The people have spoken but the elite can’t understand what they’ve said. So the elite have to ask another question in a different way.
It’s pretty bloody obvious: form a caretaker government for 6-12 months, don’t start on any serious cutbacks, tell the market they’ll have to wait and then hold another election. If you’re Lib Dem or (possibly) Labour you’ll want to hold this election under new rules (cue argument about voting systems, resolvable only via a referendum). Under this scenario, it wouldn’t matter over much who led the caretaker government.
What the phrase,” strong and stable government” actually means is 'give the Tories a four year term to carry out (the key parts of) their economic policy' despite them lacking a mandate. It’s the nearest thing I’ve ever seen in this country to the saga of the Hanging Chads in Florida. A active politically motivated government that attempts to rule as if it had a popular majority is heading for the rocks.
Now, if you believe there is an economic crisis based on an unsustainable deficit you will violently disagree with what I’ve just written. The key thing is get a set of grim faced apparatchiks in power and start slashing before the bond markets bankrupt us all. On this view, it is Democracy, not the bond markets, that will have to wait.
As it happens, I do think there is an economic crisis – but its mainly a chronic problem, not acute. I think the deficit is a symptom, not the problem itself. The problem is basically that we in Britain – well, in the West generally, but especially in Britain and America – have lived on credit for a generation and half. We’ve built our economies around it – and now it’s not sustainable in the same way any more.
Credit and debt are a contract with the future: it’s about bringing forward - at a price (interest) - the ability to spend income you haven’t yet received. Now, fairly clearly, this depends on having a reasonably reliable sense of what the future is likely to bring - and of your ability to make an efficient enough use of the resources received in advance as to bring you a net benefit overall, despite having to pay interest. You can, if you like, discuss both of these matters in terms of ‘risk’.
& there’s the rub. There are two overwhelming problems here. Firstly, the financial wallahs built themselves neat little models which told them nothing could ever, ever go wrong in the future as long as they used the right set of complicated sums. They thought they had tamed future uncertainty in a Gaussian equation and proceeded to behave as if the vast sea of credit they surfed held no dangers, ever, for any one. They were wrong, and they almost broke the West – and would have done, if states hadn’t stepped in to assume their traditional responsibility of insuring against future uncertainty. There has been no reckoning with these people: the financial wallahs still rule the world.
But even Western states don’t have an unlimited ability to protect against risk- and especially not against the entirely predictable risk that, sometime in my life time, America stops being Top Nation At Everything. This will mean , at some point, we in the West are going to stop being able to use all that cheap credit to buy stuff that other people make or grow or extract from the ground at such absurdly advantageous prices. & this is going to be true even if the credit – the contract with the future – is guaranteed by states rather than Gaussian equations.
Already we see in Greece what happens when weak (financially weak) states try to guarantee debt beyond their means: they’re not believed. The much vaunted move by the Eurozone to shuffle closer to making itself something more like as state in order to face down the fiscal crisis of Mediterranean Europe is a response. It may or may not work - but, as Mason hints, even if it does it may be using the last bits of credibility left in the system in defence of a deflating World Order:
"In looking for a metaphor to describe the anti-crisis measures, I am thinking of tank armour. It consists of layer upon layer of complicated material - ceramics, metals, fabrics - which diffuse impact. When a sabot round goes through one layer it loses energy, then the next, then the next. If you are lucky it never penetrates the final layer and the crew survives. But take a look at the armour: it is destroyed, mangled, defabricated. It can never be used again."All this is going to be a shock to the population of the West. They’re not going to like it and, for a long time, I don’t expect them to believe it. Why should they? Which politician has actually explained any of this to them? & who has ever asked them for a mandate to confront a problem they haven’t been told exists? Potlatch is good on this point:
"Fiscal policy is at the epicentre of modern democracy (I'm not sure the American revolution would have got off the ground with the slogan "no inflation without representation", for example). A fiscal crisis, as we now face, represents a political choice inviting political answers. It cannot be met simply with strength, and the promise of a 'robust regulatory environment' or strong property rights. But until the options are properly laid out, any democratic choice is arbitrary, and ambivalence ....is the most honest answer."So I say to the political class come back and ask us for a ‘strong and stable government’ when you’ve told us something of the truth – and of a path to national economic renewal which gets us out of the grasp of the City and makes us believe we genuinely are all in this together.
We’re not taking your painful medicine till then.