Sunday, 29 March 2009

Giving Money to People, Not Banks..

One of the most cogent and coherent analyses of the current economic situation is contained in an article by Simon Jenkins in today's Guardian and I commend it to everyone.

For me, it underlines what I have argued since last autumn - that the assumption that the Government can spend its (and our) way out of recession is fundamentally flawed. It was flawed in the 1930s and is flawed now.

Jenkins argues not for wholesale tax cuts but for a more targetted approach based on raising personal incomes in the short-term to regenerate spending and demand. I fear that even if this were introduced now, it would be too late, the damage has already been done and, as the RBS announcement yesterday showed, more job losses are on the way.

That said, Jenkins also strongly endorses Vince Cable and the Liberal Democrat response to recent events. The Conservatives have struggled to come up with a narrative as they were so tied to the mechanisms which have now been seen to fail.

It may well be that while the odious Glenn Beck might call it "socialism", the future of Anglo-American capitalism might be nearer to the European model than has been the case in the last thirty years. Certainly, no one wants the degree of State control practiced in Russia or China but there is also no appetite for a return to the deregulated chaos that has let us down so badly.

Professor Niall Ferguson, in a recent Telegraph article, tried to articulate a Conservative ideological response but a promising start finished up an incoherent shambles. Conservatives have nothing to say and very little to offer and it is, in my view, only the justifiable contempt in which Gordon Brown and Labour are now held that is maintaining the Conservative poll ratings.

I hope that Vince Cable and Nick Clegg will pick up and run with some of Jenkins's ideas - we need to get people spending and above all confident once again. The British enjoy a good shop and will spend if they can when they can. I do accept that tax cuts, while in my view desirable, are too blunt a weapon at this time and a more focussed approach is required.

It is also vital that we boost the incomes of pensioners in particular whose savings have been ravaged by the falls in interest rates and who have been, in many ways, the real victims of the recession so far.

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