Left In The Lurch?

Damian McBride writes:

Five months ago this week, I invited some good-natured mockery by warning people that the only way to survive the looming economic crisis was to take a large notepad and go and watch The Revenant. We’d all be living in the wilderness soon enough, so it was time to learn how.

Well I didn’t go quite that far, but I did state my profound belief that this crash would be much worse than the 2008 banking crisis, and – given how close we came to the collapse of the financial system then – it’s a reasonable fear that we won’t get so lucky twice.

Back in August, the Chinese government and the US Federal Reserve combined to kick the can down the road, as they have done many times before.

But now here we are again, the can looks more like a boulder, and even George Osborne has joined the chorus warning of risks ahead.

Whether or not a crash is imminent – let alone one on the scale I fear – remains deeply uncertain, but the one assumption I have up to this point considered safe is that the beneficiaries in political terms would be on the left.

My reasoning was that if – for the second time in a decade – the economy crashes because of loose lending, bad investment and laissez-faire government, the capitalist model that survived the 2008 crash unscathed would finally be ripe for upheaval.

In that case, I believed, Jeremy Corbyn, Bernie Sanders and other leftist candidates around the world might get the mainstream hearing they are currently denied. Now I’m not so sure.

When I look at the US voices who have shouted longest, loudest and most persuasively about the current economic bubble – from young market analysts such as Jesse Colombo to old hands such as David Stockman, as well as politicians such as Ron Paul and Donald Trump who have jumped on their bandwagon – they could not be further from the left. 

In their minds, what we are seeing now is not a further repudiation of the capitalist economic model, but proof of what happens when market forces are not allowed to operate freely, and where governments and central banks see it as their role to prop up markets and keep the bubbles growing. 

In other words, if we’d stuck to libertarian, free-market, sink-or-swim economic fundamentals, with a dash of isolationism thrown in, none of this would be happening.

And it follows that the very last response to any crash should be more of what they depict as the state-controlled, debt-fuelled pump-priming of the economy that has got us into this mess. 

No wonder Trump wants the bubble to burst before November. How he would relish depicting Hillary Clinton as the status quo candidate in those circumstances.

In Britain, Corbyn’s ability to capitalise on a new crisis should in theory be easier. Against a government that has fetishised austerity, relaxed controls on the banks, and bet the farm on continued Chinese prosperity, Labour’s alternative must surely appeal.

But what if the Tory right beats him to it? After all, if a crash does occur, Theresa May and Boris Johnson will need to differentiate themselves quickly from George Osborne’s economic policies, so why not follow the lead of their American colleagues and start now? 

In 2008, given the scale of the crisis the world faced, no one could sensibly have argued against the case for government intervention and stronger curbs on the banking system.

Next time round, the debate will be very different. Will everything be blamed on the excesses of the market, or the market not operating freely enough? Will the answer be an even bigger role for government, or government learning its lesson and getting out of the way?

Who wins those debates will have a huge impact on how people vote at the next elections in the US and Britain, and whether we lurch to the left or the right.