Only a mug would bank on a crisis
Does the current economic turmoil really offer New Labour prime minister Gordon Brown his best hope of survival? Don’t bet on it.
It is a damning indictment of the narrow-minded, know-nothing navel-gazing of Gordon Brown and his New Labour lieutenants that they should now seriously imagine that the financial crisis is a good thing for them. The economic problems besetting Britain and the world, they suggest, could be Brown’s ace in the hole, providing him with the opportunity to persuade his party and the electorate that he is the best leader for hard times. So never mind what happens to people’s jobs or living standards, the important thing is that Brown might earn some brownie points.
In reality, the best thing that could be said for Brown’s situation is perhaps that the pilot of a crashing plane is guaranteed to get his name in the papers.
The financial crisis entered a new phase in the past week or so with the effective nationalisation of the world’s biggest insurance company, AIG and the collapse of Lehman Brothers bank in the US, and a crisis-averting takeover of Britain’s biggest mortgage lender, Halifax Bank of Scotland (HBOS). In response, governments have announced a series of extraordinary measures. The US authorities moved to bail out AIG and proposed a $700billion buy up of US banks’ ‘toxic assets’ – the mortgage-backed bonds rendered all-but-worthless since the sub-prime mortgage crisis exploded last year. The UK authorities waived their own anti-monopoly rules to force through the merger of HBOS with Lloyds TSB, and pledged to double to more than £100billion the amount available to banks under their Special Liquidity Scheme. Both the UK and US governments also sought to ban financial speculators from betting that banks will fail.
These almost unprecedented reactive measures are not a cure-all solution, but rather a sign of how bad the financial crisis has become and how close things are to spinning out of control. The ‘euphoria’ with which the media and share markets greeted last week’s dramatic announcements has already dissipated.
It remains to be seen just how severe an impact the still-tightening credit crunch and crisis of financial institutions will have on the ‘real’ economy, which has become so dependent on the over-extension of credit in recent times. But it should be clear that governments of whatever political stripe will soon be left facing hard decisions about whether to cut public spending, or raise taxes, or both, to meet their commitments to providing a welfare system for corporate capitalism. Both Barack Obama and John McCain are getting nervous about what President Bush’s huge bail-out scheme will mean for federal finances by the time one of them enters the White House next year. Yet this is the scenario that some deluded New Labourites now appear to see as relatively ‘good news’ for Brown.
Looking at the financial world from the outside, it appears that nobody really has much clue of what is going on or what will happen next. Last week, some pundits seemed to veer from blind optimism to deep gloom and back again within a few days, while one top financier declared that they had been ‘to hell and back’ in a week. Now they are looking more gloomy and hellish once more. Such wild swings in sentiment, even among people who are making hard-headed decisions in pursuit of their financial self-interests, only reinforce the impression of detachment from the real world.
There is a similar air of unreality hanging over politics. A week or so ago, it was supposedly all over for Brown as Labour leader. Now suddenly we are assured by some that he is safe and regaining authority even before his big conference speech. Why on earth should that be so? It’s the economic crisis, stoopid. Apparently, the official intervention to help HBOS merge with Lloyds has saved not only the bank, but also the Brown government, by showing that he is the man for the job. And surely, we are asked to believe, nobody in their right mind would want to change leader in the middle of a crisis. Thus the potential financial meltdown must be the best thing that could have happened to Brown.
The self-centred short-sighted idiocy of this version of events beggars belief. Brown is now claiming that his experience as chancellor over the past decade makes him the man the public will trust with the economy. He seems almost unaware that his 10 years in the Treasury are now widely held responsible for sowing the seeds of the current difficulties. More to the point, Brown has no experience at all of facing a challenge such as this. His golden decade was spent hiding behind Tony Blair in every big political battle, while claiming the credit for credit-fuelled economic prosperity.
If there is a crisis saving Brown’s bacon for now, it is the crisis of political leadership. As previously discussed on spiked, that crisis means he hasn’t the nerve to take bold decisions or a clue as to what to do next. But it also means that nobody else in the New Labour leadership has the nerve to challenge him. The financial crisis simply provides them with the excuse for dodging the fight. It is nonsense, of course, to suggest that you cannot change leaders in a crisis. History would suggest that is precisely when many inadequates are overthrown. But it generally requires some alternative leader with some idea of what is to be done. Think Chamberlain and Churchill, 1940.
Today, nobody appears to have any notion of what to do beyond bailing out the banks and hoping for the best. The recent crisis measures were not signs of a bold new political approach, but simply the continuation of the short-term managerial politics of the past decade in new circumstances. The injection of state support to keep finance capital limping along on both sides of the Atlantic confirmed that neither a Republican administration in the US nor a Labour government in the UK believes in free enterprise, or state socialism, or anything else much beyond survival today. But like the banks, these managerial statesmen will soon find they have trouble meeting their financial obligations without drastically cutting spending or raising new funds, in their case through taxes.
How all this is supposed to ‘boost’ Brown must surely be a mystery to all except the self-deluded few spending the week in denial, aka Manchester, at the Labour party conference. One sympathetic commentator has suggested that, since it is hard to imagine how things could get worse for the prime minister than last week, ‘shares in Brown now look cheap’. But it is quite possible to imagine things getting worse for Brown, given the hard circumstance he has to face. After all, whatever he may tell the conference, he has not suddenly discovered a new sense of purpose or vision of the future just because the banks have gone into meltdown. Certainly it should be true, as the New Labourites say, that the insubstantial David Cameron is beatable. But that does not mean shares in Brown or New Labour look any better a long-term investment this week than last.
For the rest of us, meanwhile, there is another relationship between the economic and political crises that is worth mentioning. Most people now experience both these processes as little more than powerless spectators. Thus last week, while fortunes in the finance sector shot up and down, economic reality for most people stayed much the same. Indeed while the headlines reported ‘euphoria’ in the markets over the US financial rescue package, the footnotes mentioned that mortgage rates for many UK homeowners were still expected to rise.
In the distant world of politics, meanwhile, we can watch political fortunes being made and lost at party conferences in a way that does not touch the lives of most people. This is a particularly passive, unrewarding and dispiriting form of spectator pastime, where you cannot even find anything to whoop about momentarily. At least the golf fans who watched the European team get walloped in the Ryder Cup last weekend had a few moments to cheer along the way.
Whatever fate befalls Brown in the short-term, it is certainly easy enough to see how, unless something drastic is done, things could get worse for the rest of us, in terms of an absence of political alternatives that might offer some way out of the economic and social impasse.
Mick Hume is editor-at-large of spiked.
Buy your tickets now for the spiked debate ‘Are we talking ourselves into a recession?’ in London on 24 September. Click here.
Previously on spiked
Mick Hume argued that parliamentary politics has become a battle of courtly cliques, and looked at the fall of Gordon Brown. Elsewhere, he looked at the economics of fear, and argued that Labour couldn’t run a credit spree in a bank. And to mark the beginning of Gordon Brown’s reign, Brendan O’Neill listed 10 reasons why Brown is not fit to be Prime Minister. Or read more at spiked issues British politics.
No paywall. No subscriptions.
spiked is free for all.
Donate today to keep us fighting.Donate online
To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.