Forward to the Sunny Uplands

The expenses scandal has driven the economic news off the front page. So what about those 'green shoots of recovery' we were hearing about before we were so rudely interrupted?

Here's Martin Wolf reading the runes:

On the economy, we already know five important things. First, when the US catches pneumonia, everybody falls seriously ill. Second, this is the most severe economic crisis since the 1930s. Third, the crisis is global, with a particularly severe impact on countries that specialised in exports of manufactured goods or that relied on net imports of capital. Fourth, policymakers have thrown the most aggressive fiscal and monetary stimuli and financial rescues ever seen at this crisis. Finally, this effort has brought some success: confidence is returning and the inventory cycle should bring relief....

The state, meanwhile, is back, but it is also looking ever more bankrupt. Ratios of public sector debt to gross domestic product seem likely to double in many advanced countries: the fiscal impact of a big financial crisis can, we have been reminded, be as costly as a large war. This, then, is a disaster that governments of slow-growing advanced economies cannot afford to see repeated in a generation. The legacy of the crisis will also limit fiscal largesse. The effort to consolidate public finances will dominate politics for years, perhaps decades. The state is back, therefore, but it will be the state as intrusive busybody, not big spender.

In summary then: yup, things are - if not quite getting better - at least stabilising. But we're broke, and we can never let this happen again or it might really be back to bartering cans of baked beans. So governments around the world are going to have to try to keep those money men on a much shorter leash than before - whilst raising taxes and cutting services for 'perhaps decades'. (I suspect the British government, whoever that proves to be this time next year, is going to pursue the second and perhaps third of those tasks with a lot more application than the first.)

OK - now can I have a volunteer to write the general election manifestos of our three main political parties please ? Just a few thousand words are needed - but they must be full of hope and promise. Mustn't frighten the horses by suggesting we're in a pickle now, must we?

There will be time enough for that after the election...

Things Really Were Better When I Was Your Age

Anne Pettifor of debtonation provides this wonderful graph. To me it suggests two things:

1. There is a lot of mileage in the Marxist/Left Keynesian idea that our easy credit economy has developed to head off what would otherwise have been falling demand as working class people have lost ground in respect of their share of the national cake.

2. The workers have never had it so good, at least relatively speaking, as in the early-mid 1970s. As the son of manual workers who hit puberty at that point I can't but help find this obscurely comforting. Things really have been downhill ever since...

How Long Can the Labour Bounce Last?

Stumbling tells us the government is all over the place: the right hand doesn't quite know what, er, the other right hand is doing. It's probably true: a large ship of state is being turned round after many years of steaming in one direction and the crew have quite forgotten how to perform the manoeuvre. Underneath the headlines about Brown leading the world into a series of counter-cyclical Keynesian reflation measures are a whole host of more practical problems which New Labour is only weakly equipped to address in this new world. Today reported this morning that Lord Mandelson - now doesn't that name have a ring to it, like a title that was somehow always pre-ordained – was considering shelving the family friendly/flexible working extension proposals for small businesses. Meanwhile Brown and others still plough on in their quest to help 'hard-working families'. Something is going to have to give.

Perhaps some of this is inherent in the nature of politics itself: you deal with one problem and another one pops up somewhere else and you suddenly remember you used a different technique to deal with that one some time ago. 'Events dear boy, events'. But it is also due to the fact that New Labour abandoned politics per se, or at least politics as it was previously understood on the Left of the spectrum. They were and remain essentially technocratic managerialists. They ask not 'What is the Good Society and how can we edge towards it?' as old-style social democrats did, but simply," What Works?" A global recession makes it very, very difficult not to extend this into the obvious next question of "Who do you want it to work for?" and that's a political, not a managerial, question.

There is more than one historic model for Keynesianism. FDR tried it with infrastructure projects – but so did Hitler with his rearmament programme. Dave Osler reminds us that Keynesianism alone is not enough: we need policies for full employment. Will Hutton makes the striking observation that the quickest way to get the economy moving is not pulling forward large scale building projects but raising unemployment benefits. & the Green New Deal people want the infrastructure measures to be ones that leave us better off than before in terms of being able to face the challenge of climate change. But every one of these things involves some renegotiation of the relationship between state and economy, not just technocratic reflation.

New Labour will go down in the history books as the masters of spin - and the original spinmeister is back in the cabinet. But that's not going to be enough now. They need some politics now and I'm not sure they can magic it up without hurting their long time friends.