Keynes had the right description for the state of Britain today when he said a depression was "a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards collapse".
Every part of that statement applies to the UK. The economy has been operating at low levels of activity for five years and while there is no immediate sign of another slump there is no evidence of recovery either. Britain has achieved a form of stability, but it is the stability of the comatose.
For the past three years, the treatment administered by the government has been a mixture of crash diet and happy pills. The rigour has come from the Treasury in the form of higher taxes and spending cuts, while the Bank of England has doled out the anti-depressants. It's time to change the medicine.
George Osborne's original diagnosis of Britain's economic problems had merit. He was right to say that growth was far too dependent on debt. He was right to point out that Britain's public finances going into the crisis were far weaker than they should have been.
All that said, the treatment has not worked. The past three years have seen weak growth, slippage on deficit reduction, zero evidence of rebalancing and the downgrade of Britain's credit rating that austerity was supposed to insure against.
This Wednesday Osborne will deliver his fourth budget and has the opportunity to try something different. But changing course now would mean admitting that Ed Balls was right all along. Even worse, it would lay David Cameron open to the charge that he was the political reincarnation of the U-turning Ted Heath.
So the rhetoric will remain the same. Osborne will say that the downgrade makes it even more imperative that there is no Treasury backsliding and will insist that budgetary rigour can allow the Bank to become even more activist in its approach.
The expectation is that the package will be neutral, with every pound of giveaways matched pound for pound by takeaways. Financial markets know there will be headline-grabbing measures on Wednesday but believe the budget will neither stimulate the economy nor lead to demand contracting. Boosting growth will be left to the Bank of England.
The results of four years of monetary activism from the Bank have been disappointing. Ultra-low interest rates have not done the trick, nor has £375bn of quantitative easing (QE) through the asset purchase scheme. Osborne feels he has been let down by King, who in the eyes of the chancellor has failed to deliver his side of the bargain. The hope is that under the new governor, Mark Carney, the economy will achieve "escape velocity".
To achieve this, Carney looks likely to get the extra leeway he has sought. Osborne may announce a consultation into the Bank's remit, the legal mandate under which it independently conducts monetary policy. Suggestions include giving the Bank a longer period to bring inflation back to its 2% target, providing it with a dual inflation/growth target like the US Federal Reserve, or broadening the scope of the QE programme so that a wider range of assets, such as mortgages, could be purchased.
Relying on the Bank to do the heavy lifting looks like the safe option. However, it is the wrong option and if he delivers the steady-as-she-goes package the City is braced for Osborne may regret it.
Michael Saunders, UK economist at Citibank, points out that Osborne has been chipping away at the UK's structural budget deficit by about 0.5% of GDP in the past two years. But in the next year (2013-14) the tightening will increase to 1% of GDP as a result of "fiscal drag", the phenomenon whereby the Treasury's revenue take rises because individuals move into higher tax brackets.
With the economy as weak as it is, intensifying the squeeze is plain daft, and if the chancellor decides to maintain deficit reduction at the current 0.5%-a-year pace he could cut taxes or boost capital spending by £8bn in the budget.
It would not make that much difference to the economy but it would be a start. What's more, it would make Osborne look less like a doctor who refuses to change his treatment even when the patient is not getting better. The time is rapidly approaching when the patient can ask for a second opinion.
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