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Leaving cloud cuckoo land

The International Monetary Fund is amongst the most influential institutions on the planet. It has a membership of 188 countries and employs 2,400 staff. Half of them are economists. If anyone should know about the state of the global economy and its likely trajectory, you might think it was the IMF.

But you’d be wrong. The IMF has just had to “revise” its growth forecasts downwards, not for the first time. Fear not, Britain has its own forecasters. But they’re no better.

The Office for Budget Responsibility was created by the Coalition in 2010 to provide as its website proclaims “independent and authoritative analysis of the UK’s public finances. It is one of a growing number of official independent fiscal watchdogs around the world”.

It too got it’s forecast wrong. Badly. And now it’s own up time.

In its latest Forecast Evaluation Report, the OBR says:

Following the Coalition’s first Budget in June 2010 we forecast that the recovery would be slower than its predecessors, but nowhere near as slow as it has been. We forecast that GDP would rise by 5.7% from the first quarter of 2010 to the second quarter of 2012, but the latest data suggest it has grown by only 0.9%.

Ask virtually anyone on the street whether the economy is going to improve and they’d give it the thumbs down. Nothing could be more obvious.

How is it that these highly paid experts got it so wrong?

Are they, perhaps, living in cloud cuckoo land, in “an unrealistically idealistic state where everything is perfect”? Are they perhaps unaware of reality or deranged in holding such an optimistic belief’?

The truth is the OBR, like the IMF, is collectively blinded to reality by the views held by all in common and expressed recently by an eminent political figure, who said:

21st-century politics is, in fact, increasingly post-ideological. The biggest challenges we face are similar in most countries: growing our economies in a way that creates opportunities for everyone, providing high-quality health and education services, ensuring safety and security. [my emphasis]

This was former New Labour prime minister Tony Blair in a collection of essays on "Government for New Times”. The extract is from the first of five lessons Blair claims to have learnt from his period as PM. It’s not surprising that Blair remains wedded to the growth that has brought the planet’s ecological systems to the limits of their ability to support life.

But you might find his second lesson a bit of a shocker:

The second lesson is that you have to aim for systemic change. The pace of change in the modern world is incredible, with the emergence of new powers, such as China, India, and Brazil; new technologies in communications, energy, and medicine; and new global challenges like climate change and the financial crisis. Only systemic change, as opposed to incremental or piecemeal reform, will allow government to keep pace in a rapidly changing world.

Has Blair suddenly become a revolutionary?

We might even agree with his third lesson that “the best systemic change and delivery begins with the right conceptual analysis”. But Blair, the IMF and the OBR share the same foundational concept held by the 1% – there is no alternative to the capitalist system of production.

And they’ll do anything to preserve it. Like destroying the productive infrastructure of Iraq, and causing the death of more than 1 million people in order to give contracts to the oil corporations for its reconstruction and exploitation.

Or driving down living standards and cutting public services and reducing real wages in Europe and North America to compete with emerging powers.

These are the kinds of things that Blair and his co-thinkers mean by “systemic change”.

Real system change requires new forms of democratic ownership and control, a switch from production for profit to sustainable production to meet socially-determined priorities and the removal of the political elites that act as proxies for corporate power. We need, therefore, an Agreement of the People, a constitution that puts the majority in charge. Please come to the assembly on November 17 to work on this very strategy.

Gerry Gold
Economics editor
17 October 2012

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