Though Cowards Flinch

I wrote this short piece for the  CommentisFree at the Guardian, under the auspices of my surprise new membership of a top-secret group of leading world economists.

But CommentisFree couldn’t even be bothered to reply.  ‘Bugger this for a game of soldiers’ I said to myself.   ‘Though Cowards Flinch has got double the readership of CommentisFree* and it’s eight times as intelligent**, so why don’t I just post it there instead?’

So I did.  Read on.

Tory Story

The Tories really have a very easy story to tell about the UK economy: there is a big government debt; Labour has been in power for 13 years; therefore Labour must have caused the big government debt.

What could be simpler?  The fact that it’s not true is neither here nor there.  It sounds believable enough if you say it often enough in enough Tory-supporting papers.

 The Pre-Budget Report was an opportunity to give a different version, but it’s widely acknowledged in the media (though, interestingly, not at all in the post-PBR by-elections) that Labour mucked it up, and that now the game is up.

 But Labour has not yet lost.   The latest opinion polls show that.

 Every time the Tories are seen up close by the electorate, their lead softens and Labour hopes rise.  What Labour needs to do is ensure that they’re seen up close as much as possible.

 The best way to do this is not to try to rebut the Tories’ simple storyline of debt, because that will always look forced and defensive.

The best way is to tell Labour’s own simple story – the story of how the Tories are actively harming the UK economy, as their selfish route to what would be selfish power.

 The story goes like this: there is a big government debt caused by ‘the bankers’; the government needs to borrow money for the time being at as low an interest rate as possible and is doing that pretty well; the Tories are doing their damnedest to make the interest rates as high as possible so that the debt looks bigger, and so that they get power.

Yes, the story goes, while the government tries responsibly to close the deficit, the opposition is trying to widen it in its own narrow interest.

Of course it’s more complicated than that. It’s economics, and they’re hard.

But what Labour needs is a story about the Tories, with plenty of evidence to back it up.  The evidence is there; the Tories have consistently talked up the potential for a rating downgrade by the very credit rating agencies who were the cause of the financial crisis in the first place, to the extent that it may just become a self-fulfilling prophecy.  

In contrast, a concerted international effort to tell these same agencies to stick their discredited ratings somewhere where the sun don’t shine might just become a self-fulfilling prophecy, and allow the markets to decide for themselves whether the traditional ‘safe havens’ in the UK and the US are worth backing. 

The market’s answer, unencumbered by the political calculations of the rating agencies, will be yes, just as was shown with the flight to US bonds in during the Dubai crisis.

While stimulus-free economies like New Zealand’s and Canada’s may be attractive for investors in bonds interested in spreading risk, the sheer size of the US economy means that there no sense in investors regarding the US, and by extension of such logic the UK, as anything other than a continued safe haven.

Indeed, as I set out yesterday, the whole premise set out by the mainstream financial press that continued fiscal stimulus leads to higher gilt yields is highly debatable; there is at least some recent evidence, both in general and specifically in the wake of the budgetary decision in the UK and Ireland last week, that the markets respond positively to determined reflationary policy, and that the initial negative reaction by the market to the PBR was a reaction to a lack of commitment by the government to continued stimulus measures, not to an insufficiently large cuts package.

But that’s all just the back story to the Tories.  The lead story must be as simple and direct as the story the Tories have about Labour.

 ‘Tories as traitors’ fits that bill.

* This is not true.

** or this.