No, not quantitative easing—this has nothing to do with printing money. This is something quite different. Welcome instead to the “Quantum Economy,” which has less to do with the sound of rolling printing presses and everything to do with deep, flummoxing uncertainty. In this new “QE”, all economic measurements appear contradictory. The most basic judgements are impossible. There is no agreement about how the economy is behaving. If 0 denotes economic failure and 1 success, then the sum of all available expertise suggests that the answer to the simple question “how is Britain’s economy performing?” is both 1 and 0 at the same time.
It is a disconcerting thought, especially as the economy will be the deciding factor in determining the outcome of the general election; and yet how contradictory, how bewildering is the morass of evidence and analysis that the electorate must face. Take, for example, Ed Miliband’s insistence that there is “a cost of living crisis” in Britain and that the average household has been made £1,600 worse off by the government’s policies. Everyone is getting poorer and productivity growth is weak, a sign that wages will remain low. What is that if not outright economic failure? But wait. Other data—referring to the same economy, remember—shows that consumer inflation is now at 0.3 per cent and that wages are rising by 2.1 per cent year on year. Every employed person in Britain is becoming richer—what is that if not success?
That appearance of economic wellbeing is strengthened by the jobless rate, which at 5.7 per cent is at a six-year low. (Success!) But according to the Office for National Statistics, in August last year, there were 1.8m zero hours contracts in Britain, which guarantee no paid work but demand the signatory’s constant availability (failure!)
Judgements of the government’s over-all economic plan since 2010 are similarly paradoxical. George Osborne has been adamant that the only way to achieve economic recovery has been to reduce the overall burden of debt and to shrink the deficit. For this reason he has cut government spending, or at least he has reduced the rate at which spending has increased. His policies initially resulted in economic sluggishness, but this was followed by growth of 1.7 per cent in 2013, rising to 2.6 per cent in 2014, one of the most robust growth rates in the developed world. The OECD called Osborne’s policies “text book”, and an example to other countries. Christine Lagarde of the IMF has also praised the UK’s economic recovery. What is this if not success?
Osborne’s opponents, chiefly Ed Balls, reply that though it may look like success now, overall Osborne has failed. This Ballsian argument says that in the early days of 2010-12, the government cut spending too far and too fast. And what’s more, the argument continues, even though the UK may be experiencing a recovery now, this upturn would have come about sooner had spending been reduced at a gentler pace. George Osborne gave Britain two wholly unnecessary years of economic pain.
So Osborne’s overall record is yet another contradiction—on the one hand he has succeeded, and on the other, he has failed. But dig a little deeper and we find that this latter judgement, that Osborne has failed, contains an ulterior layer of internal contradiction all of its own. “If only the government had done this back in 2010, then the resulting economic growth would have been that,” is a statement about something that never happened—and what value can we ascribe to a statement of something that never happened? How does it help if we propose an alternate reality in which, back in 2010, George Osborne was a moderate Keynesian who allowed the economy to come back to life on a cushion of stimulative spending? What does it mean to compare something that never happened (Osborne increasing spending levels) with something that did (austerity) and to suggest that one is better than the other?
And here we reach the deepest layer of the mystery of Quantum Economics—the core fact that stares us in the face—the realisation that the most accurate description of the British economy resides in precisely these contradictions. There is a high probability that, in the economic argument at least, the Conservative and Labour parties are both correct. Labour is right to say that a big Keynesian splurge throughout 2010-12 would have helped growth and that cuts slowed the economy. But the Conservatives are also correct to say that debt had to come down and the deficit be reduced because of the crushing burden of debt interest payments and because of the simple fact that, well, you’ve got to stop borrowing eventually. Nothing can expand forever—not even the universe.
And so to the ultimate insight to be gleaned from this hazardously-stretched theory of Quantum Economics: that political economy is riven with contradiction and paradox. The results 0 and 1 often occur simultaneously, sitting side-by-side in a rebuke to the crass logic of brute political argument, which recoils at the possibility of such a thing. The political party that embraces the contradictory character of Britain’s economic recovery would be doing something truly innovative. But that, alas, will have to wait until the general election has passed, after which hopefully, the two sides of the argument will collapse into one and more sober judgements will prevail.
