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The missing answers in the Darling interview

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Paul Mason | 09:19 UK time, Saturday, 30 August 2008

I think people are missing the wider context of Alistair Darling's interview with Decca Aitkenhead in today's Guardian, which is spun on the front page as "Economy at 60 year low". Obviously it prompts a number of questions, which I would be only too keen to put to him, especially if his special adviser is now in a mood to advise him "tell them everything". But first context.

The interview itself is not a "hard hitting interrogation" - and is proof that the quiet game is often more effective. It was conceived as a fireside chat on his Hebridean hideaway. But WHEN did it take place. I know for a fact that when HM Treasury was dealing with the Downing Street/Rebekah Wade-spun story on Stamp Duty Darling and his advisers were on Lewis, on holiday and as it now seems with Ms Aitkenhead the only journalist invited.

But that was two weeks ago! The interview, in other words, has been long set up by the G2 section as a profile piece and because Darling has, as I know only too well, not been doing interviews, the news line in it has aged very well and is fresher than it was when he gave it because in the meantime we have had the Q2 figures showing we are on the edge of recession...

Now here's a quote from the article:

>>The economic times we are facing "are arguably the worst they've been in 60 years," he says bluntly. "And I think it's going to be more profound and long-lasting than people thought."

This is where the advantages of a fireside chat in the Hebrides are outweighed by the inability to hear exactly what Mr Darling said, and of precision language. Because it is manifestly untrue that these are the worst economic times for 60 years.

We have 0% growth for a quarter and a 10% drop in house prices. McDonalds is booming, so is Netto, so is Primark so is Ryanair. People are reallocating their spending but they are still spending. The recessions of the 1970s and 80s saw two years in a row of negative growth, sometimes above 2% negative. There were 3 million unemployed under Thatcher. In the 1970s the secondary banking system collapsed followed by the Latin American debt crisis.

What it is commonplace to hear in the City is that this is the worst financial crisis for 60 years: bankers are losing their Lamborghinis because they've had to write off 500bn dollars worth of inadvisedly lent money. So there is a major risk of systemic banking collapse. I would have liked to have heard Darling's view on this, and on how the lifeboat he and the Bank of England are creating is going to work if it has to be launched. There is one maverick but respected banking analyst in the City (Bruce Packard at Pali) who believes the whole sector is going to have to be nationalised. Given it took Mr Darling four months to come round to nationalising Northern Rock, has he changed his mind?

House prices? My house is now worth what it was when I bought it three years ago. Big deal. I am glad because it means there is a chance that people with kids who are not stockbrokers might be able to afford to live on my street.

Where I agree with him is when he says: "And I think it's going to be more profound and long-lasting than people thought."

Certainly than he thought: only in May at the Mansion House speech he was telling us that the economy would grow but more slowly. I will bet him that extra bottle of wine the waiter wouldn't give him in a restaurant (see the interview) that we are in recession.

I think his remark on not anticipating the crisis has also been misinterpreted:

>>He hadn't the faintest inkling of the financial crisis about to unfold before him. "No, no one did. No one had any idea."

I assume he means the actual week that inderbank lending dried up in August 2007, while he was on Mallorca on holiday. This is true: I spoke to investment bankers white-gilled shortly after it happened. But the growing risk of a credit crunch was there. Even idiots could spot it. One absolute amateur, writing in the New Statesman in March 2007 said:

"The fear now is that, as investors run away from risk, they take losses and expose problems previously masked by the sheer complexity of modern financial instruments - and that this in turn begins to impact on the real-world economy. Attention is focused on four threats which, in their over-optimism, policy-makers at Davos had downplayed."

That was me. Read the rest of the article - fear of a credit crash was widespread and in hindsight I surprised myself with the accuracy of the rest of it, but it was all based on briefings from people in global consultancy, hedge funds and investment banking.

I find the rest of the article vaguely interesting, and especially that he doesn't like Wendy Alexander.

But the unanswered question now is, pace Keynes: if the facts have changed, are you going to change your mind? Maybe amid the home made soup and Talisker this question got lost. And of course it was never meant to be that kind of interview. But he needs to answer it sharpish.

Since we're dipping into recession are you going to reinterpret the Bank of England's mandate, as one MPC member has requested, and direct it to prioritise growth above inflation. Are you going to launch a comprehensive economic plan promised umpteen times by Gordon Brown in the aftermath of Crewe & Nantwich? Are you going to extend the special liquidity scheme, are you going to launch state-backed mortgages as optioned by Crosby, are you going to give a stamp duty holiday; are you going to borrow to give headroom for fiscally reflationary tax cuts?

