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Public Sector Informant : PSI
BRADLEY ALLEN LAWYERS P: 02 6274 0999 | F: 02 6274 0888 9 th Floor Canberra House, 40 Marcus Clarke Street, Canberra ACT 2601 | GPO Box 240 Canberra ACT 2601 DX 5633 Canberra | www.bradleyallen.com.au Estate Planning Keith Bradley and Rebecca Tetlow are experts in Estate Planning and are available to advise and assist with: Estate planning including Wills against estates Keith Bradley AM Partner Rebecca Tetlow 10-01337/1 99 london circuit. tel 6257 9995 call us now for expert information and advice on your employment issues. Visit our new website www.nicholasdibb.com Feeling like Fair Work is passing you by?.... [MAY 2010] THE PUBLIC SECTOR INFORMANT 5 third-place humiliation manufacturing sector struggled. In the Great Moderation -- the period spanned from the late 1990s to the early 2000s -- inflationary pressures were suppressed by cheap goods from emerging economies, most notably China. Production moved from west to east, with hot money coming in the other direction, into the deregulated financial markets of London and New York. The capital flows pushed up the value of the pound, making imports cheaper and exports dearer. Subdued domestic price pressures meant the Bank of England, which had a tightly drawn remit to control inflation, had to cut interest rates, encouraging excessive borrowing, an explosion in debt and higher asset prices. Throughout Labour's first decade in office, there was barely a mention by ministers of the balance of trade, even though its steady deterioration was a clear sign of an economy out of kilter. The mood changed -- for the better -- after the financial crisis began in the summer of 2007. Ministers realised they had been taken in by the snake oil salesmen of the City, and found that they had no alternative but to resort to Old Labour methods -- nationalisation -- to save the banking system from collapse. Once it was observed that the masters of the universe had feet of clay, all sorts of hitherto heretical notions became possible: active industrial policies, higher taxes on the rich, direct pressure on mortgage lenders to be gentle with those falling into arrears. Belatedly, Labour smacked of the social democratic government its supporters had always wanted it to be.Even so, the recession has been long and painful. When living standards are being squeezed and unemployment is rising, saying life will be even more terrible under the other lot is of dubious political merit. What Labour should have been saying throughout this campaign is that it intends to use the power of government, not just as a short-term expedient, but as a means of tackling some of Britain's long-standing economic defects over the next five years. It's not that difficult. Yes, Labour should say, we were wrong to believe so cravenly in market forces, but we have seen the error of our ways and now intend to use the state for good. For the economy as a whole, it means new macro-prudential controls to allow the Bank of England to target asset bubbles as well as inflation; for the financial sector, it means use of government ownership to direct lending, breaking up the banks into retail and speculative arms, and tighter regulation on the hedge fund industry. In industrial policy, it means taking a soundbite (less financial engineering and more real engineering) and fleshing it out with policies for the exchange rate, government procurement and tax. The financial help provided by Whitehall (the executive arm of government) to persuade Nissan to build electric cars in Britain is an example of how a hands-on strategy can work, but sadly the negative campaigning means little has been heard of how the government could promote fuel efficiency, create jobs and help environmental industries through a Green New Deal. Where there is evidence of market failure -- the provision of low-cost housing, for example -- Labour should be trumpeting the need for the state to act. What's strange about this election is that the financial crisis has created the best climate for progressive politics for a generation, yet Labour looks set for a crushing defeat. It is ironic that newspapers which supported the government in the days when it told us we should learn to love the market, should desert it when it is moving in a progressive direction. If Labour is indeed heading for opposition, it should hold its nerve. It should call for the taming of the market and the protection of the poor. Above all, it should argue that it offers, warts and all, the best prospect among the three main parties of social justice. Which it does. Larry Elliott is economics editor of The Guardian
PSI - September