CSR and economic confusion

Economics is an imperfect science. It never fails to amaze me how clueless everyone is when it comes to understanding the economy and even worse when it comes to trying to manage it.

I bring this up, because at the moment, some sort of understanding of economies would be useful.

James Heckman, a Nobel winning economist, was recently asked how best to tackle the downturn. He said: “I wish I knew more and I wish our profession did. Macro economics is not a science, it’s a patchwork of theorems and bad data. There is little serious work on the subject, which seems dominated by beliefs.”

Reassuring isn’t it?

The Conservatives this week announced £81bn worth of cuts over the next five years through the comprehensive spending review. They claim the cuts are ‘unavoidable and are the only way to reduce the deficit albeit at the price of 500,000 people losing their jobs in the public sector.

Labour on the other hand say purely taking money out of the economy risks a double dip recession. More welfare money will be spent on supporting the unemployed whilst less tax will be paid into the system. According to postman Alan Johnson, about £41bn of cuts in combination with targeted public sector investment and increased taxes is a far safer route out of recession.

Both are just economic chancers in reality, betting on one ideology over the other. Neither knows the answer and that is no disrespect to them, because no one ever has. And if no one has ever known the answer, what chance does a layman like me have?

I look to the newspapers for guidance, but they don’t offer much help either. Take Sunday’s Observer for example.

Will Hutton said: “Never before has a country with such a large economy, carrying so much private debt, taken the experience of near financial collapse to squeeze its budget with such severity and speed…

…

“The gamble did not have to be taken. The scale of spending cuts were not ‘unavoidable’. The country was not on the brink of bankruptcy. The stock of national debt built up over the decades lies in the middle of the international average as a proportion of GDP. Indeed, the national debt has been proportionally higher for 200 of the last 250 years.”

Well someone tell DC quickly. He is making a grave mistake.

But then a page later my fears are put to rest by Andrew Rawnsley, who concludes the cuts are not as severe as expected.

“The great squeeze will reduce public spending from its current level of 48% of GDP to about 41% by 2014-15. That is above, not below the postwar average for Britain. It is fairly typical of a European welfare state. Spending will fall to about the same proportion of GSP as in 2007-08 when Ed Miliband was a senior aide at the Treasury to Gordon Brown. In cash terms, at the end of the four years, the government will be spending 6% more than it does now. In real terms, the coalition will be spending more than when New Labour came to power in 1997.”

Well in that case I'm not so worried.

Who do you trust, rather than, what do you believe seems to be the most relevant question at the moment. And until the impact of the cuts start to be felt, this will be the dividing line in British politics.

#Leadersdebate – a new experience for all

Picture the scene; three friends, Texas BBQ pizza, cans of beer, plenty of banter and ... a lively political debate on the TV.

It felt more like the FA cup final than the general election. And that can only be a good thing for bringing people back to politics. Not even the 7 million pre agreed rules could ruin what turned out to be a lively yet insightful debate with a surprise runaway winner.

Sorry, add one more thing to this winning equation – Twitter. I was glued to it, probably more than the actual debate. In 90 minutes I had tweeted close to twenty times.

But the real attraction was in what everyone else was saying. I watched the public pour scorn on their political adversaries through the #leadersdebate hashtag whilst the Conservative and Labour feeds competed for points online.

My two favourite tweeters were John Prescott and Alistair Campbell. They were giving a blow by blow account of how they saw the debate panning out:

@johnprescott Tonight you're seeing the real Gordon I know. Funny, intelligent and a man of real substance #leadersdebate

@johnprescott Substance beats style EVERY time. Solid win for Gordon. Just doing post-match analysis with John Denham! #leadersdebate

@campbellclaret Post-match review of #leadersdebate - Clegg wins on style, Brown substance, Cameron shallowness

@campbellclaret Cameron now has the look of a man about to see a team that will tell him he did well, and he'll know they're just trying to cheer him up

I, of course, agreed with every word. In my eyes it was John, Alistair and I taking it to the people last night! It was an interactive election debate like never before and I am proud to say that I played my part!

@andrewwebster25 "What matters is what comes out" - exactly David #leadersdebate

How did they perform?

