide reaching power after it is elected (as opposed to the American system that consists of more rigorous checks and balances). So we now get to see whether their prescription of austerity measures, tax breaks for the rich and privatisation works. And so far, it isn't looking good. The New Statesman reports on the shocking decline of the economy under chancellor of the exchequer George Osborne:
Growth is falling, unemployment and inflation are rising and consumer confidence has collapsed to levels lower than it reached in the depths of the recession in 2009. Rather than evidence of an "expansionary fiscal contraction", we are observing a "contractionary fiscal contraction". New data shows that all of the countries that have implemented fiscal austerity policies experienced negative GDP growth rates in the fourth quarter of 2010: Greece (-1.4 per cent), Iceland (-1.5 per cent), Ireland (-1.6 per cent), Portugal (-0.3 per cent) and the UK (-0.5 per cent).
Despite this evidence and the mounting public opposition to the Conservative agenda, the coalition government is still pushing ahead with its reforms and slashing spending across the board. The nation is set to transform under David Cameron and Nick Clegg's watch, and the trend so far is deeply troubling. Their vision is of a radically decentralized state with the localization of political control and privatization of state function sounds great in theory, but in reality is simply a method of transferring wealth from the lower and middle classes to the rich. If the economy was growing, this would be better hidden by increased prosperity for all, but applying it during a recession is making the motives all the more clearer. While corporate profits are up, the poor are being left out to dry by the cuts, proof of where the government's priorities lie.
Generally speaking, neo liberal measures have not been particularly successful when it comes to overall growth (and they have been disastrous when it comes to income disparity and economic stability). An excellent explanation by Noam Chomsky of this can be read here - the main point being regulation and state redistribution of resources have proved remarkably successful when it comes to creating economic prosperity, and the reverse is true of the 'free market' solutions.
At some point, public opposition to the cuts will be too much for the government to ignore. The worst of the cuts have not made an impact yet, but they will be felt in full force over the next 12 months. They will no doubt reverse many of their austerity measures to cope with a shrinking economy and rising unemployment, but will they ever admit that their economic philosophy is bankrupt, and finally put to rest the ideas of Milton Friedman and Ayn Rand?