Politicians pay the price for the recession

11 05 2009

Since the recession began, it has felt to me as if economics was coming into line with politics. What does this mean? Since the collapse of the left in the 80s the sphere of ideological disputation in political life has diminished consistently. Politics in the UK has come to be defined as a narrow contest between parties who disagree on very little and who conduct their politics via market research led focus groups. The idea of politics as a place where there is a battle of leadership to determine what direction the country should be going in has faded away. Instead, we have an increasingly personality led and cliquish political class which has shifted to the margins of what most people feel is important in their lives.

Over the past ten years, political leaders, Gordon Brown especially, made a virtue of their support for the expansion of financial services, the housing bubble and the vast increase of credit based consumption . The absence of any alternative to this approach did not matter as long as the bubbles kept inflating.  Brown was able to claim that he had brought an end to boom and bust, although unfortunately as we now know the boom was built on the expansion of credit, paid for by the Chinese and others.  Growth did not happen because the UK had developed a new productive economy, but because the Chinese and other productive developing countries could not find a domestic use for their profits.

The collapse of the financial bubble revealed that the UK economy had not been built on solid ground, rather, as Tony Blair has since admitted, Labour was lucky. Its rule coincided with the availability of cheap credit. The narrowness and introverted character of our political life combined with a blind faith in the market,  encouraged a lack of proper examination of what lay behind the financial and housing bubbles.

Politicians here and elsewhere reacted with shock and disbelief when the recession began.  For a long time they could not believe that their faith in the explosion of financial services could have been wrong. When they did begin to react they tried to avert attention from their own complicity in what had happened by trying to pin the blame on greedy bankers.  This should have been the time to launch into a proper debate about what went wrong and to try to work out a new approach to the economy. Instead, having blamed ‘greed’ for the recession they set themselves up perfectly for their current humiliations over their expenses.

Now we are in a very dire state. We have a political class which is lacking in ideas and credibility. We have an economy which has lost its driving force. What can we do about these problems? These and other issues will be at the core of the discussion at the Battle for The Economy next weekend.

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