Will the British electorate decide who runs the country in 2010?
I smiled a rueful smile when I heard David Cameron call for a ‘good clean fight’ in the forthcoming general election.
Let’s set aside for the moment the fact by pouring millions of Lord Ashcroft mega-wealth into marginal constituencies, the Conservatives are effectively buying up seats, while having the gall to suggest that it is the Labour party that prey to the agenda of its key financial backers.
Let’s set aside the fact that the Conservatives are so heavily reliant on the favours of the Murdoch empire for its media strategy.
We should forget these aspects not least because getting the mega-rich to win an election for you is copyright Blair c.1997.
It may be wrong, but it’s not new this time around.
What is new this time around is that the result of the election may be decided, not by the apocryphal ‘man on the Clapham omnibus’ with a copy of the Sun in his hand, but by the apparently all-too-real ‘diffident Welshman who does not stand out on the bus from his home in North London’ (hat tip: Freethinking Economist).
This is the same diffident Welshman who, according to Chris Huhne in the linked Times article, single-handedly ‘downgraded the Greek Government’s credit rating.The result was to push up its cost of borrowing by 0.4 per cent in a week.’
On the basis of a single, methodologically obscure decision by a single credit ratings analyst – not necessarily that very Welshman, I know – may depend the tenor and outcome of the whole of the 2010 campaign.
Let’s let Stephanie Flanders take up the story, in her ‘intriguing question for 2010’:
Everyone thinks that the markets will politely wait until Britain has gone to the polls to draw its verdict on the UK. Well, maybe.
But if sovereign debt is indeed the new sub-prime – at least where the markets are concerned – it’s difficult to believe that Britain will get through the months before the election without at least one major market wobble.
Perhaps one ratings agency will put the UK on negative watch. Or investors will get seized with the idea of a hung Parliament. Or Britain will simply get caught in the crosshairs of a market panic over sovereign debt in Central and Eastern Europe.
Who knows what the trigger will be. But my hunch is there will be something, this side of polling day. The question will be how the major political parties react.
In fact, the Conservative party is already reacting to the possibility of a ratings downgrade as part of its pre-election hype. Here’s George Osborne in the Telegraph just before Christmas:
It is clear that 2010 will be the year when the world’s focus shifts from the debts in our banks to the enormous debts being run up by governments. The last month has seen a crucial change, beginning with Dubai and followed by Greece, Ireland and Spain, in the way that international investors perceive the riskiness of sovereign debt and the sustainability of public finances. On this count, the credit-rating agencies have singled out Britain as the most vulnerable of any top-rated country, with the biggest budget deficit in the G20.’
While this may not in fact be true (the US is placed in the same ‘resilient’ rather than resistant’ category by Moody’s), such technicalities are unimportant in the general narrative.
When even Tory apparatchik Iain Dale, who wouldn’t recognise the workings of a bond market if they fell on him from a great height, starts predicting the loss of Aaa status in 2010, you know what the Conservative line is.
While they can’t go as far as express support for downgrading, you can bet your bottom dollar that behind closed doors they’re hoping that it will come early in the New Year, in the context of the ‘panic’ factors that Stephanie Flanders alludes to.
And let’s face it. While there is no evidence as yet to suggest that the rating agencies will actively collude with the Conservatives over producing a downgrade at an electorally convenient moment, it is also clear from their decisions on Greece that they favour stupidly radical budgetary cuts even in the face of the real prospect of major social unrest. This is in spite of at least some evidence to suggest that the markets themselves actually favour a less draconian approach to fiscal balance.
The Conservative strategy, then, is clear enough. They’ll continue to bang the drum about the possible loss of Aaa status, and they may even be trying to manipulate the actions of the rating agencies behind the scenes. As and when it arrives, they’ll be shouting ‘bankrupt nation’ from the rooftops, in spite of inconvenient facts like the ten-year old Aa status of Japan.
For Labour, the response is trickier, and it’s even possible to sympathise with them in their predicament. If they make too many signals to the markets and the rating agencies about plans for cutting the deficit (in the budget, assuming a May election), they risk abandoning their new class-focused narrative which looks like it may serve them well. If they don’t do that, they risk a downgrade just weeks before polling day.
What Labour needs to do is take the bull by the horns, and attack the Tories and Cameron around their ‘good, clean fight claims’, as part of their evolving ‘them vs. us’ election narrative, but to imbue that narrative with the message that not only are the Tories just out for themselves and their own class, they’re also prepared to sacrifice the very spirit of democracy to get the power they want.rrin
With Ashcroft’s millions, this is already happening at a general level, though the amount of cash poured into each and every constituency needs to be made clearer (here’s a pretty good example from Tom Williams at Labourhome, though the focus is on an individual Zac Goldsmith of the North-type figure and how much personal wealth has been put in).
But the bigger story Labour can create, if it has the political will, is the one around the way a small set of anonymous financial analysts, from mega-earning firms that just twelve months ago were pinpointed as having caused the greatest financial crisis since 1929, are now in a position to undermine British democracy. As Peter Apps of Reuters says
A year ago, they were being blamed for the financial crisis. Now, the three credit rating agencies are emerging as new powerhouses in European politics, driving policy as governments face record deficits………..
Britain’s AAA credit rating is also in the spotlight. S&P put it on negative outlook in May and while Moody’s and Fitch retained stable outlooks, they have made a string of comments demanding greater austerity…..
The opposition Conservative party has frequently cited the S&P move in speeches and policy statements to underscore its pledge to make stringent spending cuts.
Any downgrade before an expected May 2010 general election would be a heavy blow to Prime Minister Gordon Brown’s embattled Labour government.
Even more saliently, from the same article, Steve Shifferes (Professor of Financial Journalism at City University) says:
It is not that they necessarily know more than any other analysts. But because the credit rating is such an easy thing to focus on, they have much more power. It’s not very democratic.
Absolutely. It’s not very democratic. It’s not Cameron’s ‘good, clean fight’.
Labour would do well to remind people that Cameron is a liar to suggest that he wants any such thing, when many his party’s efforts are directed at subverting the democratic process.