18 November 2008

UK Public Debt is Low, So Spend Spend Spend

Unlike the 70s, 80s and 90s, the current consensus amongst economists seems to be that deflation is a bigger risk than inflation. This fact alone gives parties of...
the left an advantage in the current debate over what to do about the recession. The recent opinion poll gains for Labour seem to bear this out - after the pain of the 80s and early 90s Tory recessions with cutbacks and tight monetary policy, people want a more humane approach - the Keynesian economics that worked before stagflation. With commodity and oil prices now tumbling there is every possibility that Keynesian economics - now back in vogue will work. Stagflation is not going to recur in the midst of this economic downturn.

The Tories have been running a three-pronged attack on Labour and all of their attacks have fallen foul of recent economic condiitons;

Tory Claim 1- The recession is Gordon Brown and Labour's fault - But it is all too obvious that this recession is world-wide - the Tory heroes - the neo-liberal US is suffering all too plainly. So this Tory claim is ringing hollow.

Tory Claim 2 - Brown has borrowed too much and we are not ready to withstand the economic turbulence - BUT at 43% of GDP, UK public debt is lower than most other developed nations and no higher than it was under the Tories - so if Brown is profligate so were 18 years of Tory rule.

Tory Claim 3 - The Tories have got themselves so into a pickle that they are now seen as the party opposing tax cuts - this could be Labour's coup de grace and is it a coincidence that Labour's message has become clearer since the return of Campbell and Mandelson?

Finally the Tories principle claim that small government and the 'free market' will solve our ills is looking decidedly shaky now banks are having to be nationalised to save them from collapse and banker's obscene bonuses dominate the headlines - the political weather has turned and barring more Brown balls-ups (which is still quite likely) it might make the next general election a touch more interesting. Still likely the Tories will get their majority,but now Labour could be back in with an outside chance.

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