Thursday 19 January 2012

Boom and Bust - the definitive explanation

At the Press Gallery Lunch earlier The Guardian’s Michael White and Ed Balls had a conversation about the claim that Labour had abolished Boom and Bust, and it led to the most, shall we say, meticulous explanation of it that I have heard. It follows here…

Michael White: Whenever Gordon Brown said, as he so often did, ‘no more boom and bust’, some of us GCSE economists flinched because we knew that couldn’t possibly be true. We thought it couldn’t be right. What did you think?

Ed Balls: I think, economist or not, the power of retrospection is a great power.

MW: No. That’s the chairman’s cheap joke, come on, what did you think at the time?

EB: Since 2008 there have been many people who have written columns that said in retrospect that phrase about ‘boom and bust’ shouldn’t have been used. But I certainly used the boom and bust phrase as did other politicians in the previous 15 years. Go back to the first time it was used, was in the Labour party economic policy submission to Labour party conference of 1993. I wrote the words, and it was basically pointing out how Conservative politicians of the previous ten years, particularly Nigel Lawson, in their attempt to play politics with interest rates and the currency had ended up with self-inflicted boom and bust ups and downs, and the solution to that boom and bust political interference was an independent central bank, which was our argument. It was never an argument which was, ‘we could abolish the economic cycle’. It was an argument that we could through bank independence prevent the self inflicted political mistakes of the political era.
Did, as the years go on and Gordon Brown made more and more budget speeches, did he sometimes give the impression that stability might have been cemented into the British economic reality and psyche….perhaps. And perhaps in retrospect that was a rhetorical error.

It is only a “rhetorical error” rather than an “error”, Balls explained, because the fact that Labour used the phrase was not a reflection of an irresponsible fiscal policy executed by the party, as claimed by the Tories. The country’s economic situation going into 2008 was sound, said Balls.

So summed up, the boom and bust thing was just a phrase that Gordon Brown got a bit carried away with. I’ll say he did.

Cameron's speech is, er, more about "setting tone"...

There was a rather distracting Union Jack poster behind the PM as he gave his speech on capitalism just now – it almost meant I missed the new thing in his speech which was thoroughly tucked away.

The talk was the latest move in a bid to wrestle the lucrative “responsible capitalism” territory away from Ed Miliband. It’s been riling the Tories that the Labour Leader has been going round saying he started the debate on the issue in his conference speech last September.

And so to show that actually the Tories were talking about it first, Cameron claimed his party set the ground for this debate years ago, and just to make sure Eddie couldn’t trump him again he went as far back as Disraeli and Pitt, before Labour even existed.

Most of the rest of the speech was doing that thing that the Tories do quite often, where they choose a theme and then try and show how all their existing policies already link into it.

So here renewal of the right-to-buy scheme, academies and free schools all tied into moral capitalism.

Then 2,600 words into a 2,800 word speech the PM announced that there were 12million co-operative members in the UK and that their groups are governed by 17 pieces of legislation.

“Today I can announce they will all be brought together and simplified in a new Co-Operatives Bill that will be put before Parliament.”

I know he’s unable to step on the toes of Vince Cable, announcing measures on executive pay in the near future, but it’s hardly a measure to get the blood racing is it.