Brown uses the D-word – freudian slip or…?

Gordon Brown’s utterance of the dread word “depression” was ‘a slip of the tongue” at Prime Minister’s Questions, his spokesman hastily asserted, minutes later. Another one. Less than two months ago, he “saved the world.” Picking on the Prime Minister for the odd “misspeak” ( an old Watergate era word) may seem like a silly game played only by political journalists, but it may also reveal the real state of his mind. Prime Minister’s words do matter and can merge into actions. Yet once potent actions are now being written off as increasingly ineffective. The latest think tank assessment from the National Institute of Economic and Social Research uses the word “slump” rather than “depression.” It pooh-poohs the impact the next interest rate cut expected tomorrow on the immediate, real problem..

“The contraction of credit meant that rate cuts by the Bank of England were now ineffective in stemming the downturn… the central bank should make more use of measures such as buying corporate bonds, the framework for which was set up last week.”

So – depression or not? The runes of the 1930s are being read again to help assess the present threat of protectionism. President Obama’s watering down of his “Buy America” rhetoric should produce a sigh of relief in Downing St, where Gordon Brown has set his face against pandering to the foreign workers protest at the Lindsey oil refinery.. With luck, quiet mediation behind the scenes there may be paying off.

But what of the 1930s parallel? BBC Economics Editor Stephanie Flanders favours the theory that it wasn’t protectionism, it wuz the banks, guv. The Guardian’s Larry Elliot goes with the variant that UK GDP slumped little in the 1930s because of the protectionist wall of imperial preference.
… no country since the dawning of the modern age has managed to industrialise successfully without protectionism. Lord Skidelsky, the biographer of Keynes, says that Britain’s economic recovery from the Great Depression was based on three policies – devaluation, cheap money and protectionism. London created a system of “imperial preference” – free trade within the empire but barriers to trade with the rest of the world. Other countries followed suit, abandoning the gold standard so they could devalue and increasing tariffs, and this contributed to the collapse in trade and the prolongation of the slump.

Yet the data shows that Britain had one of the shallowest downturns of all the major industrial nations in the 1930s – a 5% fall in GDP. By contrast, Brown’s devotion to free trade and open markets sits uneasily with Britain’s massive – and growing – trade deficit.

These days, with the Empire gone, the EU might become the emergency substitute. Meanwhile, let’s just concentrate on getting the banks to lend shall we? Next up, the “bad bank?”

  • Mack

    If we’re going to succomb to protectionism in Europe, I think the Eurozone countries would have to impose tariffs on imports from outside the currency zone.

    Tariffs that are merely EU wide would enable those countries who refused to take part in the single currency to beggar-thy-Eurozone-neighbour, by devaluing their currency. Thereby taking advantage of the internal market protections from cheaper competitors such as China, while undercutting their (largely) contintental rivals. Unless we get into a money supply race to the bottom (print Mr. Trichet, print!).

  • Rory Carr

    I don’t see what all the fuss is about over Brown using the ‘D’-word, after all it wasn’t as if he used it in some rareified, over-sensitive atmosphere such as a BBC television Green Room.

  • Greenflag

    ‘Unless we get into a money supply race to the bottom (print Mr. Trichet, print!).’

    Correct me please if I’m being too pessimistic here but the stimulatory plans on both sides of the Atlantic appear to be ‘print money’ and spend it on infrastructure and anything that will get money into the hands of people who will spend it instead of hoarding it like the banks and the already wealthy .?

    Problem being that some 3 trillion dollars of home equity has disappeared in the USA not to mention hundreds of billions in pension funds and the ‘survivors ‘ are not enthused about spending any extra moneys that may ‘trickle down ‘ from on high . Most of that money will be used to reduce huge levels of debt and stop further foreclosures . Any money left over will be spent on Chinese made products?

    Of course it will ease unemployment particularly for the construction sector . BUt will it be enough to respark growth ?

    Looks like a shot in the dark to me . But then it’s better than no shot at all or letting everything collapse and start again which sounds to me like a recipe for worldwide conflict on a scale we haven’t experienced since World War 2 .

    According to Niall Ferguson the more peaceful postwar world 1945 through 1990 only resulted in about 20 million deaths due to proxie wars , civil wars , genocides , religious and anti colonial aftermaths etc ‘

    Some 4,000 of those 20 million would have been in Northern Ireland . Would’nt want yiz to feel left out of the great game now would we ;(?

  • Damian O’Loan

    I may be too tired, but it appears to have vanished from the Hansard record:

    http://www.publications.parliament.uk/pa/cm/cmtoday/cmdebate/02.htm

  • Brian Walker

    Damian – you are too tired ( see end). What he actually said was… ” take the world out of re.. depression” He corrected himself exactly wrongly, a sign of his usual nervousness at PMQs.

