An Election Well Worth Winning

As the U.K. goes to the polls, the front page of football jersey this morning’s Times regurgitates the conventional wisdom that the party that loses the election could turn out to be the real winner, and vice versa. The British economy is in such bad shape, the argument goes, and the coming budget cuts are going to be so large, that the governing party will face a deadly backlash. The Times cites a widely-reported claim by David Hale, an American economist, that the governor of the Bank of England, Mervyn King, said to him during a recent lunch: “Whoever wins will be out of power for a whole generation because of how tough the fiscal austerity will have to be.”

I beg to differ. In my opinion, Britain’s long-term economic difficulties have been overstated, and its political firmament has been misinterpreted. With an economic recovery already under way, I expect the fiscal arithmetic to steadily improve, and the scare stories about Britain turning into Greece to be discredited. From a political perspective, today’s victor, widely expected to be the Conservative Party, will enter office with the priceless asset of diminished expectations. With a budget deficit of soccer uniforms more than ten per cent of G.D.P., most Britons accept the need fiscal retrenchment, which, in any case, can be blamed on Gordon Brown’s financial mismanagement. By 2015, when the next scheduled election is due, most of the harsh measures will have been taken, the economic outlook is likely to be much brighter, and the incumbent party will be well-placed for reëlection. (If there is a hung parliament, things get a bit more complicated, with another election likely later this year or early next. But I would still expect the party that emerges as the victor of that contest to be reëlected in 2015.)

The crux of my argument is that the recession of the past two years has exaggerated Britain’s underlying problems: the country hasn’t returned to its previous status as “the sick man of Europe.” To be sure, the fiscal arithmetic is ugly: since 2007, the overall budget deficit has gone from about two per cent of G.D.P. to close to twelve per cent, and the national debt has jumped from about thirty-five per cent of G.D.P. to more than fifty per cent. (The Institute of Fiscal Studies, an independent research body, has produced a detailed summary of the figures.) If you listen to right-wing commentators like Niall Ferguson, you will hear scurrilous talk of soccer jerseys the U.K. debt skyrocketing to more than five hundred per cent of G.D.P. in the next thirty years. If these figures were credible, it would be only a matter of time before international investors balked at buying U.K. government bonds, precipitating another financial collapse.