Special election comment

In: Uncategorized

7 May 2010

Below is my special comment on the election for Fund Strategy.

From an economic perspective the impact of the British election result is being grossly exaggerated. The uncertain outcome is a symptom of the problems confronting British politics rather than the cause of economic weakness.

Perhaps the height of absurdity in relation to the election coverage came on television this morning. Stephanie Flanders, the BBC’s economics editor, was asked by one of the Breakfast programme’s presenters what market movements said about the election result. This, remember, was the day after the Dow had fallen by 9% at one point and the eurozone markets were wracked by concern over a possible Greek default. Reading tea leaves would be more scientific than drawing anything meaningful from an extremely short term price movement.

The concern that a hung parliament will lead to a lack of political decisiveness is also misplaced. Britain’s political parties were indecisive before the election was called and even if a stable coalition is formed it will likely be indecisive too. Angst over a hung parliament is based on the assumption that there could be a political deadlock as a result of disagreement between parties with different outlooks. But, as I argued in an earlier Fund Strategy cover story, the striking thing about all Britain’s main parties is that none has a clear vision of the future.

To the extent that Britain’s main parties discuss the economy their overwhelmingly focus is on the huge fiscal deficit. But even in relation to that, none of them is willing to spell out in any detail how they think it should be tackled.

On the longer term problem of how to regenerate Britain’s chronically sluggish economy they can only mouth platitudes. All of them pay lip service to the need for growth but none of them has any conception of how to achieve it. The idea that the economy is in desperate need of restructuring is alien to them. Their focus is on stability and sustainability – in other words averting economic collapse or another financial crisis – rather than economic progress.

In essence Britain had a no-party government before the election and it will have a no-party government after it. All the parties are essentially electoral machines rather than organisations with any roots in society or any big ideas. They are completely detached from the interests of ordinary people.

It is now more important than ever to start examining the difficult economic questions to which Britain’s decrepit political class seems oblivious.