The middle of the line

Oh dear!

Yet more problems with the Tory would-be Chancellor of the Exchequer. He’s been caught out overstating the benefits of an increase in the pension age (and of course, this follows days of questions as to what he actually meant by it and how it would affect women).

What is more damning, however, is the view of David Blanchflower. He used to sit on the Bank Of England’s Monetary Policy Committee (which sets the base interest rate for the UK), and was one of the few people to predict the path of the downturn:

We are in the midst of the worst recession most people alive have ever experienced, or will probably ever experience. It is already worse than the 1980s and it isn’t over yet. The only comparison is to the 1930s (my parents, now in their 80s, can remember how bad it was). The monetary and fiscal authorities have so far managed to prevent a recession turning into a depression – but it still could, especially if David Cameron and George Osborne have their way…

…The simple lesson when you are deep in recession is that a serious policy error is to reverse stimulus too early, which then sends the economy crashing into a depression. This is what happened in the United States in the 30s. Monetary and fiscal policy were tightened before recovery was firmly established, which drove the country back into a deep recession at the end of 1937…

…Lesson one in a deep recession is you don’t cut public spending until you are into the boom phase. Keynes taught us that. The consequence of cutting too soon is to drive the economy into a depression. That means rapidly rising unemployment, social disorder, rising poverty, falling living standards and even soup kitchens. The Tory economic proposals have the potential to push the British economy into a death spiral of decline that would be almost impossible to reverse for a generation.

The depressing thing is that the Tories will benefit from the recession, then likely make it worse, and then spend the next 4-5 years claiming that it’s all down to the previous government. Just like in 1979, when the economy was starting to recover, and the Tories came in and almost doubled VAT – killing off growth in retail sales driven activity, the party that believes in Capitalism doesn’t have the first idea of how it actually works.

Update: 17:45 on 10 October 2009 – seems that in recognition of their achievements, the Tories have won the ironic Nobel Prize for Economics 🙂