Blimpish || a Tory

Beyond the rather tedious three-time election repeat of “Tory cuts” over a few billion quid here or there, back in my previous blogging days, economic matters were rarely a point of controversy.  We thought all that was solved.  We all did, it seems.  Turns out we were wrong.

The first thing I want to say is that the recession’s probably going to finally euthanise state socialism as a real political option.  Apparently this is controversial, but it seems to me basically true, and already occurring.  It was already the case that no centre-Left leader could be elected (or, if elected, sustained) in the developed world without subscribing to the core tenets of economic liberalism – sound money, competitive markets, free trade.  Now, circumstances mean they not only have to comply with the orthodoxy, but positively embrace it.

Consider the shining new hope, President-elect Obama.  Rarely has a new President had such an opportunity, and such momentum, to take a decisive turn back to the Left – the crisis could allow him to jettison the Reagan consensus, to spend as much as wanted, to restructure the tax system, and so on.  But what’s happening?  He’s appointed an economics team (Geithner, Summers, Romer, Volcker, Goolsbee) who would in the UK be considered Right-of-centre.  He’s emphasised temporary tax relief over large spending expansion as part of his stimulus.  He’s put major campaign pledges – NAFTA, immigration, climate change, possibly healthcare reform - on hold until the economy’s sorted.

Quite right too.  Over here’s, even though Brown will do all he can to cling on to power, and so the quality of policymaking seems in freefall decline, there’s no running away from the core orthodoxy.  The concern is still with monetary control, the Government offers an embarrassed “what else can we do?” defence of it deficit projections, and there is no decisive change in direction.  Indeed, while as the collapse of the finance system offers massively important lessons, the Government seem so much in the grip of the Thatcher-Howe-Lawson consensus on economic policy that it has yet to offer much if anything as a revised economic doctrine which will avoid the same problems.

Some on both Right and Left will say (negatively and positively, respectively), that I’m being way, way too confident in making such a forecast from where we are now.  They will point to the nationalisation of banks, the socialisation of risk, the proliferation of crisis-addressing policy measures, paid for through borrowing.  So what?  Nobody serious in the Labour Party wants the job of running the banks; and at any rate, the Government have only taken over some banks, and given the record of public ownership, they’ll be poor competition for Barclays, HSBC, etc.  Socialisation of risk is an issue, because of the potential for moral hazard next time around – but it’s being done to keep private, competitive markets operating.  The proliferation of new deficit-financed policies happens in most recessions, but we’re talking small beer in terms of additional expenditure, and come the recovery, neither taxpayers nor lenders are going to pay for the excess – even before the recession, taxes were hitting historically high levels (previously seen in the 1970s and 1980s) and the political tide had turned against any more increases.  There’s no appetite for socialism there.

The Government tried to corner the Tories on taxing “the rich”, by bringing in a 45% marginal tax rate.  The Tories (for once!) spotted the trap and avoided it, but it was fairly easy for them – nobody except a very few foam-flecked libertarians are going to be that bothered over a 5%-point (12.5% increase in liability) difference in marginal tax rates.  The Government must’ve guessed that would be the case, so why not go higher – 50%, maybe 60%?  I’ve no doubt the public would back it – they would have done for most of the time since Labour established itself in Government (1998? 1999?).  No, the reason is that the Government wouldn’t do it for fear of losing not just the revenue but some of the people earning high sums…  And their fear is rooted in their acceptance of the Thatcher-Howe-Lawson consensus.

State socialism is now not just not a real political option any more, but it can’t even be pretended that it is by anybody near Government.  The cover of the Brown spending spree from 2000 to 2008 is no longer available - talk of stimulus aside, most public services are going to have more straitened times in the years to come than they did before them; and this, even as what evidence there is suggests that public service productivity may have been falling in recent years.  The Government are instead left to focus on seeking changes in private sector practice (good luck with that one) because the traditional, easy, powerful levers of Government intervention are no longer affordable.  The paradox of the Brown years (1997-2010?) is that he spent years chucking money at public services and yet managed to gain little lasting appreciation for it; and the time when the tap is running dry just happened to be the time when people really would’ve been grateful.  (Oh, how I cry for Brown.  No, really.  Especially as the ex-boss just explained he doesn’t appreciate the work done in the good years, either.)

You might say, what difference does all this make, even if true?  Quite a bit I think.  In order for a tradition to be anything more than quaint, it needs to be lived, and has to have people for whom it is a living part of their world.  State socialism has already been 30 years out of power, and more than 15 years since it was even nearly a credible force in a General Election in the UK.  Assuming the recession gives way to a long, flat economic period, it could be 10 or 20 years before it could even find a political opportunity; by that time, there will be no practitioners of state socialism left outside the nursing home.

Consider how, from the 1930s onwards, the old aristocratic reactionary Right never again glimpsed executive power; they might’ve sat in Cabinet, might’ve influenced the Party at the margins, but were never in power.  By the time there was a Right-wing Government in 1979, they were a spent force, and have since become a matter for historians.  That’s the same trajectory I expect for state socialism – some of them will stay around and influence the next generation, but no more.  Note, I say “state socialism” and I mean it: the passing of the aristocracy didn’t mean the end of the Right, and neither will the passing of a particular theory for the Left; it’s just that the regret of some on the Left that Neil Kinnock didn’t win in 1992 or that it wasn’t Robin Cook instead of Tony Blair in 1994, will be forgotten and they’ll find new aims, new strategies, new obsessions.

Except, except…  If the Government screw up and we end up with a full-blooed Kehoe-Prescott depression (more than 20% below trend for more than one year), then all bets are off.  In that case, it won’t be immediate, but once the bottom had been reached, people will grab a hold of any daft ideas they can.  Ken Livingstone will be elected President-for-Life, or something.  At which point, go for Plan B, people.