24 January 2009

Depression (economic and political), lame rhetoric, and the National Government of 2010

I'm enjoying this morning's Telegraph headline: Britain on the brink of an economic depression, say experts.

So in six months we've gone from slowdown to recession to depression. What's next - Zimbabwe UK and the barter economy? Jesus Christ.

Actually Jesus Christ could be next... although it's not normally Gordon's style to wear his religion on his sleeve. An appeal to some cheesy version of Christianity to get us through the slump would be more in the Tony Blair bag of tricks. (Note that Tony, after helping lead the country over a cliff, managed to get out just before this all started, with Northern Rock. Coincidence? Probably).

But even some evangelical waffle would be a damn sight better than the crap that Gordon has been churning out in recent interviews. Again in the Telegraph, Iain Martin's writeup of the Prime Minister's Today interview with Evan Davis is an amusing read, even if a teeny bit biased.

The key paragraph is:

"Because [Gordon] is psychologically incapable of a "hands up moment" he cannot say: look, I have regrets, I made some mistakes, I might have let elements of the boom run too far for too long, but I'm determined to deal with a real national emergency. It's my responsibility."

He's always been like this. I remember Andrew Dilnot, then head of the Institute for Fiscal Studies, trying to get him to admit that the ratio of tax to GDP had increased over Labour's first term, in a Treasury Select Committee session. Dilnot had the ONS figures in his hand, and Brown still wouldn't admit it.

Occasionally, this stubborn refusal to admit the facts can leave you looking like a strong politician - if the facts turn out your way after all. For example, a few years ago the balance of independent economic forecasters consistently understated the UK growth rate, whereas the Treasury's forecasts were much closer to being on the money. Brown held out, and was vindicated.

But more often, this kind of obstinacy just leaves the protagonist looking like an imbecile. And that's the danger with Brown - and Darling - unless they change tack pretty damn soon. They need a complete change in approach - the objective should not be to try to ride these little difficulties with the economic system out so that we can resume business as usual, but to effect a complete change in the UK's economic system. We need nothing less than a revolution in economic policy. Instead, after the bailout in October which was handled reasonably well, Brown and Darling assumed that everything would be OK. And so, of course, the present crisis has engulfed them because they thought they'd already done all they had to do.

"Son of Bailout" announced this week seems to have reassured the markets not at all, because people have finally woken up to the fact that the potential bad debts of the three main UK banks are so large that they could completely overwhelm the public finances. That's why we've got people going round saying that the UK might need to go to the IMF.

At the very least, it would be good if Government ministers could show a bit more fight and nail the opposition, whose response to the crisis is even more incoherent, if anything. Cameron and Osborne have opposed the bailout on the face of it, but have NO ideas of their own other than cutting public spending - which in the short run, would make the slump worse. They are 50% Herbert Hoover and 50% Jeffrey Archer. Complete paper tigers. Only Vince Cable for the Lib Dems has shown any real understanding of the situation.

And that might provide a way forward for Brown... a 1931-style national government, with the Lib Dems, plus anybody he can persuade over from the Tories (Ken Clarke?) He does believe in the 'broad tent' after all. A pro-Euro 'broad centre' coalition, formed later this year, going to the country under some kind of combined banner in summer 2010, fighting a rump Tory and Labour party... with support from the business community. They'd probably win a landslide by labelling anyone who didn't agree with them as an extremist, and Brown would be kept on as a Ramsay McDonald style figurehead, with Cable or Clarke at Number 11.

If the government's poll rating deteriorates through the year (and unless they start changing the rhetoric and hitting the Tories hard, I can't see any reason for it not to), a National Goverment begins to look more and more of a possibility. A state of emergency might be declared just to make it look a bit more exciting. Let's see.

1 comment:

Van Patten said...

I don't think you realise how prescient your second paragraph is.
The road to Harare is a short one, and we could be there sooner than we think.

A broad centrist coalition (and a succession of chancellors at its head) was followed in Germany in the 1930's by an extreme Nationalist government, with consequences and ramifications still felt to this day (Check out a tourist guide to Western Poland or North Bohemia)Whilst it's probably too early to use the analogies of the Weimar Republic, I don't think printing money is going to have any effect.

You deride the solution (which must involve a degree of retrenchment) of cutting out public expenditure as likely to intensify the slump - however, even in the 1980's or 1970's government departments which have now reached monstrous proportions, and which in some cases are actually destrucive to National Income proliferate seemingly without end. The head of the Civil Service Association was on the BBC complaining that 2,700 Civil Servants had lost their jobs 'since the recession'. Unless that figure is raised by a factor of 100, we're in deep trouble. Whilst carefully targeted public expenditure might help alleviate the slump, I do not think this government is capable of depoliticising it and spending taxpayer's in an efficient manner.

Hence the need for a serious audit of what the government is doing. Bullshit like 'Climate change advisors' might be tolerable when times are good, but otherwise is an expensive luxury - we need to batten down the hatches and ride the storm out!