Sorry is the wrongest word


There’s a lot of commentary around at the moment about whether Gordon Brown should apologize for the recession.

This is a political ploy straight from the playbook. Conveniently bypass the stage where you analyze whether there is, in fact, any blame to be applied – make that implicit. Then, if he doesn’t apologize, he’s ignorantly refusing to face facts. If he does, he’s got something to apologize for.

A lot of commentators seem to say that the recession is Brown’s fault. If this is the case, why is GDP down across the world, with the World Bank preducting the first contraction in global GDP since the war?

Still others say that Gordon Brown’s regulatory system has failed. Fair point, but a few points in mitigation:

  • All of the countries affected by the downturn have different regulatory systems. In the US, for example, the post-Enron regulatory regime was very strict. No correlation exists between types of regulatory regime and severity of national recession.
  • Setting up the FSA in 1997 was a sensible move aftergiving the Bank of England independent control of monetary policy – it doesn’t work to have an institution which is meant to act primarily in the interests of maintaining an inflation target also worrying about the (often competing) interests of the financial sector.
  • The system of having banking regulation outside of the Bank, and at the FSA, was arguably more stringent than that operating before. The Tories opposed this.
  • At none of the last three, four or even five elections have the Tories taken to the country a message about a serious threat to theeconomy arising from lax banking regulation – quite the opposite, in fact.

The real reason why Britain is affected more than some other OECD countries is the centrality of financial services in the British economy. Since the deregulation of the City in the 1980s, financial services and related industries have made up a greater proportion of British GDP and employment than in France or Germany.

Perhaps this was wrong. Whether it was or not, it was (or became in the 1990s) a matter of consensus between the major parties in the UK that this would be the case. Given the fact that our manufacturing base had been cut to the bone by this point, whether in the cause of Britain’s comparative advantage in the terms of trade or for political expedience for the Conservatives, keeping the financial sector booming wasn’t a bad bet for Labour or the Tories.

Enough all ready. The excellent Chris Dillow has already said this far better than I can hope to. However, I will leave you with this thought – in Ireland, where the Fianna Fail-led government of Brian Cowen is pursuing a similar line to that which the Tories say they would implement (deflationary measures and an aversion to government indebtedness), GDP is falling by a staggering 6% and unemployment looks set to top 11%. It’s a good job David Cameron isn’t in charge, because he would have something to apologize for.


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4 Responses to “Sorry is the wrongest word”

  1. electionsproduceerections Says:

    You make a good point. However, without having any figures to hand, I was under the impression that Britain has been more reliant on financial services than other West European countries since well before deregulation in the 1980s. The policy of maintaining high interest rates to benefit the City of London at the expense of provincial manufacturing goes back to Gladstone.

  2. voteredgogreen Says:

    A good point, comrade EPE. Perhaps you’d like to flesh this thought out into a full post?

  3. *sigh* defending Gordon. Again. « Frank Owen’s Paintbrush Says:

    […] I’ve expounded on this myself. The tripartite system was sensible, given that the Bank of England was taking over control of Monetary Policy, and was far more stringent than any previous system. It’s also unarguable that every regulartory system in Europe failed – begging the question, was it possible to construct a regulatory system that would withstand the recession? […]

  4. Speeches I wish Gordon Brown had made (number 94) « Frank Owen’s Paintbrush Says:

    […] I think Gordon has handled the technical detail of holding back the worst of the recession well. I also think that a lot of the blame being laid at his door for the recession happening is […]

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