G20 battle lines

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No really, I thought the DVDs were great.

"No really, I thought the DVDs were great."

To be honest, I’m almost glad that there’s a row brewing at the G20 – at least, one in which Merkel and Sark0 are lining up against Obama and the Gord.

After several months in which the media have used every disagreement between Western European leaders as a stick with which to beat Gordo, it’s refreshing to see the dispute cast differently.

Previously, the debate was cast as a clash of personalities: poor, dishevelled, unpopular-kid-in-the-class Gord, trying to make the other members of the European club play with him. Merkel and Sarko take their toys and play elsewhere.

This has very much been the narrative, both foreign and domestic: that policy doesn’t matter, and that the response to the recession that Gord is offering is poor, because nobody likes poor Gordon. Other, more eminent, political bloggers – among them, comrade Hopi Sen – have blogged in the past about the paucity of policy analysis coming out of the recession, relative to the amount of tired old “who’s up, who’s down” copy.

Well, Obama to the rescue. The Prime Minister may not be the media’s favourite uncle, but they sure like Barry – and now that Brown and Obama seem to be forming (broadly speaking) a coalition in favour of a further stimulus against the Sarkozy-Merkel axis, the media are forced (I would hope) to consider this in policy terms, at long last.

This is good for two reasons. First, because I genuinely believe a further fiscal stimulus to be necessary: although the crisis was caused by credit market failures rather than a large shock to aggregate demand, confidence (and thus demand) has undoubtedly been knocked.

Without government, output will fall and unemployment will grow: with hysteresis effects – that is, that expensive-to-replace capital is scrapped, and workers fall out of the labour market, unlikely to be fit to return to work when the recession ends – an output fall is extremely costly, in the long as well as the short term. I have blogged about this before, as have Duncan and Hopi, amongst others.

For all of their words on regulation – and, by the way, we ought not to forget that every regulatory system in the world has failed, not just our own, casting doubt on the argument that “better regulation” would have helped – and clamping down on tax havens and the rest of it, Merkel and Sarkozy must be made to justify why they want to restrict government fiscal action and pursue an essentially deflationary policy.

The second reason why I think this is good is that it forces the Tories into yet more contortions about their position on the recession: they were anti-regulation to begin with, but are pro-regulation now; they’re anti-state interference, apart from in the regulation of financial markets; and they’re euro-sceptic and pro-US, apart from when the French and German leaders (whose European Parliamentary grouping Cameron has just left) are looking uncomfortably close to their own positions.

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2 Responses to “G20 battle lines”

  1. Robert Says:

    With so many people leaving the Labour party, you should re-name your self go green become red. so many blue rinse now run Labour it might be called the pink tie brigade. or the blue tinge, a new name for Labour.

  2. Vote Red Go Green Says:

    “so many blue rinse now run Labour it might be called the pink tie brigade”

    Sorry Robert, you’ve lost me there. Although I do have more than one very fetching pink tie, I most definitely do not have a blue rinse.

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