You can’t say much good about Gordon Brown’s management of the UK economy. But you can say this: he has done one hell of a good PR job on it. Check out Anatole Kaletsky in The Times today.
Gordon Brown, he says, “really did save the world economy in the autumn of 2008 when he became the first leader of a leading nation to offer unlimited government guarantees to every bank in the country.” His were “bold financial policies.” That’s certainly what Mr Brown seems to think too.
But is he right? Not really. For starters he wasn’t the first in with the guarantees – the US was (they had already bailed out AIG and Fannie Mae and Freddie Mac). Still, it doesn’t really matter who was first. What really grates is the idea that bailouts and guarantees were bold financial policies. They were not. They were panic-driven necessities. Brown had absolutely no choice but to bail everyone out. What else was he going to do in the wake of the bank run he had already allowed on Northern Rock? Let a run begin on RBS? Hardly.
And the reason he provided the guarantee before most other nations? Because the UK’s banks were the weakest in Europe and hence likely to go down the fastest. So none of this was a brilliant policy choice. Instead it was the desperate action of a government which had made the worst possible mess of regulating the banking and property sectors.
The next excellent bit of PR relates to the fiscal stimulus our economy has supposedly been given. But what is this stimulus? There was the cut in VAT (already gone) and the scrappage scheme (to end shortly). And that’s about it. Compared to the wads of cash that have been on offer elsewhere (in Germany, in the US and in China for example) it’s absolutely pathetic – as even Kaletsky notes.
But the government doesn’t really want you to see that. Why? Because it wants us to think that high levels of fiscal stimulus are the reason why our national debt is so high when that simply isn’t the case. The national debt is high because Labour has spent too much money, and the budget deficit is high because the ongoing recession has meant an utter collapse in tax revenues.
The truth is that the only real stimulus measures that the UK has seen are the monetary ones. First, we have low interest rates, which have staved off, but not yet prevented, disaster. Secondly, QE – which has worked for the bankers who really needed their bonuses, but not for many others.
My friend Nick Reid points me in the direction of the Guardian letters page, where a group of MPs has written in demanding a new and better fiscal stimulus package – one in which we invest (by which I really mean invest not just spend) in our inadequate infrastructure in an effort to not only boost the economy in the short term, but to improve the state of the nation for the long term. It’s a nice idea, says Nick. Better broadband access and fast trains are surely a “good thing” and promote growth in a way that extra middle managers for the NHS simply don’t. It is just a shame we haven’t the money for them.