Thursday, 3 November 2011

Labour vindicated on the economy? Not so fast

Polly Toynbee
On Monday Alastair Campbell ran a positive blog piece which points out that a billion pounds worth of infrastructure projects signals a change in the Tories’ previous policy of “no plan B”:

“It is not exactly plan B. But it is an admission of sorts that plan A isn’t working, that their hope that the private sector would fill the gap left by their huge cuts in the public sector (most of which are yet to be felt incidentally) was exactly that – a hope.
Now that the hope has been shown to be largely hopeless, their magic wand having failed to deliver, and more bad figures due this week, they are having to turn back to good old-fashioned public money kickstarting. And about time too.” 
Now, I realise that Campbell is not saying that the debate is over, nor anything close. His analysis is largely correct. Much has also been made of the letter from 100 economists  calling for a plan B. I will go as far as to say that they are right to call for one, and it is indeed good to see, in a purely non-partisan and, well, patriotic sense, some arguments being made as to how to stop our economy flat-lining. But I will let greater minds than mine pick over Compass’ “Good Society” plan, not least because we will be in no position to put any plan in place for a few more years yet.

No, my real concern is about an alternative, hubris-laden reading of the current economic situation which goes further. In the absence of proof – so far – of a longer-term slump to vindicate us, there is a fervent hope that George Osborne is anyway now in the process of realising that there really is a need for Keynesian stimulus, and now we are all set for a comeback in our economic credibility, as commentators in Britain and across the world agree that we were right all along. Polly Toynbee’s triumphal piece on Monday was entitled “Vindication for Ed Miliband is in the air”: you can imagine her punching it.

Well, no.

Now, don’t get me wrong. It may even be true that Osborne is starting to think about stimulus: the Tories have got the path to growth wrong (as world-renowned economist Joseph Stiglitz argues here), and Ed Balls has largely got it right, as many of us have said before (although neither has he got everything else right, by the way, for example, his ill-advised comments on the 50p tax rate). But, sadly, the rest is not true. We are not about to be lauded for our foresight.

You see, it’s not always enough merely to be right. You need to be seen and accepted to be right.

There are three reasons why we can forget about the key to the next election being a “we were right all along” argument winning over the electorate.

- First, don’t underestimate the Tories' adaptability. A tweak here, a tweak there and – voil√†! – Keynesian stimulus through the back door, just enough to get to Norman Lamont’s legendary “green shoots of recovery”. Do we seriously believe that if we reach the point where everyone says that the Tories are getting it wrong – which is by no means the case – that they won’t gently tack, to get to where they need to be? In fact, it is exactly what the Economist suggests here and what Campbell has noted above: it is the obvious course of action. In extremis, Cameron can always threaten to sack Osborne if he is too stubborn, which it probably won’t come to because Osborne is not stupid, either. As Keynes himself said, “When the facts change, I change my mind. What do you do?”

- Second, it’s no use in 2015 having been right in 2010. No-one will really care, even if they believe it to be true. There is a host of other reasons that low growth will be blamed on, the euro-zone crisis being the most obvious. If, as seems very likely indeed, our economy is knocked for six by an imploding euro, that is all people will remember in 2015. That, and quite possibly even then, a vague remembrance of the Tories’ line about it all being Labour’s fault.

- Third, simply, we have to control the politics, not just the economics, as we have argued here before. Our reputation will take a lot more than that to restore: check our abysmal economic polling. End of.

The unpalatable fact that we need to learn to accept, in spite of the vital importance of rebuilding our economic credibility, is that Labour’s economic reputation is unlikely to surpass that of the Tories in time for the next election.

The best we can hope for is that the public and opinion-formers in the media reach a “six one, half-a-dozen the other” conclusion: that there wouldn’t have been much difference between Balls and Osborne in terms of the handling of the recovery; that the economy becomes a neutral, and not the negative it currently is. That may just happen, and that’s what we must fight for. And even then, the reality is that it would be despite Balls’ association with Brown, not because of it.

But a vindication in the eyes of the public, and a return to the economic credibility we won with blood, sweat and tears, sadly, is a pipe-dream.

Let’s get real.
This piece first published at LabourList, and was selected for "What we're reading" at Progress Online

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