So now we know the truth: the £6bn ‘efficiency savings’ the Tories promised before the election were calculated on the back of an envelope. It was clearly cooked up in the two weeks between the Budget and the announcement of the election, with the sole aim of giving the Tories some tactical room to attack Labour’s proposed rise in National Insurance contributions (aka ‘jobs tax’), whilst at the same time delivering a sleight of hand that would enable them to claim they were still serious about cutting the deficit without adverse consequences to ‘frontline’ public spending. Time and again during the leaders’ debates, when Gordon Brown accused the Tories of risking the recovery by cutting public expenditure this year, David Cameron responded by talking about ‘waste’ not ‘cuts’.

Well, the smoke has lifted and the lie is exposed. Whilst the Tories suggested that £1bn of savings could be found from efficiencies in government IT projects, the Treasury confirmed this week that the real figure would be £95 million – less than 10% of the figure claimed. Similarly the Tories suggested that £1bn of savings could be found by freezing civil service recruitment; the real figure will be £120 million, just over 10% of the saving claimed.

So the £6bn of ‘savings’ are ‘real’ cuts that will undoubtedly affect ‘frontline’ public services. Much of this has been detailed in the press, and I don’t want to go into that here. What does need to be said (again and again) is this: firstly, this calls the coalition government’s claims about ‘budgetary responsibility’ into serious question. Why should we trust them when their figures fail the first test?

Secondly, why did they bother? They’re in government now, so they don’t need to pretend that £6bn needs to be saved (especially since the deficit this year has turned out to be £7bn lower than previously estimated). Apparently it is because they needed some ‘symbolic’ cuts to send signals to the markets that the coalition was indeed serious about tackling the deficit. Well, this is not a game. These ‘symbolic’ cuts will mean real hardship for those who lose their jobs, those businesses whose contracts will now be cancelled, those school pupils who will now not be able to attend university and so on. Is this worth it just to send a ‘signal’ to the financial markets – those ‘stampeding herds of electronic gamblers’, as David Marquand calls them?

Which brings us to the markets, currently so spooked by budgetary deficits in Europe that they are pushing European governments to the brink of a double-dip recession. Whilst it is true that Europe (and the West more generally) has been living way beyond its means, the way in which the clumsy ‘invisible hand’ of the financial markets is pushing sovereign nations towards social armageddon is a democratic outrage.

For all their talk about devolving power to the people, this coalition government has said absolutely nothing about the real democratic deficit in today’s world: the fact that sovereign states are at the mercy of nameless, faceless, unaccountable speculators who hold, collectively, far more power over the lives of ordinary people than any government. All parties in this dying act of the neoliberal tragedy have been guilty of this complicit silence, but it is the Tories – with their bluster about protecting Britain’s sovereignty – that are most guilty of rank hypocrisy for they are the most in thrall to the merciless sovereignty of the financial markets. They share the markets’ irrational and dogmatic belief in the monetarism that served as a kind of ten commandments during the neoliberal hegemony (cut back the state; the market is always right; rely on the private sector). But what happens when the market fails; when the private sector is on its knees and is unable to fill the gap left by a retreating state? What is needed now is the kind of counter-intuitive Keynesianism proposed by economists such as David Blanchflower (who, by the way, served under Mervyn King on the Monetary Policy Committee and witnessed at first hand how the Governor of the Bank of England fretted about inflation just prior to the financial crisis when in fact the real threat was deflation; King got it wrong then, and he’s wrong now).

And if the financial crisis of 2008 has taught us anything it is that markets do not act rationally; much is made of the ‘wisdom of crowds’, but this cliche obscures the utter banality of this so-called truism. Crowds are just as likely to act stupidly as wisely – just witness the ways in which mobs quickly spiral out of  control. Financial currency speculators are just sophisticated mobs and the rule of global markets is mob rule, simple as that. That is why George Soros has called for the banning of speculation which destabilizes the economies of sovereign nations. Too much power in the hands of an unelected mob means, by definition, too little power for citizens in democracies to determine their own economic, social and political priorities.

Moreover, by pandering to the frenzy of the mob, the coalition is making a double-dip recession more not less likely thereby resulting in the likely growth of the very deficits that the markets are so concerned about. Blanchflower calls this the ‘death spiral’ – recession leads to unemployment and the provate sector collapsing, leading to higher spending on welfare and less tax revenue, leading to cuts in public spending, which further entrenches the recession and so on, leading to a great depression of the kind we have just narrowly avoided. And if you want to know what death by a billion cuts looks like, you don’t have to look very far: Ireland is an economy on its knees and a society in turmoil (the deficit is 14.3% of GDP, larger than Greece’s; unemployment is a staggering 13.4%). The Celtic Tiger was once the cheerleader for neoliberal free market economics, now it is cutting its way out of recession as required by the neoliberal orthodoxy. The problem is, it isn’t working.