We're not all Keynesians now
Yet Westminster-watchers thrown by this turbulence are now being treated to a comfortingly familiar spectacle. Public spending versus tax cuts—the argument that split Labour and the Tories at the previous two general elections—again divides the country's main parties. In both 2001 and 2005 they were arguing about what to do with the tax revenues then cascading into government coffers. The dispute now is over the best way to mitigate a recession.
On October 19th Alistair Darling, the chancellor of the exchequer, suggested he would try to boost demand by scrapping previous plans to restrain the rate of increase in public spending and bringing forward to 2009-10 money earmarked for the following year. Details will come in his pre-budget report in November, but some expenditure has already been fast-tracked in housing and defence. Other candidates for early dollops of cash are schools, medical facilities and leisure centres. Figures released on October 20th showed that government borrowing had already hit a post-war high in the first half of this fiscal year. But after chiselling away at public debt during the boom years, insists Mr Darling, the government can now safely borrow a bit more to prime the pump.
The Tories, whose "statesmanlike" support for the government during the banking crisis ended abruptly with a speech by David Cameron, their leader, on October 17th, have other ideas. Keynesian boondoggles are acceptable in principle, they say, but they cite Japan in the 1990s as proof that such spending does not always stimulate the economy: better to boost businesses' cashflow by easing their tax burden. Under Tory plans, firms employing up to 250 workers could defer payment of value-added tax (VAT) for six months, while those with up to four employees and a wage bill of less than £150,000 ($255,000) would get a cut of one percentage point in their national-insurance contributions.
This break with the government is a calculated gamble by the Tories. After all, voters plumped for spending over tax cuts in both 2001 and 2005. But the Conservatives are not offering an overall cut this time. Instead, the VAT holiday would be paid for by interest charged on the deferred tax, and the national-insurance cut would be funded by ditching various reliefs and allowances. Moreover, a resumption of hostilities with the government is in the Tories' political interests: their non-aggression pact with Mr Brown allowed him to become the hero of the financial crisis while dodging any blame for it.
And though Mr Darling's plans evoke Keynesian high theory, they may crash on rocks of the most mundane kind. Thanks to planning restrictions and other pesky hold-ups, spending public money quickly in Britain is not always easy. The government's schools-building programme is already behind schedule. Raising the private finance that helps pay for many public-sector capital projects is also likely to take longer than usual. The last global slowdown, in 2001-02, coincided with a spending splurge that Mr Brown, then chancellor, had already set in motion. This time the pump-priming may come too late to relieve a far more serious downturn.
The Tories are not invulnerable, of course, despite their continuing lead in the polls. Small, targeted tax reliefs may strike voters as a piffling response. There are doubts about whether their VAT policy complies with European Union law, though the party is confident it does. And if the Tories do win the next election (which must be held by June 2010) despite the government's spending wheeze, they may find the public finances in even direr shape than now looks likely.
For all that gladiatorial politics is here again, the differences between the parties should not be overstated. Neither is so far trumpeting the need for an overall massive spending rise or tax cut. But Britain is entering a recession with its main protagonists divided in important ways about how to get out of it. The stakes are higher for the government, if only because its plan will be the one that is tested by reality. If it works, the recent bounce in Mr Brown's popularity may come to be seen as just the start of a journey back to electability. If it fails, the prime minister will return to being the surefire loser of the next election. For a really deep recession will surely be too much for voters to forgive, whether or not they can remember the last one.
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Publicity stunts that exploit the world's poor
The Times.By Simon Jenkins
What is the point of another world summit on poverty? The new American Secretary of State, Condoleeza Rice, has been conducting a charm offensive in Europe. In the course of it, her government sabotaged Gordon Brown's tentative proposal, "a Marshall plan for Africa", deflecting his plan for Third World debt relief. Why a proper deal was not negotiated in advance, as summits used to be, is a mystery. Perhaps only the Americans are honest enough to admit that these costly meetings are all hot air.
Consider recent history. In 2000 in New York 150 world leaders gathered in New York for a "Millennium Summit". Its aim at this climactic of history was finally to "confront world poverty". So crowded were the most expensive hotels in New York that they reportedly exhausted the city's supplies of lobster and champagne. Nothing happened. The following year the G7 leaders were frantic to say something relevant at the over-cosseted Genoa summit. Amid an array of destroyers, personal masseuses, private chefs and three tenors, Tony Blair, George Bush and others declared their unshakeable commitment to "alleviating world poverty". Nothing happened.
It was Ms Rice who, at the time of Genoa, pledged the American government to attack world poverty with an "emphasis on economic growth, free trade and accountability systems of governance". Most important, she asserted, was "making market access possible" for the produce of poor countries. Her government then proceeded to reduce market access by increasing domestic food subsidies - while the European Union similarly declined to cut its farm spending. Nothing happened.
Next came the UN's 2002 Johannesburg Summit. This took as its theme our old friend, "tackling world poverty", by means of sustainable development. Pre-summit sessions were held, papers written, hotels booked and delegates arrived. Nothing happened.
Like an addict unable to kick the subject, this year's Davos economic conference decided to make its theme, yes, fighting world poverty. In the obscenely rich surroundings of a ski resort, the world's plutocrats vied with each other in their passionate commitment to world poverty. Davos's publicity stunt of inviting show-business celebrities backfired when the actress, Sharon Stone, became so fed up with the collective mendacity that she stood up and offered a speaker from Africa $10,000, if others in the rooms would follow suit. She shamed them into raising close to a million dollars on the spot. It might have covered part of the cost of the conference itself.
As if oblivious to the cynicism of this farrago, the British government chose as the theme for this year's British-led G7 summits, yes, combating world poverty. In the glitzy surroundings of Lancaster House, Mrs Stone was replaced by Nelson Mandela in a magnificent shirt. He called for world poverty to be combated. The G7 ended with another declaration that world poverty must be tackled, but with no agreement on implementing even the debt relief proposals. Sure enough this will be discussed at the next world summit, at Gleneagles in July. The wait should be just long enough to forget that this was the point of the last summits.
(…….)
Perhaps one day someone will tackle it (poverty), really. Or perhaps they will replace it with something else as impressively beyond reach, like climate change or energy depletion. For the moment we have only an answer to the question, why are people so sceptical about politics.
The answer is that the more important politicians get, the more time they spend in expensive hotels, mouthing the vapidities of international relations. They let soldiers fight their wars and publicists handle their conferences. Nothing can be so cynical as publicity that exploits the misery of the world's poor - especially when the misery is so often the result of the aid and trade policies of the rich.
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