Coffee House has a posting today which says something we may be hearing more and more about in the next year or two: “Scorched earth”. If what Fraser Nelson says is true, then I certainly hope we do. Nelson says that Gordon Brown is now borrowing and spending like there’s no tomorrow, for him, but in a way that Prime Minister David Cameron will have to find the money to pay for. Nelson harks back to a Brown proclamation from way back, which went like this:
“I can give you a guarantee that is our fiscal rules, that we must uphold. And that is the basis of… and that discipline is the basis on which I think people have seen this Government as competent.”
That policy, says Nelson – linking to an FT piece which is, alas, stuck behind a registration wall – is now being forgotten about.
The assumption Fraser Nelson seems to be accepting is that in addition to hurting the country (party political blogs don’t tend to dwell on that aspect of things very much), this will hurt the next Conservative government (a much weightier consideration). Instead of pulling back on government spending, the way that other more responsible national governments are now doing, Brown, egged on by the trade unions upon whom the Labour Party now depends financially, is hell-bent on borrowing still more. Not content with wrecking his own administration, Brown wants also to wreck the next one.
Like a retreating army, he doesn’t want the advancing Cameroons to have any advantage at all. …
And then Nelson continues:
… Debt is a boring subject, but it means we’ll all pay more taxes for longer.
Debt is a boring subject. Hm. I’m not now in debt myself, thank heavens, but I suspect that debt is something that the people of Britain understand better and better with every week that now passes. Boring? Scary, more like. And if the Conservatives keep saying, as Fraser Nelson just did: more debt means higher taxes, that will surely get everyone’s attention. Tax increases are not boring, we already know that. Look at the damage that the recent income tax increase did to the Prime Minister’s standing and job prospects.
I suspect that, if Gordon Brown continues to send out signals like this, to use that phrase that politicians are so fond of, this may actually play right into Cameron’s hands, politically. Cameron has made a point of not ruling out tax increases. This is not because he likes tax increases, he is now saying, but because the British economy is now such a huge mess. Brown is now smashing up the nursery, and Cameron and his oh-so-fiscally responsible Conservatives will have to tidy it up.
Meanwhile, if the Labour Party as a whole does not either restrain or dump Gordon Brown, it will stand accused at the next general election of having brought about this disaster, perhaps even deliberately. Labour already faces electoral carnage. This could make it a lot worse for them.
The one thing that the Conservatives might do to save Labour would be if they kept quiet about this until the election campaign, on the grounds that they don’t want Labour stealing their policy of fiscal semi-sanity. Such an attitude would be too clever by half. If the Conservatives keep even relatively quiet, and then try to make this kind of mud stick only after colossal further damage has already been done, they too will stand accused, deservedly, of having contributed to the disaster. If, on the other hand, the Conservatives loudly denounce Brown for this borrowing-and-spending right now and keep on denouncing him, it will be a win-win game for them. Either the Labour Party listens, and the Conservatives don’t get landed with too horrible a bill when they duly become the government. Or the Labour Party stuffs its fingers in its ears, and gets wiped out for a generation at the next election, and maybe for ever.
This particular Labour government was elected because it was going to be different. This Labour government was, above all, not going to do, well: this. Fiscal responsibility was the big promise of 1997, repeated and repeated during the years after 1997. Gordon Brown was during those early New Labour years the very personification of this supposed new rectitude. This was the very thing that made New Labour so particularly New. So if this Labour government ends by doing … this, again, not only will it be all the more frightfully punished for its big lie, but the lie will linger in the electoral memory for decades. This Scorched Earth moment could be the difference between a mere electoral stuffing, such as Thatcher’s opponents, and then Blair’s opponents, all had to live with so painfully until the political weather changed, and something altogether more complete and permanent.
I hope, for the sake of my country, that the Labour Party, alerted or not by the Conservatives to the oblivion they now face if not to the mere damage to Britain that they are doing, sees the logic of this argument (in other words I hope that others besides me put this argument forward) before too much further damage is done. I realise that it is dreadfully naïve to be thinking of something as politically beside-the-point as the mere good of the country, but I live in hope.
But not expectation. The short- and medium-term prospects for the British economy now seem appalling.
So if this Labour government ends by doing … this, again, not only will it be all the more frightfully punished for its big lie, but the lie will linger in the electoral memory for decades.
No it won’t. It will linger in memory until the electorate gets tired of the Conservative government, and want to throw it out. Labour will then get re-elected because it is the other party. I give them about ten years in opposition, maybe a bit more, maybe a bit less, depending on the competence level of the Tories.
