The Labour blogosphere is jumping with joy (yes, Duncan, Paul and Hopi, I do mean you) that Stumbling and Mumbling has called the end of the recession, albeit very tentatively. Who knows if he’s right or wrong? Not me. You have to have a degree of expertise in econometrics to even enter the debate. JKA certainly disagrees, and, to be fair, Chris himself is much less definitive than his cheerleaders.
But let’s say Chris Dillow is right. What would it mean? Let me suggest two broad themes for thought.
1. First it wouldn’t mean it is necessarily the pain is all over. The recovery may just be the initial upswing of the ‘W’ shaped recession predicted by some – and in that event there’s no necessary reason why the second downswing shouldn’t be at least as bad as the first. (There is an entertaining range of alternatively shaped recessions to choose from as well- who says capitalism doesn’t give you consumer choice?). Secondly of course it most certainly wouldn’t mean that unemployment stops rising: unemployment is a ‘lagging indicator’ and so the number of jobless is likely to continue to go up for some time. & thirdly it wouldn’t say anything at all about the effects of any public spending cuts or tax rises which might be necessary to deal with the after effects of the government’s counter cyclical spending and rescue of the banks. So in human terms it wouldn’t mean ‘we’re through the worst of it. Let’s remind ourselves that, in general, it is human experience which has directly political consequences, not the econometric data per se. So there’s no guarantee that an economic improvement will result in any Labour polling improvement in a crude economic determinist manner.
2. It would raise quite big questions about how our economy now works. If the international financial system really did come within days of simply jamming up – and no one seems to question that is what almost happened last autumn – yet we can return to growth within months, might that not mean that the basic thesis of ‘the Great Moderation’ is correct in outline at least, and just needs to be ‘tweaked’ to account for the possibility of the odd Black Swan moment? Which might suggest a policy of steering a political path back to the economic status quo ante with some risk management/regulatory bells and whistles added. Or is it a sign that the key boffins in HM Treasury really had read their Minsky, and have had their Minsky moment of triumph ? Which would imply an aggressive future policy of bank regulation, even bank direction and long term and active ownership of key financial institutions. Or perhaps it might even mean we should all suddenly convert to Boffy’s unorthodox Trotskyite view that this a sign of the amazing strength of the underlying Long Wave upswing, based on new technologies and new sets of productive relations, and that the time is now ripe for a massive expansion of workers co-operatives. Whatever: I’m no economist and I don’t know. But I do know that all three of these perspectives might gain some traction in different parts of the Labour movement – and all three lead to very different, and clashing, economic programmes. I think even a recovery might mean Labour is sunk by internal policy differences which, in the grand scheme of things, would be considerably more important that the sort of personality driven, Mafioso-lite failed coup we saw last week.
I like reading Duncan, Paul and Hopi. They’re bright and self aware, even if I don’t always agree with any of them. But I think they’re clutching at straws here.
Addendum: In any event, Anne Pettifor makes the case for believing the recession isn't over.