Tuesday, 18 May 2010

Rabbits and Headlights and Old Fashioned Leftie Phraseology.

I see Mandelson's short-lived championing of a rehashed dirigisme seems unlikely to survive the immediate cuts - the new Govt is looking at ways of wriggling out of a promised £750m worth of subsidies to the car and nuclear industries. And, in truth, I personally wouldn't have chosen either of these industries to back if I was the one on whose shoulders the ghost of Harold Wilson's 'white hot heat of the technological revolution' had belatedly descended. I'd have gone with the Green or bio-tech industries of the future.

But I don't think that is the Coalition's plan. I think they're just doing a 'rabbit in the headlights' act in the face of the endless drumbeat of pressure from the markets. Someone needs to remind them of the wise - and not at all leftwing - words of Edward Hugh:

"Something strange seems to have happened to the discourse over the last three years, since a problem which originated in the financial sector has now metamorphised into a fiscal crisis for almost all modern democratic states. Indeed, such is the sense of panic being generated out there on this issue that I am already starting to see articles from investor circles asking whether or not democracy is compatible with fiscal rectitude. This is rather putting the cart before the horse, I feel.....we should not fail to notice the fact that another significant part of rising state indebtedness comes from having recently bailed out a significant chunk of the private sector. ...In fact, a rather weird circle has been created. The private sector (possibly as a result of the absence of adequate public vigilance) got itself into a huge mess of its own making. Governments all over the globe (understandably and correctly) rushed in to put the fire out, and in the process transferred the problem over to their own balance sheets. But what is most interesting to note about what happened next is how, given that the crisis itself means there are few positive investment outlets in the first world, the money generated by the bailouts is increasingly being used to encircle those very governments who initially made them. Basically a massive moral hazard conundrum has been created, as markets leverage a discourse which pressures governments for fiscal rectitude (which is contractionary - given the depth of the crisis - as far as aggregate demand is concerned), in the process creating the need for yet more bailouts, and so on (the possibility of ultimate Greek default being perhaps the clearest example here)."


What he's saying here, translated into archaic leftwing language, is that there is a need for a greater 'relative autonomy of the state'. & Coalition strategy is basically about decreasing that relative autonomy.

1 comment:

  1. I share your sentiments. But one thing. This "endless drumbeat of pressure from the markets" DOESN'T EXIST. As Giles points out, gilt prices have risen sharply:
    http://freethinkingeconomist.com/2010/05/19/the-day-after-the-inflation-shock-the-gilt-rockets/

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