A constant refrain, from both the Conservative and LibDem
party conferences, is how the current government saved the country from a
crisis. Here
is Osborne: “Four years ago, our economy was in crisis, our country was on the
floor.” Or LibDem Danny Alexander: “We’ve seen the economy through its darkest
hour ..” Now someone from outside the UK would immediately think Osborne and
Alexander had got their counting wrong: the Great Recession was in 2009, which
was five not four years ago. But of course they do not mean that little old crisis - they
are talking about the Great Government Debt crisis. The only problem is that
this debt crisis is as mythical as the unicorn.
The real crisis was the Great Recession. And if any politicians can claim to have saved the country from that crisis, it is Labour's Gordon Brown and Alistair Darling. They introduced stimulus measures
(opposed by Conservatives) that helped arrest the decline in GDP. By 2010,
which is when Osborne took over, the economy was growing by nearly 2%.
But surely there was a debt crisis in 2010? Indeed there
was, in other countries. Crucially, these were countries that could not print
their own currencies. This became apparent when interest rates on Greek debt
went through the roof. Interest rates on UK and US government debt after the
recession stayed well below levels observed before the recession. UK and US
governments never had any problems raising money, for the simple reason that there was never any chance they would default.
So wrong time, wrong country, but also maybe wrong people.
Consumers and firms in the US and UK did feel they had borrowed too much, or
wanted to save more, as a result of the financial crisis. The personal savings
ratio in both countries rose substantially, and stayed high for a number of
years. But people need something to save, like government debt. Which is one
reason why interest rates on UK and US government debt stayed low: although the
supply of that debt increased, the demand for it was increasing even faster.
So why do we not hear Labour claiming that they saved us
from a crisis - at least their crisis was real! Why do claims that the current
government saved us from an entirely mythical crisis generally go unchallenged? Such claims are the equivalent to the Republican Congress claiming they saved the US economy. Welcome to the strange world of mediamacro. What the media should be doing, the
next time this government claims it saved us from the Great Government Debt crisis, is to borrow a phrase from Jim
Royle: crisis my arse!
