In the wake of the Labour Party conference last week, and as the Conservative Party’s conference takes place, it is clear that the campaign for the next general election is under way.
No sane person would contend that our budget deficit is not in need of some serious attention.
At present the choice would seem to be between the Conservatives contention that a serious reduction is essential now and Labour’s argument that phased reductions over the lifetime of the next parliament would be more appropriate.
What I look for, when it comes to issues of this magnitude, is not just the proposed policies on offer, what concerns me more is the analysis that underpins and informs the policies.
In other words if someone doesn’t understand how and why the present situation evolved then it follows, in my opinion, that they are less likely to be able to deliver the most apposite solution.
From the presentation of the issues by our media one could be forgiven for concluding that Gordon Brown is single-handedly responsible for the current global financial crisis.
Or that he is single-handedly responsible for the budget deficit.
It has also been a recent theme in political debates to castigate and deride Gordon Brown for his assertion that he had abolished ‘boom and bust’. Critics point to the present recession as evidence that he was talking nonsense.
For people of a certain age there is actually no need for me to present facts, figures and arguments to the contrary – because you all know the necessary information already.
For example, let me ask you a simple question:
‘What is it that has characterised every recession apart from the present one ?’
You’ll agree with me when I say that is was high interest rates and high inflation.
Under Lady Thatcher’s governments both inflation and interest rates ran at over 15%.
It was a similar story under the Wilson and Callaghan governments during the 1970s and again, albeit to a lesser extent, under Heath’s government. Etc, etc.
A very clear picture emerges when the economy overheats – inflation and interest rates rocket. No doubt all of those governments would insist that there were mitigating factors yet it is also arguable that their respective domestic policies were in the very least partly responsible.
Now look at our situation today – inflation and interest rates are extremely low. In the case of interest rates the lowest since records began with the formation of the Bank of England back in the 1790’s.
Indeed both were very low even before the present crisis hit a year ago.
My conclusion is that our present problems are directly and exclusively attributable to the global collapse of finance.
OK then say the critics; the regulatory system that Brown put in place failed miserably.
Such a position tends to overlook that, with a couple of notable exceptions, nobody saw the collapse coming.
It also overlooks the fact that the Conservatives OPPOSED any regulation whatsoever. They wanted further deregulation.
It also fails to consider that it was Brown’s first act as Chancellor to remove the setting of interest rates out of political hands and to give the responsibility to the Bank of England.
Thus it is no longer possible for any government to instigate periods of boom and bust because they are no longer able to manipulate interest rates out of political expediency.
What we witnessed last year was not just the collapse of finance but also the entire intellectual theoretical edifice that supported deregulated, free market, laissez faire capitalism. The notion that the markets were best placed to decide on these matters and that government should not interfere has been shattered forever.
The discrediting of this theory, so enthusiastically adopted and promoted by Lady Thatcher, goes to the heart of the current debates.
The Conservatives are doing everything in their power to keep this out of the public eye. They blame Brown, not because they believe him to be culpable, rather it is because it deflects attention from their central role in all of this.
The Conservatives now talk about our children and our grandchildren having to pay off the debt, as they would have it, that Brown has lumbered them with.
I would ask you to consider two points.
Everybody would agree that this crisis is the worst the country has faced since the last war. Yet nobody seems prepared to acknowledge that the debt we took on during the Second World War was as a greater percentage of GDP then now.
There is no suggestion that Churchill and his government should have capitulated to the nazis rather than take on astronomical levels of debt. That would have been unpalatable. There was, and is, no talk of Churchill lumbering future generations with debt – and quite rightly so – he did the right thing.
Likewise Brown. Is anyone seriously suggesting that the government should not have intervened a year ago – that they should have simply let the markets take their course ?
That they should have stood by whilst banks collapsed, ATM’s ceased to dispense cash, savers lost their savings. Whilst millions of homes were repossessed; and whilst millions of business’s crashed and millions lost their jobs.
In short that they should have capitulated ?
Of course not, what sane person, looking at things in the round would fairly come to that conclusion.
Yet that was, and is, the policy of the Conservatives.
They opposed Brown’s measures every step of the way and they blame him for everything NOW.
Even to the extent that they credit the Bank of England for keeping interest rates low – without mentioning that it was Brown who had the wisdom and foresight to give the bank such control – and without mentioning that they, the Conservatives, opposed the move at the time.
To be continued…..