On Question Time last night the economy was discussed. A member of the audience likened the government's management of the economy with the management of a household budget (the "live within your means" policy of Margaret Thatcher). This idea was endorsed by government minister Caroline Spelman on the panel and was applauded by a large section of the audience.
On one level it is not possible to compare a western industrialised economy with a Micowber-run household budget. A national economy is too complex to be run on simplified lines. There are too many paradoxes and subtleties.
However the "live within your means" argument is one of the great political communications of the modern era. From a PR point of view it reduces economic policy to a concept that can be understood by ordinary people (and it has the added bonus of being not entirely untrue). Such is the power of this message that it cannot be refuted, it can only be replaced by a more effective message.
Labour countered the household budget argument with simplifications of their own. They were spectacularly successful with "No more boom and bust". This delivered the trust of the people for the eleven years of the boom, and the argument only really came to grief when the bust arrived in 2008.
So I think we must conclude that the next election will be won by the party most trusted on the economy, and trust on the economy will be given to the party with a simple and convincing argument that is familiar and logical (being logical does not mean it has to be right).
To attempt to argue the merits of the Keynesian theory or the Austrian school will simply bamboozle most of the electorate. What is really being said with complex arguments is "trust me I am an expert" or "trust me I am a politician" or worst of all "trust me I am an expert politician". A party going into the 2015 election talking about endogenous growth theory is asking to be punished.
The Coalition is winning the argument on the economy because they have the best interpretations of the economic situation ("Labour maxed out the national credit card" or "We are clearing up the mess Labour left" or "There is no money left - they told us this in a letter from Liam Byrne").
On that basis I think the "live within your means" argument of running the national economy has a lot of life left in it. "If you are in debt you need to stop spending" is deceptively alluring. I don't see Labour coming up with anything (so far) that is even close to challenging it.
On one level it is not possible to compare a western industrialised economy with a Micowber-run household budget. A national economy is too complex to be run on simplified lines. There are too many paradoxes and subtleties.
However the "live within your means" argument is one of the great political communications of the modern era. From a PR point of view it reduces economic policy to a concept that can be understood by ordinary people (and it has the added bonus of being not entirely untrue). Such is the power of this message that it cannot be refuted, it can only be replaced by a more effective message.
Labour countered the household budget argument with simplifications of their own. They were spectacularly successful with "No more boom and bust". This delivered the trust of the people for the eleven years of the boom, and the argument only really came to grief when the bust arrived in 2008.
So I think we must conclude that the next election will be won by the party most trusted on the economy, and trust on the economy will be given to the party with a simple and convincing argument that is familiar and logical (being logical does not mean it has to be right).
To attempt to argue the merits of the Keynesian theory or the Austrian school will simply bamboozle most of the electorate. What is really being said with complex arguments is "trust me I am an expert" or "trust me I am a politician" or worst of all "trust me I am an expert politician". A party going into the 2015 election talking about endogenous growth theory is asking to be punished.
The Coalition is winning the argument on the economy because they have the best interpretations of the economic situation ("Labour maxed out the national credit card" or "We are clearing up the mess Labour left" or "There is no money left - they told us this in a letter from Liam Byrne").
On that basis I think the "live within your means" argument of running the national economy has a lot of life left in it. "If you are in debt you need to stop spending" is deceptively alluring. I don't see Labour coming up with anything (so far) that is even close to challenging it.
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