Bold… but not as bold as Obama

‘The recession has to take its course… bad debts have to be written off, bad investments have to be written off and people and businesses need to repair their balance sheets. The Prime Minister knows that…’
John Maples MP, deputy chair Conservative Party
‘I would personally like to explain and apologise for a phrase I used on Monday, which was that the recession must take its course. I realise that may have caused offence to people who are the victims of the recession…’
John Maples MP, deputy chair Conservative Party

I’ve some sympathy for ConservativeHome readers who think poor old John Maples should not have apologised for saying the recession should be left to run its course. Not because he’s right, but because he’s merely saying what many Tories think. Gordon Brown was right to take Maples to task, but if Maples had anything about him, he’d have stood up for himself. Instead he flip-flopped to a position that surely places him at odds with the shadow chancellor: ‘I did not mean to convey the impression that the Government should not help victims of the recession. I fully support borrowing to do that.’

Whatever happened to Conservatives with the balls to say: ‘If higher unemployment is the price we have to pay in order to bring inflation down, then it is a price worth paying.’?

Unemployment is not a price worth paying, but we are going through a necessary correction. There are few sustainable ecosystems in nature and succession is often violent, sudden and dramatic. And markets are forces of nature; bubbles grow and bubbles burst.

There is no reason to believe the market outcome will be at all desirable but fortunately, markets do react to regulation and government intervention. Recession creates opportunities for government to invest, employing workers the private sector no longer needs on big construction projects, say. Government can borrow when the private sector can’t to arrest the decline in demand and so save businesses and the jobs that depend on them.

This bubble was spotted well ahead. It was well known that people were taking out mortgages they could not afford and building up credit card debt well beyond their means; it was the only way they could keep up with their peers and everyone else was doing the same. Banks and their customers were behaving irresponsibly. Pressure built up to a tipping point and dramatic consequences followed, first in the USA but spreading quickly throughout the capitalist world.

Labour could do nothing to prevent this without international support, which would never come from a Bush White House or a Europe of centre right regimes. Meanwhile, despite all that has happened, the Tories still cannot claim to be pro-regulation. Just the opposite, even now they oppose government intervention to smooth out this trough.

Fortunately, a far more progressive consensus is beginning to emerge. Obama is talking of a $400bn to $700bn stimulus package. Per capita that’s around $1,300 to $2,290; per capita the UK’s package is worth a little more than $500.

Partly this illustrates how much worse things are for America. It’s also evidence that Obama may be as bold as he promised… let’s hope that inspires the rest of world’s leaders including our own.

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