Knifonomics (part 33): PWUGO redux

Everyone loved George's new suit
Everyone loved George’s new suit

A  couple of years ago, in a rip off of Iain Martin’s perpetually faltering DUEMA campaign, The Knife started PWUGO – People Who Underestimate George Osborne. It’s got lots of members, in fact, most UK citizens are in it.

However, the membership may now be dropping. This is nothing to do with George’s dubious personal charms, but more with the fact that the economy is looking up. Modestly perhaps, but still.

Not everyone agrees. On the right, acting as devil’s advocates, are Fraser Nelson and Allister Heath:

In other areas, however, the pace of change has been glacial, preventing the supply-side, market-driven economic renaissance that Britain so desperately requires. We still urgently need more competition, fewer regulations and improved incentives; more airports, roads and a proper energy infrastructure; and to embrace shale gas while ditching our outdated obsessions with costly, job-destroying renewables. We need a sustainable retirement system, business-friendly universities, a radical reform to our health system and sharply reduced levels of tax and spend. We need the City to start growing again.

Until all of this happens, we will remain mired in an unbearable New Normal of mediocrity, zombie firms and households, squeezed banks, stagnant living standards, unaffordable levels of consumption and artificial, debt-fuelled “growth” masterminded by increasingly absurd interventions in the credit markets. None of the economy’s structural flaws have been fixed and we still face a major crisis when interest rates go up. Sorry to disappoint but, despite the Royal baby, the present recovery is a false dawn.

Hmm…fair points, but a little pessimistic.  On the left, however, try today’s Guardian, primarily the piece by Larry Elliot, who is not only relatively normal, but also partly predicted Brown’s nemesis –  the Crash of 2008 – in the strangely underpublicised Fantasy Island (still worth reading):

Labour’s position will be yet more difficult should the economic news remain even modestly good. Osborne wants to go into the next election with the following message: we inherited a right old mess from the last lot; that mess has taken us longer than we expected to clear up; we stuck to our plan when the opposition told us to change course; the benefits are now coming through; so don’t hand power back to the people who screwed up in the first place. He doesn’t need the economy to grow at 1% a quarter to construct this sort of political narrative: 0.6% or so a quarter will do fine.

The government’s message will lack potency if the 2015 election approaches with real incomes still falling and fresh public spending cuts on the horizon. It will be blown out of the water if the economy stalls again between now and the election, something that currently looks unlikely but cannot be entirely ruled out. There will be a reckoning for the economy but that looks likely to be early in the next parliament when the Help to Buy support for the housing market is removed, interest rates start to rise and austerity continues for a sixth and seventh year rather than over the next 18 months.

In the meantime, Osborne, who looked like a dead man walking three months ago, is very much back in the game.

Well, those of us who never joined PWUGO never thought he was out of the game.

However, George isn’t always easy to like, and in an attempt to capture why this is so, I recommend this blog.




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