Wednesday, May 14, 2008

Its the Economy...stupid

Now the air truly is dark with chickens coming home to roost for Gordon Brown.

It is now clear that the Governor of the Bank of England is going to be writing a lot of letters explaining how he has missed the inflation target. The newspapers are full of columns on the coming economic disaster. The dreaded "R word" - recession- is now being coupled with inflation and comparisons are being drawn with the stagflation decade of the 1970s.

Thus, the fact that many comparisons are being made between Gordon Brown today and the Major government after 1995, is even worse for Gordon Brown than it appears- Major, after all was presiding over a substantial improvement in the economy, ironically enough largely caused by the collapse of the long term Conservative strategy of targeting a stable currency rate for Sterling against the D-Mark, rather than targeting inflation directly.

Inflation targeting is now facing its first serious test- a challenge for the Governor of the Bank of England, Mervyn King- but equally a test of the commitment of the government to maintain the independence of the Central Bank. There will be growing temptation to intervene.

However, such temptation rests on the fact that Gordan Brown promised "an end to boom and bust". What he really meant was and end to bust, of course, since no government would try to end a boom, unless they were prepared to commit political suicide. Unfortunately for Mr. Brown, the bust seems to be well underway, and there is now precious little he can do about it.

If division was poisonous for John Major's Conservatives in bad times, how much worse will the fall of Labour be, in the face of the first downturn in a decade and a half, and a downturn that could well turn out to be severe and prolonged?

In six months all of Mr. Brown's hopes have turned to ash- yet the voters remain fickle. The Conservatives may be growing in confidence, but there is precious little trust on offer from a cynical and fearful electorate. The re-emergence of the hunting ban as a political football- the sub-text being, of course that David Cameron and his cronies are pro-hunting toffs- is a rather crude attempt by the Labour spin machine to fight back.

However- as the economic gloom continues to grow, Gordon Brown seems set to be hoisted by his own petard- the economy, of which he has been the steward throughout the Labour government, will be what he is judged on- and the electorate seems set to convict.

1 comment:

Newmania said...

Now I quite like that post.