Thursday
With the raised anxieties over national bankruptcy and the failure of the government to produce a strategy over the medium term for the control of public expenditure and the reduction of the national debt, the potential for a crisis in gilts funding has risen.This comes in the form of a disruptive change, propelled by external financial events, that undermines and destroys the government's economic strategy. If such a crisis were to take place, it is worth considering the transformative effect upon national politics and the government. The decisions taken by Gordon Brown and the Labour party would form the framework of change and we can surmise that they have already examined possible scenarios at some length.
The most likely tactic employed by Brown is to go long, calling an election in 2010, whilst using the same methods to deny responsibility for the crisis and blaming the necessary cuts in public expensiture upon others. The government is mugged by the markets and forced to conform to the footsteps of Healey in 1976. This is the headless socialists mugged by reality model.
Less likely are radical and unpredictable political changes: Labour forming a national government with the Liberal Democrats and/or the Tories; the government toppling in a welter of incumbent incompetence with an election to follow; or Brown knifed by his own Malvolio and a novitiate attempting to rescue their reputation under a caretaker Prme Minister. Whatever political changes do follow, this will not prevent the years of national humiliation and deleveraging: if they buck the trend and halve the state, the recovery won't come so late.
The most unlikely and frightening scenario is the one that depends upon Brown's psychology: that the 'man with a plan' is convinced he can steer the country through the national crisis and that transferring power to the Tories would be an act of personal and national treason. If so, Brown could invoke the enabling act, prorogue Parliament and declare a national emergency for the duration of the financial crisis. This is the least likely outcome as the stakes are very high and Brown could not be sure that he would enjoy the support of the Civil Service, the police or the armed forces. The support of his own party is a given, spineless apparatchiks that they would become. On his past record of dithering and reluctance it is a long shot that he would only undertake this action in the most desperate of circumstances, but New Labour's authoritarian bent and antipathy to democratic accountability are clear.
The moral of the story is that any successor to this Parliament should abolish the Civil Contingencies Act and ensure that temptation is placed out of harm's way for any other self-righteous prophets who happen to pass through the doors of Number Ten.
we can surmise that they have already examined possible scenarios at some length.
You think? I don't think these bastards have ever thought about anything for longer than a minute.
Posted by Obnoxio The Clown at January 23, 2009 07:47 AM
Gordon's fantasy. And of course the period of crisis would never end. I always think that Brown appears to envy the amount of social control the Chinese exert over their people. He'd love it. If there could be a little war as well as a financial crisis so much the easier to declare that we can't risk a dangerous transfer of power.
Posted by rats at January 23, 2009 03:01 PM
I must confess that I had not thought of this possibility.
The tactic appears sound - use the very economic crises (and it will get vastly worse than it is now) to stay in power.
As for dealing with the economic crises - should any politician actually want to do that (which I now have been given reason to doubt).
My ranting about monetary policy and banking may well bore people - so I will stick to fiscal policy.
The economics taught in the schools and universities (and repeated in the media) is wrong. Increasing government spending reduces, not increases, the chances of economic recovery from a slump.
As income is falling govenrment spending must be CUT - in defiance of the doctrines of Lord Keynes.
If government spending is not cut then economic prospects are very bad indeed.
Of course the vast majority of governments are INCREASING government spending - the exact opposite of what they should be doing.
P.S. I wish people (sometimes quite sensible people in other ways) would stop talking about "confidence".
An economic system based on "confidence" is based on Moonshine - on smoke and mirrors, it is built on sand.
Use whatever form of words you prefer - but remember it is a bad thing.
Show me your products (be they food and raw materials, manufactured goods or services) - if they are good and if they are cheap then you have an economy. There may be hard times - but as long as the enterprises are mostly debt free (remember normal replacement investment should be financed by profits only a special project should need borrowing - and if a business finances even ordinary things like payroll by borrowing money it is a "dead man walking").
If you say "our economy depends on confidence" then you do not really have an economy.
Posted by Paul Marks at January 23, 2009 11:52 PM
Er, Paul? I rather appreciate their honesty. :-)
A confidence trick or confidence game (also known as a bunko, con, flim flam, gaffle, grift, scam, scheme, or swindle) is an attempt to defraud a person or group by gaining their confidence.
Posted by Midwesterner at January 24, 2009 10:24 PM
Quite so Midwesterner. But this does not stop otherwise good people saying "our economy depends on confidence".
If a person said the following "my enterprise has no debt and makes good quality products at cheap prices" and WAS TELLING THE TRUTH.
Then that enterprise is worth investing in.
And an economy where most enterprises are like that is an economy that is worth "having confidence in".
Confidence should follow objective reality - not the other way round in.
An economy must not be "based on" confidence.
A good farmer can survive having his crops (and his house and so on) burned to the ground.
A good manufacturer can survive his factory being bombed to ashes.
For their true strength lies in their skills and experience - and in their ownership of the land itself (as long as it is not stolen from them) - knock them down and they will come back.
They will work - invest their profits, and come back over time. Perhaps bigger than they were before.
But something that is based on "confidence" - that will be destroyed by a puff of wind.
Posted by Paul Marks at January 28, 2009 08:55 PM
