In the Guardian and on the news the run of stories about hardship at Christmas is just beginning. Housing benefit cuts and mortgage defaults are putting people on the streets, and the Government's austerity policies are to blame.
This may be true, but the Government's opponents talk of austerity as if it were a choice. The suggestion is that there might be a painless alternative which Ed Balls is just waiting to implement, and as if there will come a point at which it is over. George Osborne's latest prognosis talks in terms of cuts lasting until 2018 or thereabouts, and after that date, we're told, everything will return to normal. If only incompetent Chancellor Osborne didn't keep putting it off!
I think that view is delusional. Austerity is not optional but inevitable. The idea that when your economy is at rock bottom and you are borrowing millions of pounds a day just to stay afloat it might be rational to carry on public spending as before is beyond ridicule. Austerity is with us for the forseeable future, and if, as I expect, Labour returns to power in 2015 we will merely have Labour's version instead.
What will it look like? You would hope they would have learned that there is only a certain mileage to be gained from taxing the wealthy. A week or so ago the Torygraph reported that the numbers of people declaring an annual income of more than £1 million fell from 16,000 to 6,000 after the introduction of the 50p tax rate; the Treasury reckon they lost £7 billion. But I wouldn't bet my mortgage on it. By 2015 the clamour from Labour's natural constituencies for a bout of rich-bashing will be more intense than it is now. It won't plug the hole in the UK's budget, and, like the 50p tax rate, it might cost the Treasury more than it gains; but it'll happen all the same. Parties pander to their supporters.
All of which brings me back to a point I've been making for three or four years, one which is worth dragging out into the light every now and again. It is that the credit crunch is not a crisis of Capitalism. Rather it is a crisis for Social Democrats. Why? Boom and bust is just what capitalism does - capital is misallocated; there is mispricing of risk; it all goes pear-shaped. This was a particularly big one, exacerbated by globalisation. In the decades ahead it will eventually work through the system, as the Far East gets richer and the West gets poorer. In the end the cycle will start again, with any luck featuring better safeguards in future (it probably won't, but one can hope).
Social Democracy, on the other hand, is dead in the water. It is predicated on an extensive system of support for people who have been unfortunate or who have made bad choices. For western countries expecting high standards of living it was unaffordable in the good times; we know Britain couldn't afford it, because overall we ran a deficit during the longest period of economic growth in British history, from Black Wednesday in 1993 to summer 2008. It will be doubly so in the bad times which now stretch away into the future. Way beyond 2018.
Personally I don't think Labour is anywhere near working out what might be a plausible substitute; not that that will spoil their chances in 2015. Most of their natural support haven't even grasped the nature of the problem - it still astonishes me how many people still think it was all the fault of the banks (or Gordon Brown for that matter), without asking themselves what it was the banks were doing. Answer - working out more and more ingenious ways of making it look OK to lend to people and governments that couldn't afford to pay it back. Trying to prop up Western living standards that couldn't be supported without that lending.
No, if I were a Social Democrat I'd be chewing my fingernails. If I were on the Hard Left, on the other hand, I'd be feeling rather chipper.
