Friday, 29 August 2008

Actually, Darling, you were warned

Alistair Darling's interview with The Guardian is fairly extraordinary for all sorts of reasons.

Firstly, by admitting that the economy is possibly in its worst state for 60 years, he is just illustrating the extent of Labour's failure in government. Worse even than the Tory recessions of the 1980s and 1990s? Worse even than the stagflation of the 1970s following the oil price shock? Blimey, fasten your seatbelts, it's going to be a very bumpy ride.

But of course, it isn't really happening, as the era of boom and bust is over. Who was it who said that? Oh yes, a chap called Brown. I wonder what happened to him?

Darling also claims that the government had no inkling that they were heading for a financial crisis. You could almost feel sorry for the chap, at the mercy of such forces beyond his control.

Except the thing is that they were warned, repeatedly, that the government was presiding over an unsustainable boom in cheap credit which was artificially inflating the economy. Take, for instance this from Lib Dem Treasury spokesman Vince Cable all the way back in 2004. But rather than take action, the government did nothing to curb the credit boom and the whole house came crashing down when the sands shifted.

Darling is also very frank about the government's failings. Take the conversation he had with Brown when the government lost the personal details of 26 million people. It's worth quoting in full: "I phoned Gordon up. I said, We appear to have lost two disks containing the personal details of just about every family in the country. We knew it was bad." What did Brown say? "He said it was bad."

Really? You don't say! You've just lost personal data on 26 million people and it's a bad thing? Strewth, with such insight, I'm amazed that Darling hasn't been offered a Harvard professorship in public administration.

Darling also admits that others in the Cabinet are after his job. He says: "There's lots of people who'd like to do my job. And no doubt," he adds, half under his breath, "actively trying to do it." Sounds rather like ferrets fighting in a sack to me. Given the rumours about a possible reshuffle and demotion/sacking for Darling, it strikes me that he's done this interview to try and shore up his position.

If that was his intention, then maybe he should have been a bit more effusive about the qualities of his boss. This is what he has to say about Brown's abilities to communicate: "But we've got a hell of a lot to do. We patently have not been able to get across what we are for, and what we are about." Can Brown communicate it? "Yes, I do think he can. I do think he will." Then why hasn't he? "Er, well," Darling falters. "Well, it's always difficult, you know."

Yes, it is difficult, but that's what Brown's paid so well to do. If he hasn't been able to get across thus far what Labour is for, what on earth makes Darling think he'll be able to do so in future?

But if the economy really is in its worst shape for 60 years, I don't think that anything Brown could do or say would make the slightest bit of difference. Labour won three terms in office by building a reputation for economic competence. That's now been shattered and Labour are doomed as a result - with or without Brown in charge.

1 comment:

Stephen B said...

Actually this has interesting parallels with the ERM fisco. From 1987 onwards, Lawson's policy of shadowing the DMark could only be achieved by buying DMarks and thereby releasing increased amounts of sterling into the system...which was then subsequently lent by banks as credit. Lawson, in effect, created an inflationary credit boom for which there was time of reckoning from 1990 onwards.

Brown has achieved pretty much the same but via a different route. Basically, he has been spending on the nation's credit card, putting too much sterling into the system and thereby increasing credit opportunities. The other significant difference this time round is Chinese goods effectively meant that the cost of many goods fell in the Brown Boom years and so that credit went into an area that people rationally thought was a good investment - property.

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