Nobody landed a knock-out blow or will forever rue a horrible gaff, and I don’t think the format of three people plays to that. But it did bring out their personalities and positions better than any individual interview could.

Clegg positioned himself as the ‘alternative’ with policies placed so high on the moral high ground that they seemed a little hard to envision. It wasn’t surprising he did so well. He was concise, passionate and effectively positioned himself away from the mucky business of governing. “The more they attack each other, the more they sound the same,” he said.

Cameron’s clever sound bites and sincere apologies for the behaviour of politicians, on the other hand, just weren’t as effective when flanked by the other two leaders. His references to NI just seemed arbitrary as he tried to bring it in to every debate. That is old news now and a card he should have held in reserve. When Brown pushed him for answers he didn’t seem to have any. “This isn’t question time, David, it’s answer time,” Brown said.

And although Brown was still a bit prickly and often got tongue tied, I thought he brought his A game to Manchester last night. He was funny, getting the only laugh and applause of the night for a quip thanking Cameron for putting him on the Tory campaign posters. As numerous tweets pointed out he also had ‘substance’ talking about commitments on spending and promising a referendum on electoral reform. Still he wasn’t quite smooth or articulate enough to turn these clever quips and concrete points into viral hits.

Scores on the doors

AsI watched the Twitter commerntary and live ITV poll I thought Brown had Cameron. All the live polling had Cameron last and there was a definite anti-Cameron sentiment amongst the tweeting public. I felt so confident of Brown’s ascendency, that when the conservatives tweeted: "@conservatives ITV's tracker of how people feel about what the leaders are saying plummeted when Brown spoke about defence #LeadersDebate"

I immediately replied:

"@Andrewwebster25 @Conservatives I wouldn't be directing people to the ITV tracker if I were you, not flattering"

But it appears @conservatives got the last laugh. As soon as the debate finished I was shocked to see all of the polls point to a Clegg victory with Cameron in second and Brown brining up the rear. Were these people watching the same debate I was? This spells bad news for the Prime Minister.

The evening was summed in the closing exchanges though. Gordon spoke about improving education, policing and the NHS and paying down the deficit through difficult decisions such as the rise in NI, whereas Cameron filled it with the usual meaningless sound bites: “choose hope and not fear...” "We're in this together.." etc etc. With everything he says I think the public would be wise to ask themselves, ‘What does that even mean?’

So what happens next?

Well Clegg will retain his popularity as someone above the petty bickering, but still completely unelectable. Cameron will attack more and become more aggressive. Despite the polls, he will know that it wasn’t a good night for him. And Brown should feel confident from his performance and continue to ask questions the Tories aren’t prepared to answer.

Will this change the outcome? Well voter turnout will definitely be higher as a result of these debates and there might be some fluctuations. But from the polls this morning it seems even a winning performance by Brown on prime time TV can’t convince the electorate that he is the right man for the job.

Hung Parliament - extending the realm of possibility

Forty-four percent of the electorate want a hung parliament, according to a poll by the ICM/Guardian this week, which is far higher than support for an outright majority for either Labour or the Conservatives.

The resurgence of Labour is heartening. As it gets closer to crunch time people who have never voted Conservative before seem to be saying to themselves, “I’m not a fan of Gordon Brown, but voting Tory - that’s a bit strong isn’t it?”

As opposed to 1997, when people were excited by the prospect of change, this election is being fought between the unpopularity of the current government and the only possible alternative. That was until about a week ago when the prospect of a hung parliament came to light. A hung parliament is exciting because it offers an additional alternative that the public hadn’t seriously considered before.
And it is the media who have made this alternative a real possibility. In reality the polls haven’t tightened enough to cause the Tories serious concern and their lead is increasing once more. But the press have jumped on the idea of a hung parliament, seeing it as a new angle to a story that everyone thought had already been written as “Cameron marches into Downing Street”

Whilst the press see it as obtainable, so will the voters which makes it a much more realistic possibility. In reality, it would probably be a disaster. The British electoral system is designed to create strong government who can make big decisions. A hung parliament would end in paralysis and probably another election. But still, I am far more excited about seeing that pan out as opposed to an easy Tory victory. Let’s hope the story hasn’t already been written and the press continue to push outcomes other than a Cameron led majority.