The Keynesian battle lines open up
When the economy is growing and unemployment low, political debate is about how to distribute the fruits of growth.
Of course that can be intense and ideological. In as much as there has been a dominant issue in recent elections, it has been tax cuts v public services. But just as easily the debate becomes a difference in emphasis that does little to involve people beyond the already politically opinionated. Almost everybody can be given their little share in progress, or at least some hope that they might.
When times are difficult it is different. People say “something must be done” when bad things happen (at least in Europe and the UK). Resources are reduced, and hard choices have to be made.
The Conservatives adroitly came in behind the Government’s rescue package for the banking system (even though they opposed the nationalisation of Northern Rock) – and with governments of all stripes taking similar action it would have been hard for them to do otherwise.
But dealing with recession will not be so consensual. The Government is talking up Keynes and looks like it is about to formally ditch its golden rules as no longer appropriate for recession. Gordon Brown’s central political belief is the importance of work and full employment. It is a theme that runs through his political life.
The right however disagree. The economists’ letter opposing a Keynesian boost to the economy in yesterday’s Sunday Telegraph – many of whom I remember as monetarist warriors in the 1980s and 1990s – is a significant opening shot in what could well prove to be something of a rerun of the same debates in earlier recessions. Its subtext is that once again unemployment is a price well-worth paying.
The Conservative front bench has not been so strong – at least as yet. They may prefer to argue for a milder version of the tax cutting version of Keynes practiced in the US, rather than the public investment version more likely to be backed in the UK and the rest of Europe, but the intellectual right will argue hard for their position, and will not be easy to dismiss.
If Labour sticks to what it has said so far – and follows it through to its logical conclusion – then politics could be getting interesting again.