5 Jun 2009

Electionomics II: promoting short-term growth

Amid the chaos, it appears Team Brown are clinging on to one hope: the economy. As the prime minister himself has just said: “People are beginning to see the difference… there are already some instances of the economy showing results.”

There’s some irony here. In a previous abortive attempt at blogging I posted about electionomics at the zenith of the Brown premiership. In September 2007 Gordon Brown’s poll rating was still soaring, and despite Northern Rock, the economy was still ticking along nicely.

Mr Brown was being lobbied to go to the polls by some of his team. He surely would have won, gained an electoral mandate, and been able to combat the recession from a position of political strength. Mr Brown missed his economic window of opportunity.

So is there any possible confluence of politics and economics that could see the government remain in office after the next election?

Well, we have the reverse situation now. There are real tangible green shoots from the housing market yesterday and purchasing surveys this week. I could see them for myself on my recent trip to Liverpool with the Bank of England’s Andrew Sentance.

Clearly no-one can tell how these shoots are going to grow. Nonetheless if Brown hangs on, and the recession can be announced as “over” in February 2010, or even November 2009, it could offer some sort of platform for a fair fight with the Conservatives, on the basis of having ended the recession.

Throw in rising house prices, too, and the likelihood that any relapse in the economy would not have manifested itself until after a May 2010 election, and I think you can see the logic, flawed or otherwise, behind Team Brown’s calculations.

And it means that we should all be watching carefully for political decisions that promote short-term economic growth at the expense of long-term stability.