It wasn't Labour who spent too much, it was the banks. How did we forget this?

http://www.guardian.co.uk/commentisfree/2013/jan/04/labour-spent-too-much-banks

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The New Year, apparently, is not going to be "happy" after all. According to David Cameron, it is to be a year of "grave economic uncertainty". Yet, in this unpredictable world, one thing is certain. The government will carry on behaving as if the consequences of economic failure are actually its causes. They have to, really. If the coalition doesn't cloak its crude and desperate accountancy in the drapes of political purpose, they will be forced to admit a terrible thing: the democratic paralysis that has gripped the world is entirely the result of self-preserving, take-no-responsibility neoliberalism. Look upon your works, ye mighty, and despair.

Difficult as it is to accept that Nick Clegg can be described as "ye mighty", it's worth looking at a few choice quotes from his latest missive to the electorate, a piece published in the Times this week. "We came together to fix the UK's broken economy – and that purpose defines the coalition even more today than it did back then. Why? Because the repair job is bigger than we thought." Clegg sounds like a car mechanic of yore, explaining to an owner that he couldn't have known that the big end was gone until he got the car over the pit. Or something. Except, of course, that the coalition isn't actually fixing Britain's "big end", the UK economy. It's slashing welfare, which only exists because the economy never did have a big enough engine to take all of the population in the right direction.

Clegg continues: "The biggest divide in politics today – here and around the world – is between those who offer leadership and those who only offer dissent." What he means by "offer leadership" is "make cuts in state spending". What he means by "offer dissent" is "oppose cuts in state spending". He bolsters this interpretation with an explicit attack on Labour. "They're learning the tricks of opposition and finding their rhetorical refrains. But where are the numbers? Where are their sums?"

What's sad about this attack is that it's narrowly honest. Before the election, Clegg led a party that claimed to reject the "old politics". This, he as good as admits, can be filed under "the tricks of opposition" and "rhetorical refrains". Now, in power (as he fondly imagines himself to be), he is trying to make a virtue of the fact that he has learned that politics is not about ideas or idealism after all, but merely about balancing the government's books. He believes that the electorate will come to respect him for his hard-won wisdom. But who can respect a politician whose great revelation is that there's no place for politics in politics, because in the end it's all just bean-counting? Especially when he is so spectacularly wrong?

In framing cuts as "the answer", Clegg and the coalition are performing an astonishing inversion. The welfare state exists because competitive, choice-driven, capitalist economies by definition create winners and losers. The coalition instead behaves as if there would be no losers if the welfare state didn't create them. How can adults profess to believe so fervently in competition and choice, but deny that in competition someone always comes last, and that for some people to make "good" choices, other must make "bad" ones?

Democratic politics exists only to make the powerful answerable to the vulnerable. Without that exchange, it is nothing. The coalition – the right – overturns that link and despises the welfare state for giving the vulnerable protection from the powerful. They think that without protection, the vulnerability would disappear. Yet they need only look to places – and times – without welfare, to see what a delusion this is.

It's important to recognise that the coalition is sincere in its delusion. Accusing them of cynically employing "shock and awe" opportunistically to deliver "ideologically driven" cuts and privatisation in the wake of the banking crisis is no good. They really believe, I think, that neoliberalism has been stunted and retarded by the socialistic welfarism of the "big state". They really believe that once the public sector has been curtailed, the private sector will move in to replace it with services that are more efficient and dynamic. It's their genuine conviction that they are in the process of making Britain and the world a better place that makes them so dangerous.

The reality, however, is that all three of Britain's major political parties were speaking the truth at their pre-election conferences in 2009. Each admitted that there would have to be deep cuts to public services. But this wasn't because the economy needed "rebalancing". It wasn't because making cuts would achieve any sort of effect on the economy. It was because, as outgoing chief secretary to the secretary Liam Byrne wrote in a note to his post-election successor: "There is no money left." It's important to remember that the cuts are reactive. They are not being made to achieve an economic result. They are an economic result, a logical conclusion. The most dispiriting thing in the human world today is that there is so little clarity over what they are the result of.

The government and the opposition have carved the story up between them. They appear to have contradictory narratives when each is telling part of the truth. Labour insists that the deficit exists because the global financial crash, and the consequent bailout, cost the government a huge amount of money at a time when, also because of the crash, tax revenues were plummeting. True. The coalition insist that the deficit exists because Labour "didn't mend the roof while the sun was shining". (Interestingly, that analysis is the only bit of Keynesianism the Conservatives ever deploy.) Also true.

But the important thing is to understand what the Labour government would have to have done in order to avoid the situation it found itself in at the time of the banking crash. It would have to have been the banks' bank – taking the revenue generated by the banks and keeping it safe, in order to give it back when the sun stopped shining and rainy days came. Is it realistic, this vision of "liberal democracy" as entirely apolitical, existing only to smooth out the cycle of boom and bust? It's more realistic than Gordon Brown's great delusion that he'd "banished boom and bust". But it relies too much on the myth that booms enrich everyone, a myth easily exposed by pointing out that under that supposedly profligate Labour administration, now accused of recklessly taking from the rich and giving to the poor, the gap between the richest and the poorest didn't narrow. Even under a heavily redistributive government, it widened. Why? Because big states are a consequence of unfettered capitalism. Only when politicians – and capitalists – stop trying to pretend that isn't so, will the political cycle of spend and<strong> </strong>cut<strong> </strong>be banished. It wasn't the government that failed to mend the roof while the sun was shining. It was the banks. They borrowed and spent like there was no tomorrow. They inflated the economy until it exploded. They had no savings set aside for times of trouble. It's amazing that in five short years this glaring fact has been all but disregarded, while politicians get on with the business of blaming each other for the chaos.