First, the Spectator, possibly the single most obvious reason not to vote Conservative, praises Nick Clegg in fulsome terms:

They hate him because they can see he’s capable, plucky and politically shrewd. The house has strange ways of honouring talent.

Then I read that the Spectator’s praise is for quite a poor reason: insisting in PMQ’s that a Chocolate maker be owned by someone more recognisably British than looks likely

He wondered why the government hadn’t acted to stop RBS lending tax-payers’ money to Kraft which is about to sack Cadburys staff. That’s three bogymen in one. Nasty foreign asset-strippers. Feckless subsidised bankers.

Last night on Newsnight, I saw that John Redwood was delivering the best lines against similarly protectionist John Moulton. I have seen this crusty old character speaking on economic issues and he can be very old school – “we don’t do anything well in this country any more” saloon bar nonsense.  A better analysis of the Cadbury question is on Redwood’s Blog:

The truth is that British managers and British shareholders have been known to close UK factories and switch produciton abroad when the figures show that is the right commercial thing to do. British ownership does not protect all UK jobs. Foreign ownership does not mean automatic closure. Nissan. Toyota and Honda have done much more for UK motor industry jobs than Britsh Leyland, Rover and the UK government did.

Then just I am about to go into “Redwood you may disagree with him but you can’t deny that he’s bright” mode, when I read this post about abolishing the MPC:

The MPC remit is to control inflation. They have failed to do this. They need to think again about why they have got it so wrong, and try to do better in the future. Who are they kidding with their current 0.5% interest rate? Have they not noticed that everyone else has to use much higher rates than their recommended rate, and even the government now has to pay a lot more for most of its money.

The spread between base rates and other private rates proves . . . . what exactly?  And the State borrowing at 4% proves  . . .. what, that we are overheating?  Mervyn King thinks this is temporary. He probably understands the reasons Daniel Pimlott presented in today’s account. (Also: Lombard Street, and the excellent Jamie Dannhauser, point out how measures of inflation that are not affected by taxation or the £ are still weakening.)

Redwood is brighter than this.  He is not Guido, urging us to buy beans and gold.  Instead, hHe is jumping on a bandwagon launched by David Blanchflower but for the opposite, and wrong reasons. Blanchflower’s views, and I concur, are that if the MPC errs, it is to do with the recession, not ‘soaring’ inflation.

However, Blanchflower’s main focus is fiscal policy. Like the Liberal Democrats understands the importance of  not getting the fiscal timing wrong, but the Lib Dems also understand that you need a plan.  In a weird loop, we come back to Nick Clegg, now praised in the FT leader:

Indeed, the only national party that has publicly come to terms with the scale of the fiscal crisis is the Liberal Democrats. Last week Nick Clegg, the party leader, ditched all of his party’s spending commitments bar two because of the spending squeeze. The Lib Dems’ ambitions now match their budget more closely.

Where have I read that? And what should we Liberals think: Nick praised first for being protectionist about company ownership, then for fiscal hawkishness . .  .  All very confusing


12 thoughts on “I am quadruply conflicted

  1. On the first point I have to go with Redwood. Why on Earth is Nick being protectionist? That’s the exact opposite of the liberal tradition!

    (However, I wouldn’t say that he is being a fiscal “hawk”, that label I reserve for David Cameron. Nick is just being roughly Keynesian: when the private sector can start recovering on its own, we gotta pay back the debt. What did worry me about him is something he said in his recent FT op-ed, which was basically “No tax rises except on banks”, which sounds awfully populist, but doesn’t strike the right balance for me.)

    On the second about the MPC, I read Blanchflower’s column and am interested in what he thinks would work better. I’ll have to see in his next one. I do take his point that the BoE having a remit more like the Fed would be better (just don’t give it financial regulation like the Tories want to!), although I do question his statement that inflation targeting hasn’t worked any better for countries compared to ones that don’t have it. Is he saying that the Great Moderation had NOTHING to do with the greater understanding of modern central bankers? It’s not the full story for me, but I don’t buy that it played no role.