And where is the effort going to be targeted? How are you going to meld the bitty reforms being dribbled out next week into an electorally viable strategy, and story, to head off not just the Conservatives but those very people you have been muttering about on Lewis (eg Ed Balls), and those other Milliband/Milburn people outlined in a handy flow chart in this week's edition of PR Week?

So come on Chancellor: on Newsnight we have home-made soup too. Where's the strategy, what's the plan?

Comments

  • Comment number 1.

    This from the man who's been in the Nu Labour Treasury for the past decade, and (puppet) Chancellor for the past year. It is obvious that his erstwhile Mentor and Blessed Leader is the real target of his frustrations.

    Thanks for acknowledging how 'pissed off' we are.

    If he had any real humility he would also acknowledge his role in the economic state we now find ourselves, and resign.

    Ignorance - even when self-confessed - is no excuse.

  • Comment number 2.

    But isn't Darlings comment about being at "a 60-year low" more worrying than that. Maybe Darling isn't making a factual statement that is obviously wrong now. Maybe he's thinking of the future; maybe he's got a lot more information than ordinary commentators and economists have and can't see a way out of the mess.

  • Comment number 3.

    I'm so glad Alistair used industrial language it should be very easy for him to say to his boss...'Piss off and let me run things as you don't have a clue all that prudence crap was a smokescreen to what we have today only you got out and left me holding the headaches'...something like that, it won't help but he will feel better.

  • Comment number 4.

    FOLLOW THE MENTALITY

    I 'know' nothing about money and banking. I do know something about people.
    I was lynchpin in a small manufacturing business from early 70s to early 00s. I formed the view that money made no sense.
    I have further realised that constructive cleverness is declining and wisdom is near death.

    We British used to say, primly: "Who's counting" and we now know the answer was "nobody" if only because there was nothing to count! Sometimes it pays to look harder.
    Our pathetic leaders cry: "ad hominem" to show high scholarship and fend off inspection of THE PERSON. But, in truth, it was PERSON BLAIR, PERSON MAJOR, PERSON THATCHER and now PERSON BROWN who led us to this Wonderland where - in a quasi-literal way - nothing adds up (read both ways).
    I suggest that before we analyse any more of the (real of purported) utterances of PERSON DARLING, that we get the family album out. Check the diaries. Talk to the school contemporaries and teachers. (Had we done this with Blair instead of buying into Charismatic Oratory - who knows?)
    If CHARACTER DARLING has the stamp of ambitious mendacity (party politics) upon him, sharpen the stake and stop listening.
    It is NOT THE ECONOMY STUPID it is the totally unsuitable calibre of person who manipulates the economy, in Britain, EU, USA and much of the world tainted by their ethos.
    DON'T PLAY THE GAME - PLAY THE MAN!!!

  • Comment number 5.

    IMHO I think Darling should take the windfall tax from the cartel energy companies 'toute de suite' before they all 'piss-off' to Ireland or Switzerland.
    Yet another long list of large corporations and companies have announced relocation plans just over the past few days alone!

  • Comment number 6.

    the usa answer has been to print money. Interest rates at 2%, a massive devaluation of the dollar and a huge expansion into renewables. Pickens [who made his money in oil] has bought the next 10 years manufacturing supply of windmill generators. Renewable energy is a big bull market. The only one there is yet our govt are determined to be King Canutes and as if by ' brain waves' make the renewable tide go back.

    The govt refuse to act so the markets are doing it for them as the value of the pound crashes and we know what happened last time the govt tried to fight economic reality and the markets.

    we need cash into the economy. A two way grid will do that. In germany it support 1/4 jobs and generates 23 billion euros. Unlike most developed countries and despite the evidence HMG reject a two way grid. Is it because everyone else is wrong ?

    The british people are once again lions led by donkeys blindly using last century solutions with last century tactics. Over the top and slowly walk towards the machine guns anyone?

  • Comment number 7.

    Paul Mason,

    You quite rightly point out that 'today' the economy is nowhere near as bas as it was in the Depression - however what of tomorrow and the day after tomorrow?

    As I have written elsewhere the credit crunch is but a symptom of the malaise of 'worthless money'. Let me expound the mechanism that links too low interest rates to the credit balloon that is bursting as we speak.

    The financial sector makes money by lending money and it always to make more money. When the securitisation of dubious debt came along it was a godsend for it allowed them to create more money.

