The Coalition’s economic policies are the most right wing liberal capitalist policies of any of the world’s major governments. They wish to transform a structurally weak UK economy based on credit, an unregulated financial system and public services supported by a structural spending deficit into a power house free enterprise economy based on a dynamic private sector. This new economy, they think, will create millions of jobs and see a strong recovery in the UK in time for them to be re-elected in five years time.
To do this they are prepared to bear two to three years of austerity, vast unpopularity and a second recession in the hope that a new private sector will emerge and create these millions of jobs.
In an ideological move that goes way beyond cutting spending to reduce the deficit and debt, they wish to push the welfare state back to 1945 levels. The NHS while nominally public and will be outsourced in England to the private sector. The total NHS budget will be much reduced that is cut but the coalition will argue that a privately run NHS will be able to provide the same front line services at much reduced cost. In Scotland they will argue that less money is needed if you run the NHS as “efficiently” as in England! Scotland will see its overall budget reduced to reflect this.

The cuts alone will see about 1.4 million jobs go over the next four years – 750,000 in the public sector and 650,000 in the private sector jobs dependent on public spending. These are the estimates from the respected economic think tank Capital Economics.
Instead the UK is likely to be in a near decade long slump at the end of their term of office – if they survive the full term. Their projections for the UK economy this year and the next two years while more conservative than Labour’s old forecasts are still way above the consensus of City predictions. This means that the cuts will have to be deeper – approaching 40% – to meet spending targets.
At the same time as massive attacks on pay and conditions and public services they are giving every help to private industry – cutting corporation tax and reversing Labour’s employer’s national insurance rise and handing our government grants to selected target industries such as the ports.
But their plan is doomed to failure as the UK is the most mature capitalist economy in the world with the lowest rate of profit for manufacturing industry amongst the world’s major economies. Profit levels too are falling in the services industries as they start to reach maturity. Take these factors together with the fact that credit for individuals and corporations will be difficult to come by as banks face higher levels of capital requirements and also want to ensure they have sufficient capital to guard against further financial crises and further falls in property market.

What would be required for the coalition’s plans to come off would be a massive new investment in new industries that were competitive against the Chinas, Indias and Brasils of this world together with a big pick up in consumer demand. Both these things cannot happen because of the higher rate of exploitation in the developing countries and their less mature levels of automation. In the UK Consumer demand cannot pick up both because there will be little credit available and unemployment will remain at very high levels.
The only way forward for the UK which is ripe for change is to reorganise the economy under popular control and ownership to ensure that people’s real needs are met. It is the only way out of the slump that the coalition is recklessly preparing for us all.