    [I do also wonder if there’s some personal issues that Blanchflower has from his days on the MPC that might be interfering with his views on it as well, but that just might be me.]

    And I didn’t get him when he said, “all the attention was focused on the consumer price index (CPI) as a measure of inflation, which excluded the major variable that was increasing a lot — house prices. If house prices had been included in the index, interest rates would have been a lot higher in 2006 and 2007, and that would have helped to prevent the bubble that followed. Symmetrically, including house prices now in the measure of inflation would make it clearer that we are in a deflationary period.”

    Isn’t that RPIX? And RPIX is higher than CPI at the moment. And they were within about a percent of each other leading up to the crash of the bubble, so I don’t see what good this would do/would’ve done.

    1. I accept your point on “fiscal hawk”. There is none of the same dogma. But a mature recognition that you can’t have wishlists and a 13% deficit – and a shrewd insight as to where the LD’s are vulnerable – on the “lacking reality” side.

      I agree 100% about housing in CPI – a red herring. In fact, you can have destabilizing booms with rates at 10-12% and real rates at 5-6% – ask N Lawson!

  2. Kraft will reduce the Cadbury HQ in Uxbridge. But Cadbury were going to shut their Keynsham factory, which Kraft say they will keep open. Looks like swings and roundabouts to me.

    Still, it is election year, and we have to expect – and almost want – Nick to say things that get him good press, provided that they don’t change policy in an ongoing way. Let those of us who are party members not be too pure – we are a political party, not a philosophical discussion group.


  3. Re Redwwod, not a conflict at all. Samuel Brittain frequently sounds off against “businessman’s economics”. John Redwood is/was a successful businessman. His insight about globalization is that of a successful businessman. Bi macro-economic statements desereve as much consideration as those of anyone else who opines on macro-economic matters. Very few people have ever got those right. And then, as engineers would point out, compare macro-economic forecasts with those provided by the AGW industry – similar industry facing similar problems with similar lack of knowledge.

    1. It is not so much about getting Macro predictions right- I quite agree there – but about getting the logic of the arguments right. What is it about the MPC’s performance that indicates it can’t control inflation? I see nothing substantial – that is my problem with JR’s piece there.

  4. Dear Diogenes

    Redwood’s business career? Do you have any details?

    I know he was a fellow of All Souls, an Oxfordshire County Councillor in the 70s, Head of Thatcher’s Policy Unit in the 80’s and elected to Parliament in ’87.

    Always imagined him as someone with an internal compass that was just slightly reading out of true north. Not a bad guide over a mile or two but a disaster if you followed him for any distance.

    MPC? Surely more likely to get it right than either a Chancellor or a Central Banker.


    1. I think after a young lifetime in Policy units for Tories, he has enjoyed some big directorships in engineering companies. I have no doubt he would do a good job. But I don’t think his apprenticeship in life is business. He has been involved in meetings reports and policy his whole life, not actually doing private sector work (by work, I mean, for example, my experience of picking up 200,000 phone calls and only being rude on about 1000 of them)

  5. From 1974 to 1977, he was an investment analyst at Robert Fleming & Co.. From 1977 to 1978, he was a bank clerk at N M Rothschild & Sons, becoming a manager in 1978, assistant director in 1979 and a Director of the Overseas Division from 1980 to 1983. From 1986 to 1987, he was Overseas Corporate Finance Director and Head of International (non-UK) Privatisation

    1. Point taken, but I would still say this is much more about being in banking and high level directorships than actually running businesses. However, his experience of business and thinking about it runs deeper than 90% of MPs, I’ll concede

  6. John Redwood’s career in business and finance includes positions as Chairman of Norcros, a quoted industrial conglomerate, and as executive director of Rothschilds. He has been non-executive Chairman of Mabey Securities and non-executive director of BNB Resources plc. Since October 2003 he has been non-executive Chairman of Concentric plc, a Birmingham-based maker of pumps and fans that is a major supplier to the world’s truck and construction equipment industries.

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