Monday, October 13, 2008

Successful Cure or Sticking Plaster?

Several commentators have already mentioned how Gordon Brown seems to be relishing the present crisis, as it gives him - at last - a sense of destiny as prime minister (see Andrew Rawnsley in the Observer here). One prescient commenter on a previous post here has also suggested that the financial crisis could be Gordon's Falklands - the thing that elevates him above the apparently toxic unpopularity he has been enduring, to make him a runaway election victor when he next faces the polls.

I suspect that such optimism is mislaid. The real impact of the financial crisis has yet to hit the homes of most ordinary voters, and when it does, in the form of family budget crises and rising unemployment (The Observer carried a prediction of 2 million by next month when the crisis squeezes the real economy) there is unlikely to be much electoral sympathy for Gordon Brown. The policy of nationalising the banks may or may not work - and not every country has had to go through this extraordinary rescue plan, notably Australia and Sweden - and the long-term consequences of nationalised banking have yet to be properly weighed up, but for the crisis proper, Gordon's rescue plan is still obscure. In these circumstances, the Tories merely have to sound credible - I agree, something they are still struggling with - but they can take some comfort from the fact that no-one rewards governments that preside over a general economic stagnation. Once the banking crisis has disappeared from the front pages, what will be left will be a huge expenditure of government money, and a lot of people wondering why their jobs can't be saved in the same way as the banks. Whatever rational explanation there may be for that conundrum, it does not add up to any good electoral figures for the incumbent government.

Further Links (UPDATED):
Guido Fawkes on Brown's delusionary beliefs
John Rentoul on why it's game over for Brown.
Paul Krugman's view - the Nobel prize-winning economist praises Brown's actions - see the comments on this.
John Redwood.


Pier said...

"Gordon's rescue plan is still obscure"


The recent-Nobel-prize-winning-dogs-bollocks-at-all-things-international-finance economist (Paul Krugman) seems to disagree with you slightly.

Because he seems to be under the impression that Gordon has been brilliant.

Now who to believe, the Nobel prize winning economist or Giles Marshall, Paul Staines and the great gang of right-wing wash-ups who have so far offered nothing in terms of a solution....

GM said...

Is that the same Paul Krugman of whom the widely respected British magazine "The Economist" said:
"A glance through his past columns reveals a growing tendency to attribute all the world's ills to George Bush...Even his economics is sometimes stretched...Overall, the effect is to give lay readers the illusion that Mr Krugman's perfectly respectable personal political beliefs can somehow be derived empirically from economic theory."

Or of whom the New York Times' own ombudsman said:
"Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults."

You're right Pier - who could possibly criticise Brown now that he has such a world-beating, objective trade theory economist on his side.....

consultant said...

Giles - your somewhat childish response simply reconfirms how terrified the Tories are in response to this crisis and the resurgent Brown.

Cameron has built his lead based upon the idea that Brown is a dithering fool, so any semi-serious commentator making remarks such as "this combination of clarity and decisiveness hasn’t been matched by any other Western government" should scare the Tories. To have those comments come from a Nobel economics laureat, however, should terrify them.

The Brown approach has been tried before and has worked; the 1992 Swedish bank recapitalisation, following a similar model, actually turned a profit for the Swedish tax payer in the end. Before the Tories start accusing him of ripping off ideas, however, the important thing to see is that it is not so much the plan itself here that is inspirational, but the fact that Gordon Brown has had the courage to implement it at home without dithering, and has the international stature to encourage the rest of the world to take it up; any response to this crisis will fail unless coordinated globally. Could a rookie, intellectually feather-weight Cameron ever have dreamed of doing the same? I don't think so, and with some luck the voters won't think so either.

Incidentally, it's very easy for any idiot to type a name into wikipedia then skim through the "criticism" for choice quotations. Dig a little deeper, though, and you'll see that the Economist article you quote also contains passages such as:

"What is beyond dispute is that Mr Krugman is the finest economist to become a media superstar—at least since Milton Friedman or, earlier, John Maynard Keynes turned to journalism. Mr Krugman's work on currency crises and international trade is widely admired by other economists. He holds the John Bates Clark medal in economics, which is slightly harder to get than a Nobel prize."

GM said...

The credit crunch is clearly biting - you have too much time at work consultant; I just managed a quick wiki skim - you obviously had time to move on to the Economist website as well; congratulations!

And regardless of the wonderful accolades the New York Times' pet economic opinionist has, the proof of Brown's pudding will be in the eating, and it's not doing much to ease indigestion so far. But we'll see.....

As for the Tories being terrified of the Brown gambit, I doubt it....they know the consequences of rising unemployment and closing businesses on an incumbent government only too well.

Pier said...

But that's not quite the point is it Giles?

I'm quite willing to accept that the eventual reality of a depression could well be negative for Brown and Labour. However, the fact that a Nobel-prize winning economist has described the British rescue package designed by Brown, King and Darling as brilliant should be regarded a significant, especially given the two idiots you link to a the bottom of your post as if they were in some way sources of authority.

I wish Krugman would post on Fawkes' blog so he can sh*t all over him.

Comrade MAjor said...

You do realise that the major upturn in the markets, notably the largest increase on the Dow since the 30s, is being heralded as Brown's achievement. No idea what it'll do on home politics, but on the international stage... we can say that he has got a rather better legacy at the moment for him, than Blair who just left us with empty accounts and a dodgy war...

consultant said...

Prime Minister of the WORLD.