There is no inevitability that we’ll learn the right lesson from the Great Recession and its aftermath. “Sensible people” with a penchant for economic muddle do not like anything that smacks of being counterintuitive: despite the fact that households are nothing like government, that hoary old cliché that we must live within our means will echo until it possibly drives us to madness. Short-term political power grabs tends to find bad economics that gives people permission to do what they always personally wanted to do anyway, whether it be sit in ministerial limos or play Thatcher and decimate the British state. 8 MPs stands as the Lib Dem legacy of such an approach.
The first thing the Lib Dems need to do is to know what and who to read to understand where we’ve come from, the relationship between the state and the market that led us to the biggest economic disaster since “Of Mice and Men”.
The second thing that Lib Dems need to understand is that the people who got the Great Recession right were the people who represent continuity in the British Liberal tradition. Hayek and Keynes were never compatible and the Liberal Party was always the part of the latter and not the former. People vote based on a coherent economic vision of how to heal the economy: economics can’t be a genteel muddle in order not to offend people who joined the Lib Dems under false pretenses that the Lib Dems had ceased to be a liberal party. Some folks will leave who we will team up with on other issues where we have more in common. But there’s a world to gain with coherence and unity on the issue of economics.
We need to deal with micro causes and not just macro consequences: banks are still too big to fail, ratings agencies are still staffed by people paid a fraction of those whose models they are rating (and paid by them too to do so…), debt creation is still out of the control of government (and can be encouraged by an independent central bank) and should be under democratic control, swathes of financial services provide no social value and encourage real intellectual talent to chase dollars rather than bolster the human capital of Britain’s real economy, capital is still locked up in land speculation rather than investing in enterprises and skills. Populism need not be illiberal.
Finally, we never stop learning and never stop reading and understanding. When Lib Dem facebook groups reverberate with economic analyses from sites which understand the problems- from Naked Capitalism to Steve Keen- we’ll be part way to being a mature political movement that is fit to overtake Labour as a progressive alternative to our Conservative opponents. If we don’t, well some kind of opposition will emerge. We need to stop thinking simply about how to win elections (which is also very jejune, but that’s a later blog post) and first about how to get policy right. After that we can work out how to market the right medicine for what ails us. We can’t choose glib political stances because it is simpler for folks to understand. Muddle, middle and mediocrity will never be the answer. Be bold or go home. If we can’t be liberal, what’s the point?
Simon Radford is a Provost Fellow at the University of Southern California