Politics missing from economic debate

In: Uncategorized

25 Jan 2010

This is my comment from this week’s Fund Strategy.

Last week saw the most decisive intervention so far in the economic debate leading up to the election but it did not come from a politician.

Instead Mervyn King, the governor of the Bank of England, endorsed the need for austerity as pivotal to dealing with Britain’s plight.??Being a central banker he did not come straight to the point. By the time he had finished talking about global rebalancing and moved on to Britain his audience was probably on to after dinner drinks.??

Even then he initially talked about cutting public spending as a key way of encouraging savings. It was only when he was coming to the end that his message was made clear:??“The patience of UK households is likely to be sorely tried over the next couple of years. There is little scope for growth in real take-home pay, which may remain weak even as output recovers.”

This remark was barely commented on by the main political parties—presumably because they agree with it.
In any case it seems unlikely that anyone will challenge King’s argument. Times are hard and austerity is viewed as the only solution.

Such a point is easy for King to make. As a non-elected official he is not threatened with losing his seat if his words displease the public. In that respect he can afford to be more blunt than politicians.

Sadly today’s generation of politicians are not much better than King. Although they are answerable to their electorates they lack the imagination to envisage an alternative response to the crisis.

Industrial policy—in which the state gives direction to the promotion of industrial enterprises—is out of fashion. The government has abdicated responsibility in that area as it has for many others.

Despite the talk about infrastructure relatively little is being built. Projects such as airports, roads and power stations are seen as morally suspect rather than as necessary to a country’s economic health.

Politicians have become as dull and grey as central bankers. They may bicker like children but their arguments do not extend to promoting different visions of social organisation.

What is needed is an injection of politics. Genuine debate demands a recognition that there is more than one view of how best to do things. There are other shades of colour besides grey.

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