    This created money they lent out, but as the returns were small because interest rates were very low they needed more and more money to lend to maintain their income growth. These are the 'synthetic financial instrument' that the BoE now speaks of as being so 'bad'.

    So where has all this money gone? The answer is into speculation in oil and commodities/food. Thus I believe that all of our present and future problems can be traced back to incorrect interest rate level in the last decade. The US simply didn't care about the value of money and we followed by instructing the Bank of England to manage to a defective statistic - the cpi.

    Lots of people are culpable. The question is - are any of them in or out of government capable of managing a sensible future path? The one outstanding feature of which has to be higher interest rates.

  • Comment number 8.

    Despite Alistair Darling's admission that the general public are " pissed off " with the Labour Party, its not just the state of " the economy " which annoys people.

    Whilst the state of the economy may be a migraine for the stock market parasites and ten bob fat cat property speculators, the majority of thinking people are more concerned with the raft of Corporate Nazi leaning legislation either already implemented or proposed by Labour.

    Take for instance the smoking ban, now the health fascists are talking about legislating on obesity. The eco-fascists are being pandered to with a proposed Bin Tax and on the spot fines for putting the wrong stuff in your bin. Likewise the Manchester congestion charge and funding the development of Spy in the Sky road charging. Totally inefficient wind farms are promoted even though they require consumers to pay a hefty " private tax " for the privilege.

    The safety fascists are making roads in towns almost totally impassable in decent time and now even TFL admits that it has been deliberately creating extra congestion under Labour's Livingstone. Police close major roads for hours after accidents or other minor incidents which could be ignored or cleared up in little time. Several residents in one village have been fenced out of the back yards due to an alleged unsafe wall, they can't even go out of their back doors in case of fire.

    Then there is the mega expensive proposed national ID card scheme and database, ID cards were the first thing the Nazi's introduced when they occupied Holland in WW2. I can't help speculating that the Tories current lead in the polls is down to the Corporate Nazi factor, but will they be any different.

  • Comment number 9.

    #8

    I forgot to mention the systematic dismantling of our Welfare State. If we are heading into a depression the British people are going to need it more than ever. The ten bob fat cats forget that the British people once fought and won a war to achieve our welfare state as originally prescribed by Beveridge.

  • Comment number 10.

    On a more serious note, I also forgot to add.....things must be getting bad!
    At a lap dancing club that I frequent every now and again (not in the City I might add), one of the dancers told me the other day that they have never seen the economic situation so bad over the past 60 years!!!

  • Comment number 11.

    #5 BankRSlicker

    Pandering to every policy whim of the corporate multinationals is like being nice to a crocodile and hoping that it will eat you last. If they want to " piss off abroad " a strong government can always nationalise their UK assets without compensation or tax every penny of their subsequent UK derived profits.

  • Comment number 12.

    brossen99, I'm confused.

    In post #8 you, quite rightly, extol the virtues of freedom, liberty and individual rights. Then in post #9 your turn into a socialist, and in post #11 into a communist.

    A government that nationalises private property (whether owned individually or corporately) is no different from a fascist or communist one - and will end up violating people's rights to freedom and liberty in the same way it violates their rights to property.

    There can be no rights without the right to property.

  • Comment number 13.

    #12 Maxsceptic

    Perhaps you need a history lesson, back in WW2 Churchill was seriously considering nationalising the the then private electricity companies, they had already introduced a national fire service.

    What everybody ( individuals ) need to realise is that " freedom " is currently fighting a war against corporations. Its either a welfare state or enslavement to the banks ( how many people are enslaved already ? ) I suspect that most people would prefer the former if they thought about it.

    Clamping down on members of the corporate multinational cartel does not essentially lead to the end of small business or being denied the right to own your own home. Attley was probably the best model to follow, he worked miracles coping with government debt and the need to switch back to peacetime production.

    Perhaps the government could force the water companies to build a national grid for water. Two pipelines could suffice, one from Kielder to London, one across the Pennines from the Lake District to Yorkshire intersecting. ( no price increases or pumps needed )

    I have said this on another thread but the energy company director should be taken into a corner and politely told that if they don't invest significantly in nuclear power in the next six months they are bound to face a windfall tax every year in future. Both these could stimulate the economy but their is also the Severn barrage and also one possible for Morecambe Bay.

    Some people talk about a two way grid and micro-generation but solar panels are not yet fully developed to their potential and only a few could afford them in the short term.

    A strong government with true vision could make positive things happen, forget the stock market parasites. There is no need for nationalising corporations if they are prepared to accept efficient regulation.

  • Comment number 14.

