by Jonathan Todd
Daniel Finkelstein is a leading commentator and one of David Cameron’s most articulate defenders. No other columnist has the economic gravitas of Martin Wolf. Pieces from Finkelstein and Wolf in the week before the Budget exposed the tensions at the heart of the government’s economic and political strategies.
Finkelstein argued that the Conservatives have three assets: David Cameron; a Labour Party that “has pitched itself too far to the left”; and “the large constituency of voters who … don’t want to borrow more”.
On the same day Martin Wolf demolished David Cameron’s “there is no alternative” speech.
“What truly is incredible is that Mr Cameron cannot understand that, if an entity that spends close to half of gross domestic product retrenches as the private sector is also retrenching, the decline in overall output may be so large that its finances end up worse than when it started.”
What Wolf considers economically indefensible – not taking advantage of rock bottom interest rates to borrow more to stimulate recovery – is what Finkelstein considers to be a political strength. Those who join Wolf in advocating stimulus include: Labour, TUC, CBI, BCC, Vince Cable, IMF, NIESR, Bloomberg, The Economist, and Oxford Economics.
Equally, the political rationale that Finkelstein appeals to is not groundless. That 10 per cent more voters blame the last Labour government for the cuts than the current government speaks to the reputation for dangerous profligacy that continues to attach to Ed Miliband’s party (YouGov, 17/18 Feb). These voters believe that the Conservatives are doing the tough but necessary, while Labour offers only a risk, not a sound alternative.
This popular view, which sustains Finkelstein’s political logic, is, however, challenged by a growing economic consensus in favour of an approach quite different from that offered by Osborne.
He talks of supply-side reform when it is an absence of demand that holds the UK back. He claims fiscal responsibility when the stuff of genuine fiscal responsibility would involve recovering this demand. He pins his hopes on active monetary policy – near zero interest rates and QE – when the experience of recent years provides amble justification for Keynes’ view that loose monetary policy amounts to pushing on a piece of string in a depressed economy.