There is a potential upside to the Tories facing an economic catastrophe once elected. They might be forced to do good things that various people have been suggesting for ages.
Imagine food prices have further sky-rocketed in two years time and the media starts to claim that ordinary families are starting to go hungry, for example. The easiest way to suddenly decrease the price would be to bring down the trade barriers, currently enforced because of the EU, and announce that any country can sell food to us. Would notional ties to EU policy start to seem a little less important in those circumstances.
Of course, it could get even worse, but if a platform of free market solutions were delivered and the Tories were desperate, they might grab at them!
Nick: This is exactly what happened in the Australian state of Victoria after the disastrously incompetent Labor government of John Cain lost office in 1992, with the state almost bankrupt. Jeff Kennett did lots of fine free market things, but once the state was more or less solvent again in 1999 he lost office to a bunch of squishy (but not utterly incompetent) statists from the same Labor party who had messed things up previously, who remain in power to this day. Apparently his free market solutions were too “harsh” and his personality too abraisive. Or something. See my first comment though.
Brian,
I’ve been saying this for quite a while now. I’m not the only one. I think I posted about it on Counting Cats under the title “Gordondammerung”*. The only thing I’m not sure of is whether this is a tactic (hand Cameron a deteriorating situation and hope to bounce back in four years later) or a mere fit of pique by Heathcliff.
When The Dems were kicked out of the White House in 2000 they prised the “W”s out of the keyboards. I fear that glum jock bastard in Number 10 isn’t going to content with such petty revenge. Nope, It’ll be the full Samson in the Temple treatment for all use Philistines who haven’t the sense to see what a great and benevolent leader he is…
*Which I thought was a very clever title but nobody else felt flashed to congratulate me so I’m repeating it here.
True, but some reformsare difficult to abandon afterwards. Imagine the Tories, entering the Twilight Zone for a moment), managed to leave the EU but stay in EFTA. How easy would it be for even a die-hard pro-EU party to come to power and take us back in? I imagine it would take a tremendous swing in public opinion to achieve that.
nick,
I clicked you and got through to backlash. Wowsers! I’m writing to the local MP*. That’s appalling and an utterly stupid law.
*An appalling Tory trough-pig.
Appalling ot not, it worked for Berlusconi. The Prodi government that came afterwards quickly became very unpopular, not least because of the budget cuts it had to perform after Berlusconi’s big splurge. And as it happens, Silvio is back in office again.
That isn’t the twilight zone nick, that’s Fantasy Island. That’s bloody Oz. (a) the Tories wouldn’t (b) the EU wouldn’t let that happen.
Any one of the big nations pulls out and the EU is doomed. The Scandinavians (amongst others) are already far from gruntled with it. Therefore the EU would do it’s level-best to fuck us over if we leave. It would be back to Napoleon and the Continental System. And quite frankly I see no Nelson or Wellington around here. Although my wife nearly crashed the car when the Chairman of the Chiefs of Staff, Sir Jock Stirrup, came on the radio yesterday.
This movie couldn’t come at a better time:
http://www.iousathemovie.com/
Don’t worry about whether Brownie is calculating/peevish enough to leave a poisoned chalice for the dim-witted Cameroon — worry about the ordinary Brit who has to drink that poisoned chalice.
No less a sage than William Jefferson Clinton once famously remarked that the era of Big Government was over. It was not then, but it will be sometime. In senescent western “democracies”, the seedcorn of past investment & innovation is being eaten; education deteriorates; the Ponzi scheme of government pensions is reaching the end of the string; and the finite nature of fossil fuels becomes steadily more apparent.
The whole edifice of big intrusive goverment (inevitably leftie in character) was built on the foundations of confident civilization and cheap energy — foundations built by better men. Now the edifice is crumbling. The sooner it falls, the sooner we can get on with the task of purging those responsible and starting the long task of rebuilding. Maybe Gordie deserves our appreciation for hastening the day.
Gordon Brown, like Hitler before him, and Napoleon before him, has arrived at Moscow. Nothing left, except a cold winter, a long retreat, and a scorched earth policy.
Alice, I’ve never seen you so negative!
Anyway, the edifice may be crumbling, and we may be eating the seed corn, but those foundations are very deep, there is an awful lot of seed corn still in the bins, and (to throw in yet another metaphor) the people holding the reins of power are extremely determined not to let go of them. I don’t see Big Government collapsing until western civilization itself falls, and I don’t think that will be happening in my lifetime. We will first have to endure a long, slow, and painful slide into decay.