    The Prime Minister: I have made it clear throughout the past few months that the biggest danger that the world faces is a retreat into protectionism. I have also made it clear that, as a result of the withdrawal of foreign banking capacity in large numbers of countries, we face a downward spiral whereby these countries cannot borrow from anybody because foreign banks have left. That is all the more reason why, first, we should sign the Doha agreement—that will feature on the G20 agenda—and secondly, we should ensure that every country is analysed by the World Trade Organisation on what it is doing to prevent protectionism. It is also absolutely clear that we should agree, as a world, on a monetary and fiscal stimulus that will take the world out of depression.

  • Damian O’Loan

    Thanks Brian. Fantastic, I’m so glad when I say the wrong thing it doesn’t mean a whole country gets screwed.

    Is there a certain number of quarters of recession you have to reach before officially entering recession?

    And I would like to gloat a little and say I wrote my dissertation on the mutual exclusivity of national democracy and globalised markets. Badly, but all the same. Isn’t that helpful..

  • Dave

    “Gordon Brown has set his face against pandering to the foreign workers protest at the Lindsey oil refinery.”

    So Gordon has a choice? No he doesn’t. EU law binds the British government. The policy of the British government is never to tell its people that how little new law in the UK is devised in the UK’s pseudo-sovereign parliment (16%) and how much is imposed by the EU (84%). How many British people know that the 118 directory inquiries fiasco was the direct result of an EU directive that mandated the UK to change its system? Bugger all because the goverment took the rap for the fiasco rather than highlight the folly of imposed law. The change from the 999 emergency number to 112 resulted in 500,000 bogus emergency calls in the first year (before the UK reverted to the old number in defiance of EU law). How many British people know that the disastrous decision to separate ownership of rail track from the companies operating the trains wasn’t a decision of the British government but was, rather, the result of an EU directive that forced the British government to comply with it? And why didn’t your government point out who was actually to blame for those disasters? Why? Because they’ll take the blame rather than take the risk of opening a public debate about the disadvantages of EU membership.

  • Damian O’Loan

    I won’t even correct my middle sentence it’s so stupid, I’m sure you can guess..

    Dave, Europe made me screw my post up too.

  • Dev

    Poor old Gordy, overall I think he had a decent perfomrance at PMQs (at least by his standards) but that (Freudian?) slip-up dominated the media reports. I wish he’s stop trying to peddle the ‘do nothing Tory Party’ line, or at very least try & articulate the point in some different form of words, he’s like a broken record sometimes.

    Re: what is a depression. There’s that line that a recession is when your neighbour loses his job, a depression is when you lose yours. As far as I know there isn’t one standard definaition of what a depression is but I think some people define it as a contraction of GDP of at least 10% over a year.

  • Mack

    Dev

    Back in the ye olde days we had panics e.g. panic of 1837, 1873 or 1907. That term quickly became politically unpallatable – the pols would say – “don’t worry it’s not a panic, it’s just a crises“. Then crises became politically unpallatable, and acceptable word was depression. Then came the Great Depression and that word became upallatable too. After that other terms tried were rolling readjustment and recession.

    The point being – each ultimately descibes exactly the same thing, the hardship caused by the downturn makes the term used to describe it politically unpalatable in the future and the politicians use a new term to avoid associating the current situation with a past one (which in fairness may undermine confidence and excerbate the situation).

    The Great Depression was probably the worst Western downturn in recent memory (though the Asian Crises, Argentina’s 1990s / 2002 crashes & Japan’s 1989 crash & downturn are probably comparable & The Great leap forward in China was manifestly far worse).

    A depression is probably a bad recession that politician’s can’t name as such. It’s possible we could take Brown’s slip as confirmation that this is / will be a depression rather than a reccession. The term is on his mind, but he can’t say it out loud as it is politically unpalatable to do so!

  • Damian O’Loan

    Dev/Mack,

    Thanks for the information. I was thinking that if there is an official definition, that may have an effect. I can’t imagine any wise businessperson taking different decisions based on a slip of even the PMs tongue, and so I do wonder if all the fuss over labelling is really media hype.

    It also raises the interesting question of whether this is one area where the electorate’s best interests are served by having their political and business leaders lie to them. That would seem convenient and dangerous, and yet worthy of consideration.

  • Damian O’Loan

    A little addition: Nicolas Sarkozy just described the crisis as ‘the most serious in a century.’ He didn’t use the word depression, but clearly this was implied. He was also scathing about the British economy and crisis response – though its the model he’d been adopting and his Ministers have been saying quite different things. I reckon he’ll have upset a few people in Whitehall this evening and would expect the Telegraph to give more details..

  • Yet the data shows that Britain had one of the shallowest downturns of all the major industrial nations in the 1930s – a 5% fall in GDP.

    That’s a little misleading. Britain was in a depression throughout the 1920s, with unemployment reaching 22% at one stage, so it couldn’t get much worse! GDP was already low. That unemployment, and their continued high unemployment through the 1930s, was a result of their refusal to devalue.

    So the 30s really were shockingly bad in Britain in the 30s.