As the FT reports this morning:
The International Monetary Fund has moved a step closer to withdrawing its support for theÂ UKâ€™s economic strategy, advising the government to redraw its fiscal tightening plan if growth disappoints in the coming quarters.
The IMF said in its Fiscal Monitor report, published on Tuesday, that Britain should relax its fiscal consolidation strategy, aimed at cancelling the UKâ€™s structural deficit by 2017, if the economy remained weak.
The remarks will pile pressure on George Osborne, chancellor of the exchequer, to switch to a â€œplan Bâ€ to boost the UKâ€™s ailing economy, which has contracted over each of the past three quarters.
We knew two years ago that the task we were taking on was a great one.
It isnâ€™t too much to say ...
... that the future prosperity of our country...
... the future of a free enterprise system under law ...
... even the stability of Europe ...
... is in question, in a way it has not been in my lifetime.
Across Europe governments have abandoned intervention in the economy.Â David Cameron and George Osborne led the way in the UK when, without an electoral mandate, they secured power and declared to the surprise of the followers of their coalition partners that the only way to deal with the economic crisis was for government to walk away from the problem.
That is precisely what Cameron and Osborne, with their allies Nick Clegg and Danny Alexander, have done since then. These two have become the apotheosis of something that has been thirty years in the making: they are the personification of what I call the cowardly state. The cowardly state in the UK is the creation of Margaret Thatcher, although its US version is of course the creation of Ronald Reagan. It was these two politicians who swept neoliberalism into the political arena in 1979 and 1980 respectively following the first neoliberal revolution in Chile in 1973 that saw the overthrow of the democratically elected Allende government by General Pinochet. Since then its progress has been continual: now it forms the consensus of thinking across the political divide within the UK, Europe and the US.
The economic crisis we are now facing is the legacy of Thatcher and Reagan because they introduced into government the neoliberalÂ idea that whatever a politician does, however well-intentioned that action might be, they will always make matters worse in the economy. This is because government is never able, according to neoliberal thinking, to outperform the market, which will always, it says, allocate resources better and so increase human well-being more than government can.
That thinking is the reason why we have ended up with cowardly government. That is why in August 2011, when we had riots on streets of London we also had Conservative politicians on holiday, reluctant to return because they were quite sure that nothing they could do and no action they could take would make any difference to the outcome of the situation. What began as an economic idea has now swept across government as a whole: we have got a class of politicians who think that the only useful function for the power that they hold is to dismantle the state they have been elected to govern while transferring as many of its functions as possible to unelected businesses that have bankrolled their path to power.