Yesterday saw the largest scale government intervention in the UK Stock markets ever undertaken, plus a cut in interest rates on an unprecedentedly global scale. Brown and Darling were greeting with a wartime spirit in the Commons, and cheered to the rafters. There are calls for the US to follow the British plan. So has it worked?
Perhaps it is too early to tell. But the FT grimly records:
"News of the scheme failed to calm the stock markets. Amid massive share trading volumes, the FTSE 100 index of leading shares closed at 4,367, down more than 5 per cent, marking its worst three-day run since October 1987. Yet the cost of insuring the debt of Britain's largest banks against default dropped, suggesting that the credit markets had been reassured by the scheme."
Some technically well informed people on the left tell us that it's a wasted opportunity – we could have acquired more of the banks for this amount of money, and began the inevitable turning around of a failed 'business model', if that is quite the right way of describing how an economy should be run. Larry Elliot certainly agrees that it a plan to stabilise, not reform, the system which brought us the mess in the first place. But this hardly a surprise: no one imagined that Brown and Darling did this as a first step towards setting up a socialist economy. Nor, to be frank, is anyone suggesting that these moves alone will mean we avoid a severe recession if not an actual depression. Indeed some people – like VoxEU.org, with their frightening graphs - tell us we're still heading for a 1930s type crash.
Never mind, though: in his 'day job' Stumbling and Mumbling tells us at least some things are still working: outside the financial sector, corporate profitability is still healthy, at least in the US.
So – what's my gut feeling about all this? Simply that this is genuinely a '1940' moment for Britain. Either these moves stave off the 'threat of invasion'- for which read the collapse of the banking system - or they don't. Given the reception by mainstream economists I suspect there is a fair chance this will be realised. But 'staving off an invasion' is a long way from 'wining a war', as it were. The economy survives - we're not in the strange Icelandic world of national bankruptcy –but turning this around will require huge further shifts, which almost no-one in power seems presently to even be prepared to contemplate. What the economists call a structural adjustment is required - a different way of running the economy because it's broken for most of us. There is no way of getting there painlessly and we can certainly expect higher prices, more unemployment and lower standards of living.
The 1983 Manifesto was right: Britain as a country needs to use its financial sector to support the gainful enterprise of its citizens by directing investment to areas where meaningful jobs, ideally with a greenish tinge, are created . We need to move away from an economy based on casino capitalism because the net result is disaster. Yet the problem, 25 years on from 1983, is that all the metal bashing jobs have either migrated to the BRIC countries or been made redundant by the march of automation and technology. We need a new plan which not just socialises more of the economy, but projects a new vision of how we're going to make a living. In other words: a national-popular programme, however weird and old fashioned that sounds in what we've been told is a globalised world.
But we're not going to get it anytime soon.
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