Rome didn’t fall in a day, and neither will we.
Background: It’s late here and I’m dreading a call from the vet (and don’t get me started on *that* guild).
Sadly, it seems to me that both Alice and Laird are right. The UK is in terminal decline, other places not so – yet. Given that belief and with no kids to worry about, I’m off to Texas, on the grounds that it’s less far gone (ETD now down to 6 months).
Should Texas fall to the same malaise, to an extent that I won’t accept, then I’ll fsck off to the next place. And so forth, until I kark it.
There’s probably a metaphore here, something to do with tidal waves, I’d imagine. Or possibly rats. Oh well.
When I hear chronological comparisons of the rise and fall of the Roman Empire and the rise and eventual fall of the American Republic, I wonder if there is not some equating of political with physical infrastructure.
Politics moves at the speed and bandwidth of information. The speed and bandwidth of information during Roman times was at best, a fast courier carrying a few handwritten pages of text that would be read by a few people only. There was not a medium for broadcasting, only multicasting.
To understand pace, try building a processor chip with the bandwidth, clockspeed and interconnectedness of the Roman information network. Now build one with the bandwidth, clockspeed and interconnectedness of the modern information network.
If you compare the two’s processing speed running a complicated model, you can get a pretty good idea of how fast things may go this time. Even at the beginning of modern mass media, during the French Revolution, the actual shift from tension to release modes was very rapid. A little more than a century after that, the assassination of Archduke Ferdinand signaled a phase change in even less time. Even ‘winners’ like the UK came out of its Victorian traditions into the arms of an nascent police state. The destruction of centuries of European traditions of government took just a very few years.
The obvious rebuttal to these comparisons is that the tensions were already in place and the groundwork laid for those events to trigger the explosion. Well, as the Chinese curse goes, we live in interesting times. We unquestionably have tremendous strains within our present structures. I rather suspect that Brown’s actions could have consequences that do trigger something in the United Kingdom. In optimistic moments, I can see UKIP, by its very name, sweeping into power faster than they can manage their own affairs. They should try their best to be prepared with a full slate of vetted candidates and weed out the weirdos. I think they are already trying to. Knowing which members of existing parties are capable of embracing the UKIP platform with integrity will help.
That certainly is a defensible proposition. On the other hand, there is the recent example of the demise of the former Soviet Union — where things started to happen very rapidly after a certain point. Perhaps Mid’s idea about communication bandwidth explains the difference between old Rome & recent Moscow.
To push the analogy with Rome further, maybe the issue is the current ability of the State to provide (or at least, not to impede) bread & circuses. No doubt that materially life is better now for more people than ever before. With rising energy prices and the bill for past commitments coming due, maybe the bread & circuses will have to stop. And that is the point at which things will change rapidly.
Of course, the example of the former Soviet Union shows that the transition may be painful. For the power-hungry Neo-Stalinists who have been undermining the West, let’s hope that it will be very, very painful indeed.
Brian,
Hope you’re well.
You are right to be concerned about the stock of public and private debt. But I think you’re almost too sanguine about the longer-term prospects for the British economy.
Since 1982 we have been seen a secular decline in long-term interest rates and commodity prices globally. The UK exports services and imports commodities and manufactured goods, and the more recent boom in financial services has meant the terms of trade (price of exports/price of imports) moved in our favour over the past decade.
The MPC has (as have other central banks) kept rates much below the level consistent with monetary equilibrium and stimulated an incredible build-up of leverage.
Today all these trends are now reversing. (No, Midwesterner, cycles still take the same amount of time. Human nature and how the fixed capital stock interacts with growth and population have not changed. Fred Harrison called the housing crisis of the early 90s just as he called the crisis starting 2008).
So just as the past few years have seen favourable surprises (every year, growth has been surprising most forecasters on the upside) the next fifteen years may see the reverse: higher inflation accompanied by asset deflation, falling real disposable incomes; shockingly high interest rates (8% and then 10%); a reversal of recent immigration flows; weakness in the financial services sector. Northern Rock is just the first of many bank failures to come, and this too will lead to more borrowing. The burden of debt is much greater at an 8% short rate than under our recent experience.
The problem for the Conservatives is that there is no attractive option. Pursuing policies that lead to long-term prosperity at the cost of short-term unpleasantness are unlikely to be rewarded by the electorate, if the experience of Eastern European reformers is anything to go by. We had to reach the point of near-collapse before a moderate reformer like Thatcher could be elected – I don’t see many signs that it will be different this time.
