The US election battle may be electrifying but fight against recession is on hold
This week, I’m in America, where a poll revealed that 60% of Americans think we’re in a recession already. In Britain, we’re telling horror stories about the collapse in the US real estate business and in America, they’re tut-tutting over stories of banks foreclosing on properties in the UK.
The global village is indeed talking itself into a decline. It’s dangerous, precisely because the feel-good factor is crucial to capitalism. Confidence is the name of the game, and when people begin to believe the worst they rein back their spending, try to reduce their borrowing, and defer major projects “just in case”. What’s more, as the Fed has discovered, reducing interest rates to stimulate the economy is no panacea. All too often it increases the concern by confirming officially what the media had predicted.
Nonetheless, Europe and America are set on interest rate reductions, although the eurozone will probably continue to be more cautious than the UK. As a result, it would seem that Alistair Darling is likely to be right in predicting that house price cuts will not turn into a disastrous collapse. The underlying strength in demand, coupled with an understanding that interest rates will continue to fall, will hold the market up, even if buyers are fewer and sellers get more desperate.
World leadership
What is more difficult for the chancellor is to devise any kind of plan to deal with the situation. The prime minister talks grandly of international co-operation, and proposes that the rich nations should get together to speed recovery. In fact, there is little evidence of much interest in his tentative proposals. The US has settled on tax cuts, which play well in the increasingly frenzied electoral campaign. This week, I’ve been in Colorado, New York, Minnesota, and Georgia, and in every place each tiny element of the Democrat and Republican campaigns is being mulled over, dissected, and commented upon as the TV channels vie with each other over their extended coverage of the election. Yet, despite the verbiage, there is practically no debate about policies. People are concerned about the economy but not about the policies necessary to put things right.
The Democrat candidate Barack Obama has raised the tone as only a gifted orator can. Yet he deals in aspiration and hope, not interest rates and deficits. Hillary Clinton is desperate to get him to debate the details, but the public will have none of it. As Republican candidates Mitt Romney and John Edwards found, the electors want to know about style, rather than content.
Dealing in aspiration and hope
Obama knows that detail encourages argument. He has taken the temperature accurately and recognises that his voters – and particularly his new voters – are in the mood for change but don’t want to be pressed on specifics. Clinton’s constant repetition of the need for experience is the nearest even she gets to practical policies.
The electorate is congratulating itself on the uniqueness of Election ’08. Could it be the making of the first woman or the first black US president? That consideration, in itself, is about symbols, signals, and messages – not about a practical programme. It would therefore not be surprising if it were well into 2009 before Democrats were able to concentrate on the practicalities.
Meanwhile, Bush is busy trying to create the best environment for that amazing possibility – a Republican win. While John McCain positions himself as sufficiently Conservative to hold the core vote and suitably liberal to gain the independents, the president doles out tax cuts and subsidies that go straight to the Republican heartland. It doesn’t add up to a policy, but it reassures the activists.
Mind you, this is an electrifying contest. Watching McCain and Obama is to see two Americans that truly represent the best in their country. Either would make a great president and both have a quality rarely seen in US politics. The problem for the rest of us is that this contest is so all-engrossing that it means that the US will not be a real player until after the election. That’s bad for the property industry because there’ll be no effective high level political attempt to get us out of recession until the beginning of next year.
The world is on hold until the American people make their choice in nine months’ time. If that’s between Obama and McCain, the world can sleep easily, but in the meantime the recession is ever more inevitable because there is no one to say “stop”.
John Gummer is Conservative MP for Suffolk Coastal and a former Secretary of State for the Environment