    I Don't know what the fuss is about. For once a politician speaking the truth.

  • Comment number 15.

    GOOD CAUSE FOR FUSS

    What is Darling's motivaton?
    (1) To assert his authority as the man who should be in charge of British financial affairs? (To be right.)
    (2) To get the better of Gordon because he feels put upon? (To feel better.)
    (3) That he judges his statement (and the words and medium of its delivery) to be the most conducive to stability and a good outcome for ordinary people? (To strive to do right.)

    Darling is yet another lawyer by training - ergo by inclination. I have never found law to be humane by nature. It is more interested in tidiness than justice. I would guess a mix of 1 and 2.

  • Comment number 16.

    Spin and more spin. Labour is just softening up the public for the biggest govt borrowing spree ever. Borrow from the future to give to today. Who pays?

  • Comment number 17.

    Why is this not a Surprise ?

    Anyone who has got holiday money over the summer holidays know Sterling has nosed dived, this means a large number of people know this.

    One £ only gets 1.18 Euros , the lowest on record !

    So theres no point in saying "All is fine" .

    Now I thought the BofE had independence and its mandate was Inflation , Inflation , Inflation.

    As reported we have 2% (Imported Inflation) because of the devaluing £ .

    So wheres the higher interest rates to support the £'s value and help squeeze the "Imported Inflation" out ?

    It seems the BofE board can not agree to take any action , they are split , so we are left with inaction , what a system !

    This is another example of Browns hailed reforms that when put into practice fail !


    Interest rates have to rise or we are going not only be in recession but also have high inflation , the dreaded stagflation !

    The Markets need confidence , this Gov has not given confidence to the markets , look at the last budget for instance , what a mess !

    We need new leadership and new policies to take UK plc forward !

  • Comment number 18.

    #16
    "Spin and more spin. Labour is just softening up the public for the biggest govt borrowing spree ever. Borrow from the future to give to today. Who pays?"

    Our children !

  • Comment number 19.

    brossen99 @13,

    Firstly WW2 was a state of emergency, a time of existential threat when all manner of personal liberties were suspended.

    Secondly, although cloaked in reasonable language, you are actually making the case of the gangster enforcer: "Do as we say (i.e. pay up) or we'll confiscate (i.e. steal) your property". All that is different is that the State pretends that it has 'our' interests at heart (when actually it is the exercise of power and collectivist ideology that that is its key motivation).

    Furthermore, it can 'legally' imprison those that don't succumb to the its threats.

    A 'strong government' of the kind you seem to favour, found its true expression in Mussolini's Italy and Stalin's USSR.

  • Comment number 20.

    I’ve always been intrigued by the origins of things. From whence did they originate? How did they come about? What gave rise to it being done so, rather than not? Now, one can read about the origins of almost anything; man, earth, the side parting. You can do so by using THE great modern invention of our time – the web. Or the old fashioned way, by reading a book. Here you will find a myriad of different theories, put forward by an equally dazzling list of authors claiming to have THE definitive solution. Equally, and perhaps more satisfying, there are events that have occurred that cannot be fundamentally explained, or if they can, certainly not in a way that allows my mind to picture the event. Take, for example, the Moai statues of Easter Island. Now various theories place the creation of these statues at differing periods separated by centuries. What they all agree on is, they were created using stone not indigenous to the island. And certainly not a stone that was transportable by any known means. Which begs the question, “How did they get there?” My mind can’t even fathom such an event occuring…well, actually I can, but to realise it, one would require a Dreamworks production budget and most would then just argue that it was far fetched. Similarly, my mind and imagination hit a vacuum like wall when challenged to imagine what time must have been like prior to what many like to call The Big Bang. This is my favourite description of The Big Bang, “a cosmological model of the universe that is best supported by all lines of scientific evidence and observation. The essential idea is that the universe has expanded from a primordial hot and dense initial condition at some finite time in the past and continues to expand to this day.” Come again? I don’t get it. First I don’t get how something is growing at an infinite level. What exists on the other side of infinity? It’s growing, right? Well, what’s it growing into? A big space? A big empty space that drops as deep as it ascends high? An ocean of nothingness that drops into an abyss of nada…? Exactly. I just can’t do it. Then, there is the issue of what existed before tick tick boom? Again, we’re told that, “the universe was filled homogeneously and isotropically with an incredibly high energy density, huge temperatures and pressures, and was very rapidly expanding and cooling. Approximately 10-35 seconds into the expansion, a phase transition caused a cosmic inflation, during which the universe grew exponentially. After inflation stopped, the universe consisted of a quark-gluon plasma, as well as all other elementary particles. Temperatures were so high that the random motions of particles were at relativistic speeds, and particle-antiparticle pairs of all kinds were being continuously created and destroyed in collisions. At some point an unknown reaction called baryogenesis violated the conservation of baryon number, leading to a very small excess of quarks and leptons over antiquarks and anti-leptons—of the order of 1 part in 30 million. This resulted in the predominance of matter over antimatter in the present universe.” Yes but antiquarks, antischmarks…what did the gaff look like? I mean just try and fathom it. Bearing in mind that nothing existed in this ‘infinite density’ you can’t start imagining swirls of clouds, or “C-beams shimmering in the dark at the Tannhouser Gate.” And that for me is the fundamental intrigue, letting the imagination run to a point so far removed from the shackles of time and space that no book or theory can actually paint the picture. It instead requires an experience of the event. The joy of unchartered territory is that no one can tell you you’re wrong…