Laeeth,
No, I wasn’t referring to economic cycles. I apologize if I left that impression. Before writing that comment I actually went back and looked at other bubbles, notably the tulip bubble and saw that they do in fact follow a very similar chronology to bubbles today. I suspect economic cycles are more a product of investment to return intervals than speed of communication.
What I was referring to specifically was political cycles. I think they are quite different from economic cycles and are at the same time heavily influenced by economic cycles. If there is a ‘planets in alignment’ sort of pull with these two cycles the political response could be much quicker and greater than it would be in an environment were information is at a premium and the greater mass of people, now days voters unlike in Roman times, develop what for lack of a better description I’ll call harmonic resonance.
But I agree with what you say about the pace of cycles. I didn’t look for Roman cycles but I suspect they follow a similar pattern also.
The more I hear about Gordon Brown, the more convinced I become that he’s just looking to become a cheap Paul Martin knockoff. Given how well that worked for the original, I can’t for the life of me see why, but if this was fiction, right now would be the point where I started mocking the author for failure of imagination.
What would happen if the Tories, now, were to announce that specific, named, ‘irresponsible’ debts would not be honored once they took power? It’d be hard for Labour to borrow excessively with the lenders running screaming.
What Michael said.
Brian,
it will stand accused at the next general election of having brought about this disaster, perhaps even deliberately. Labour already faces electoral carnage. This could make it a lot worse for them.
Labour is betting, quite correctly, that it won’t. They may even calculate it will make things better. The spendng will be targetted on its friends and its clients, with a view to the 2014-15 election. The bet is they can keep their own piggies in warmish shit temporarily, for which they’ll be remembered as kindly animal comrades, and that the Tories will be blamed for all the horrors that transpire.
That’s why Darling is now saying the taxpayer cannot take any more. Not because he gives a fig for the taxpayer, but in order to provide emphasis and contrast when the taxpayer discovers he does have to pay — a few years from now — between the Labour party that understands your pain, and those vicious public-service-destroying Tory toffs. They hope to rerun 1983 without the Falklands factor, CND and Clause 4.
Guy
Thank you for stating so extremely clearly what I think is completely wrong.
Everything depends on what the Conservatives now say.
What politicians say does matter. If I have a general disagreement with the Samizdata commentariat, that is it. I’ll say it again: what politicians say does matter. What politicians say creates the “narrative”.
Cameron now has the ear of the country. What he says, if it makes sense, will be the narrative for the next few years. And if he now says that Gordon Brown is now burning seed corn, scorching earth, selling the family silver for scrap, etc., and if Brown does indeed seem now to be doing that, as he does, then that accusation will stick, and will be remembered. If Cameron warns that the early years of his government will be tough, as he is warning, that will also be remembered, to his advantage.
Of course, if he does not say these things, or say them loudly enough, they will not be the narrative, and Cameron will be overwhelmed by the events that Brown is now so busily creating.
The preferred cliche to deny that what politicians say matters goes: actions speak louder that words. True. But when actions are aligned with words, then the words matter a great deal. Actions without words are not remotely as powerful. When words are aligned with reality, and with the actions being taken to deal with reality, they are absolutely crucial. In that case, not saying the right words makes all the difference, between, in this case, the immediate future for Britain that I describe, and the one you describe. You may turn out to be right, but you will only be right if Cameron utterly fails as a communicator.
You talk as if words don’t matter. But if that is true, why do you spend your life doing words? This makes no sense to me. I spend my life doing words because I know that words do matter. Why do you?
I do not think a Labour electoral catastrophe is inevitable, but I do think that if the Conservatives say these things, then it is a very serious possibility. And I say that this catastrophe will last.
We shall see. Let’s try to remember this exchange in a few years time, not just immediately after the next election, but a few years into the Cameron government.
Michael
The British electorate got tired of the Blair government rather quickly, and were certainly tired of them by the time of the last election. Yet still they won. In order to get back into business, the Conservatives had to change their manner and their tune very seriously. The Conservatives lost the last election, despite being “the other party”.
How will “Labour” convince the voters that they have changed, when the voters get tired of Cameron, as and when they do? Remember, one of the central central claims about them be that they lie.
