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  • What does a Double Dip Recession Actually Mean?

    by Shariq
    19th August, 2010 at 9:26 pm    

    In his post on Labour List, Sunny argues that Labour centrists undermined the message on the economy, by adopting Tory language. I think Sunny is correct in identifying that centrists for the sake of being centrists are a problem. By shifting because of new conservative positions, you lose consistency and start arguing on their terms.

    However, I don’t think this is what Alistair Darling was doing during the elections. The Labour argument for reducing the deficit, but not immediately, was clear. That Labour believed this would cause a double dip was also clear. Gordon Brown could not go 2 sentences without mentioning it.

    What was misssing were the negative consequences of a double dip. For example, that it would make the recovery longer or more painful. Or perhaps more significantly, that it would cause established, productive businesses going to the wall, which would harm the long term productivity of the economy.

    Instead, David Cameron was able to make the facile argument that any business or household know that in times of trouble they have to make cutbacks.

    To be fair, the question of reducing the deficit now, versus reducing it later is a genuine policy debate. The coalition would argue that cuts allow it to keep interests rate low and keep the economy going. There is also the argument that continued deficits would cause the bond markets to worry and interest payments to rise. Where it has gone wrong, and where Labour has been negligent in attacking it is the balance between tax rises and budget cuts.

    Now one area where Labour did attack the Conservatives was their attitude towards the initial bailout and nationalisations. Here the problem was that Gordon Brown had been the person responsible for managing the economy for the past 13 years. I’m not sure if there was a solution to this. It seems Alistair Darling did an excellent job, but its not clear he would have been a successful leader of the Labour party.

    Finally going forward the argument from a Labour perspective seems clear - that the coalition is engaging in an ideological battle against the state. While Labour acknowledges that in the good times there may have been unnecessary spendimg, that’s not what the Tories were targeting. That the coalition is wrong from a policy and a fairness perspective and that the Lib Dems are simply providing window dressing for Tory policies. I don’t necessarily agree with all of that, but I see it as the debate.

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    1. sunny hundal

      Blog post:: What does a Double Dip Recession Actually Mean?

    1. MaidMarian — on 20th August, 2010 at 1:38 pm  

      Well, yes but… Incidentally, by, ‘the Conservatives,’ I assume you actually mean, ‘the Coalition.’

      Osbourne, Cameron and Clegg are all fully aware of what a double-dip would mean and what the risks are, this has been fully considered in the programme of cuts that looks ideological to say the least.

      It’s just that they consider the risks posed by sovereign debt to be greater than the risks of a recession. Easy to say that perhaps when you are a millionaire.

      Coalition policy is that a recession is a price worth paying to reduce exposure to sovereign debt in the space of one parliament.

      Thanks Nick.

    2. boyo — on 20th August, 2010 at 3:24 pm  

      I understand Sunny has an economics degree, so I’ll hesitate before saying he doesn’t know what he’s talking about, but I agree the Labour message was clear - and people heard it. Their enduring concern was and remains the Coalition’s management of the economy.

      Perhaps it is because I am closer than most (I work a lot with the public sector) but what saddens and astonishes me are the current polls and general thumbs up the Coalition appears to be getting from a public, that doesn’t appear to understand the swingeing cuts being implemented are not for their own good, but the Lib Cons are using austerity as a cloak for a livid, ideological attack on the public sector which both “millionaires parties” loathe for their own reasons.

      Oh, the people say, well something had to be done, didn’t it?

      I don’t blame Labour - I’m not sure even with a new leader in place they would be listened to. Maybe it is because the sun is shining, but the present time feels a lot like the Phoney War. The bombs will start falling soon - certainly from where I’m sitting, and in the opinion of friends in business who have recently forecasted gloomy “worse than first time around” predictions. Few will be spared.

      What Labour must do is when it does happen (I predict March 2011-onwards) please, please, please ensure they don’t get away with it - Ali Campbell et al must hammer home the same message

      - it didn’t have to be this way
      - it’s ideological
      - they do not want the services to come back

      This last one is the rub, the difference between austerity and ideology, and where the Tories and “small state” Liberals are driving us. They’re using a stolen election to steal our State.

    3. Cauldron — on 20th August, 2010 at 7:07 pm  

      More cuts please! Fire all the socialists jobsworths and send them to North Korea to experience the full benefits of a planned economy, though they might not appreciate having to work more than 35 hours a week.

      OK, I exaggerate. A little bit. But perhaps lefties might spend a minute reflecting on why the cuts are so popular among voters who work in the private sector.

    4. MaidMarian — on 20th August, 2010 at 7:28 pm  

      Cauldron - do you have some evidence that cuts are popular in the private sector relative to the public sector, or is that just an article of faith?

      It may be you have something, just I’d be interested to see it.

      But how often can it be said. Cutting the diversity programme or the press office may well be desirable. Taking billions of demand out of the economy means more than that.

      It means thing like no school building contracts for private sector construction companies. It means no NHS orders for drug companies. It means no loans to Forgemasters (though that was to do with the Lib Dems willy-waving at nuclear rather than anything rational). And so on. Taking billions of demand out of the economy means a bit more than the diversity programme and the effects do not magically stop at the rather artificial public/private divide.

      Given that you normally have a decent point Cauldron this is a bit substandard.

    5. Boyo — on 21st August, 2010 at 8:17 am  

      “… perhaps lefties might spend a minute reflecting on why the cuts are so popular among voters who work in the private sector.”

      Even if that is the case (and I presume it is for you) I think you make the mistake of thinking people make rational choices.

      For a start - most people do not support cuts, although they may see them as necessary.

      Many people have been subject to wall-to-wall propaganda from the majority of the printed media.

      They do not make the link between the “bloated public sector” and

      - schools, hospitals, etc
      - transport, clean streets
      - problem families, after-school facilities
      - policing, etc

      They often do not understand how the “private sector” had a soft landing because it was supported by people in public sector jobs - not just buying thing in shops, but services like insurance, mortgages etc. Even press officers buy financial products and flat screen TVs.

      They do not appreciate how their company may be directly affected by a loss of contracts.

      They forget (because their is a national conspiracy afoot to encourage the forgetting) that it was private sector avarice that caused the crash - not public sector spending.

      In particular they forget 1997 and how far our services have come since - they forget the legacy of Tory decline. Well, now it seems the Tories have decided neglect is not enough to “ween people off” decent health services and schools - they’re using the excuse of the crisis brought about by their banker pals to bring about wholesale destruction.

      It may be that people in the private sector are simply too stupid to wake up to what is happening. But when the nation swings back in to recession, their parents die neglected in hospital corridors and their children go back to sharing one tatty text book between five, I suspect that they might begin to make the link.

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