I was thinking about this when skimming through the Times’ endorsement for Cameron. Its basic premise is similar to that of the Economist (see last post): reform of an overmighty and just-too-large State is the essential challenge of the era, and the Conservatives are best for this:
Amid the sound and fury, a fundamental philosophical difference has emerged: the Conservatives want to reduce excessive public expenditure, the Labour Party wants to keep on ratcheting up benefits, tax credits and other forms of state spending. One party recognises the benefits of individual independence. The other keeps fostering a state of benefit dependency.
The Times praises Labour at times – for the urban renewal palpable in some cities, for an increased presence on the world stage – and some of its praise for Cameron quite justified, although the modernisation project still has ‘jury out’ all over it. There is also much that is contradictory; not many of us can believe quite so wholeheartedly in the ‘optimism’ at the heart of a Conservativism still addicted to miserabilism, and wonder why so much is wasted on inheritors and the wealthy married. Above all, this sentence is strangely unjustified:
The economy is broken and so is politics. It is time for a change
when the Times say almost nothing about the politics, and are implicitly cheering on the election of a couple of hundred unsackable MPs on a disproportionate basis.
Some of the attacks on the Liberal Democrats are wounding – anti business populism, perhaps, and an uncertain strategy on the Euro.
But in this post I want to focus on an attack on the Tories that just cannot work forever. I read on this blog and elsewhere comments along the lines of ‘how can anyone support the Tories when they are all for cutting like mad?’ I hear the same said about Vince Cable – not to be trusted, because he wants to cut.
Here is my view.
The financial crisis and deflationary slump led to an extraordinary ‘Keynesian moment’; a period of 2-4 years during which a shattered financial system and zero base rates meant that the government’s balance sheet became critical for keeping demand high. We may still be in that moment. Conservative misunderstanding or poor judgement about the need for support was an egregious error, indeed.
But it did NOT usher in a permanent new Keynesian reality, one in which monetary policy became permanently subordinate to fiscal policy. If it had, then leftish claims that the Tories just don’t get it would have real merit.
If we grow reasonably over the next few years, we will be left much closer to our economic capacity, and should quite rightly worry about our productivity, and the place an overweening government plays. Sure, in some regards that government can help in useful reforms – of finance above all. But stopping the debt becoming unsustainable without rising inflation will be a major part of the challenge. We will need to make spending/revenues more like 1.02, not 1.25, at some point, or there will be huge consequences.
The 1976 crisis tells me that the worst moments for government solvency often come years after the worst of the recession. That is when you can judge what they would choose to do. Paying down debt is about taking tough choices in the good times. I share the profound scepticism of many others that if we had a year or two of good growth, the Labour party would be unwilling to upset its public sector friends and supporters, and would – not in 2010-11, but perhaps 2013-15 – undermine confidence in this country. Particularly if Ed Balls has influence.
I support all sorts of radical policies when this economy is far beneath its potential. Keynes was so right – in 1933-9. But naive extraopolation of that thinking for 1968-79 was greviously ill-judged. Given their genetically-bred need to see government as the answer to everything, I see this as an error that Labour could easily repeat, if given the chance, and the Conservatives much more likely avoid – if they could only be trusted to do the right things for just a couple of years.