They said, more convincingly than ever before, in 1997, that they had turned over a new leaf re fiscal responsibility. They lied. Now (i.e. circa 2020) they say, again, that they have turned over a new leaf re fiscal responsibility. Wrong. They may believe this wrongness, but it is still wrong. It’s their nature. They can’t help themselves. They tax. They spend. It’s what they do. And they end up doing it too much, because it’s the only way they know to solve any problem. They inherit a sound balance sheet and they ruin in.
As I say, I think this is mud that will stick, for a very long time. Certainly for longer than a decade.
Provided only that it is thrown with sufficient eloquence, see comment above.
Mick M
Re “Gordondammerung”, yes, I recall reading your postings about this, and this must have influenced my thinking, if only because the original dammerung is one of my operatic favourites. Sorry for not linking to you. I certainly don’t claim to be the first person to have thought about all this.
And like you, I simply don’t know if this is a calculation or a mere spasm of desperation on the PM’s part. Both I suspect, since both reactions seem to be pulling him in the same direction.
“I suspect that debt is something that the people of Britain understand better and better with every week that now passes.”
I suspect that he meant it was boring to the media and political class, not to ordinary people.
Brian,
I completely agree with you that what politicians say matters. So does the current government, which for 10 years got close to demonstrating that it is only what they say that matters. Where we disagree is in the prognosis that scorched earth will fail because they will be blamed for the consequence.
I suspect it might fail for other reasons.
I suspect sentiment has turned so completely they can’t completely buy themselves out of trouble, with anyone but those who want to believe in Labour. The wells of change cannot so easily easily be poisoned. But that doesn’t mean the public will blame them for the actual consequences of what they do now – any more than they are directly blamed for the destructions of liberty and law and the lootings of power and money that took place in the forgotten first half of Blair.
I suspect also that events will make the scorched earth seem indistinguishable from the general landscape. People will say ‘things are bad’ and take it to be just the way they are, without any capacity undertake a policy hypothetical and conclude they are much worse under Labour – any more than they either credited Gordon Brown with the boom or did the calculation haw much better of they’d have been without his impositions during it.
It might lead them to feel less positive about a Cameron government. But it won’t whatever else it does lead to people in general either taking any more notice of Brown’s fiddling of figures after the fact than they did at the time, or being able to point to Labour economic decisions as responsible for the problems of a Conservative government.
There is no social action at a distance.
Midwesterner,
Maybe the forces that shape the political discourse move to their own rhythm, responding in a logical fashion to the challenges of the day and remaining more or less disconnected from those influencing art, fashion and risk-taking. In that case it makes sense to speak of new technology speeding up the political cycle.
But it is at least possible that there are cyclical influences, acting on man perhaps at a deep biological level, that shape human action across many domains. We might flatter ourselves as to how much more than the ancients we are creatures of reason than of sentiment.
If you’re curious about this, you might look up the work of Martin Armstrong, and the Foundation for the Study of Cycles. Resonance and entrainment are interesting phenomena.
I do agree that the speed and coherence of response at an inflection point may be more acute today than previously.
Laeeth.
Brian,
My bet is that in three years time the political landscape will look so radically different that nobody will care what Cameron has been saying at this point.
We’ve lived through a period of incredible stability with low interest rates and an improving and favourable terms of trade and we have grown to accept this as the normal state of affairs.
A dramatically more turbulent era has arrived and whatever the plans of an incoming Tory government, they will be very much shaken up by future events. Were Osborne to have the soundest free-market instincts, he would nonetheless still be unlikely to have the determination or mandate to respond to the coming challenges in a classically liberal fashion.
At this juncture when things start to go wrong the public instinct will be to look to fix the epiphenomena and not to address the root of the problem. Probably the situation needs to get very much worse before the public is ready for a moderate reformer such as Thatcher.
What is the Austrian approach to deal with a potential banking system collapse anyway? Best not allow fiat currency, but once you are in such a mess it is hard to properly address without getting the state heavily involved in banking. A tiger by the tail, indeed.
On the topic of the EU, I haven’t seen so much discussion of monetary policy. Bernard Connolly at AIG is the best author on this topic, having been rather close to the centre of things in his previous life.
Either the ECB cuts rates aggressively, or Portual, Italy, Ireland, Greece and Spain will enter a depression (growth was very much driven by credit-bubble activities and their relative unit labour costs are too high). But this will result in unacceptably high inflation in Germany, which after years of disinflation is very competitive and geared towards more vibrant export markets.
I can’t imagine the more prosperous states being thrilled to make fiscal transfers to the PIGS. So expect tension within EMU to increase substantially over the next few years.
Laeeth