  • Comment number 21.

    oneloveformusic @20, You've obviously wandered over here from some other blog. Or dimension.

  • Comment number 22.

    #19 MaxSkeptic

    You sound like a worn out old Tory minister who at close to the the start of WW2 strongly put forward the view that it was wrong to bomb German armaments factories because they were private property.

    The corporate multinationals are the enemy of the British people, people are forced in our climate to pay a virtual " private tax " for their utility bills and should expect something back in return.

    Thousands facing the prospect of not being able to afford to heat their homes this coming winter, a projected two million to become unemployed, sounds like a national emergency to me.

    If you think of a current strong democratic leader Putin springs to mind, no corporate nonsense in Russia today.

  • Comment number 23.

    brossen @22,

    Unconvincing socialist claptrap: Declare a peacetime 'emergency' and suspend individual liberties. (Shareholders are individuals with rights too). It's an age-long trick used by dictators and enslavers from the time of Lenin and Benito, right up to the likes of Chavez and Mugabe today.

    The only people we pay taxes to are this lame, wasteful government, feckless local authorities and the BBC licence 'fee'. And we pay them all far too much. I'm pretty sure that if half of all 'government' and the public sector disappeared tomorrow, things in this country would improve dramatically.

    As for Putin's Russia: do you really want the UK to go down that road? It may be many things, but it ain't my cup of tea.

  • Comment number 24.

    #23

    Shareholders are pure speculators into corporate gambling on a mass scale, a share is only worth its face value not its imaginary market price. When the railways were nationalised in 1947 the shareholders kept their shares and were even paid a small dividend. I know this because my family had a "quarter share " in the LMS and got a cheque every year up until the 1970s when the government offered to buy them back.

    The energy companies will end up like Railtrack did (no action taken to maintain the infrastructure until several were killed ) when the lights start to go out in ten years time ( or even earlier ), action needs to be taken now likewise with the water industry.

    If the government cut public spending as you suggest it is probable that there will be five million unemployed in short order. ( mostly from small busineses )

    At least its now official that the Tories were willing to sell out to the Nazi's in 1940, Halifax sent a junior diplomat to Italy to try to sort it out.

  • Comment number 25.

    HURRAH FOR ONELOVEFORMUSIC #20

    Cookingwithgas! I keep pleading for more fundamental address (of mankind's failings, actually) to solve social and political problems, and you turn up with a whole bunch of orders-of-magnitude MORE fundamental stuff. Way to go.

    Google 'Electric Universe' and start all over again.

  • Comment number 26.

    @24 - Some Tories were willing.... These were the same pre-war appeasement lot who were trashed a month or so later when Churchill became PM.

    If we are to sling ancient mud, please don't forget the British socialist/communist Trade Union leaders who instigated and led strikes in the mining and other essential industries during the dark days of the war in 1940-41 when Britain stood alone. They did this, of course, under the direction of their USSR masters - who were at that time still Hitler's allies and were sharing the spoils of the 'pie' called Poland and had annexed the Baltic States.

  • Comment number 27.

    10. BankRSlicker wrote:
    "At a lap dancing club ... one of the dancers told me the other day that they have never seen the economic situation so bad over the past 60 years!!!"

    How many clubs employ 60+ year old dancers?

  • Comment number 28.

    Brown, many years ago said the main reason for Britain not joining the € was the £ was too strong at the time, what reason does he give for not joining before now? I remember 14 francs to the pound, when he set the rule a tourist could get €1.5 ish now we are almost parity, the € is more stable the £ is all over the place what is the excuse? Are we in Europe or no?

 

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