Monday, 27 April 2015

Stephen Hawking & The Electorate's Crazy Cycle

Today we read in The Independent that Stephen Hawking, the so-called finest mind in the universe, is backing Ed Miliband's Labour party in the election. I don't think Hawking is the finest mind in the universe. He is certainly excellent in his specialised field, and I thought A Brief History of Time was superb - but outside of that field I think he frequently shows himself to be pretty mediocre, particularly on the subject of God and philosophy, and, it would appear from today's endorsement, economics and politics too. If I were to take a stab at how the finest mind in the universe (whoever that is) would view the up-coming election it'd be something like this.

Frivolous Fred has a spending problem. He can't stop wasting the household budget on things they don't really need. His spending got so out of control that he went on a borrowing spree so he could be even more profligate. Thankfully his wife Wise Wendy is much more prudent. She decides to impose austerity cuts on Frivolous Fred in order to get their finances back under control.

In real life Frivolous Fred is Labour under Gordon Brown and Wise Wendy is the current Conservatives, who were shrewd enough to realise that the right balance of austerity cuts, along with relying more heavily on the private sector, had a better chance of turning round the economy than Labour's perpetual plan of high taxation, high borrowing and high spending. Why isn't this simple piece of wisdom more widely understood? 

Here's a suggested reason. The crazy thing about voters is that they easily have their attention swayed by political cycles that bring about change, which means it is fairly inevitable that if you've had a left-centre government for a while a right-centre one will be voted in pretty soon, and so on as the cycle goes. After 13 years of New Labour, the Tories got back in again, albeit in coalition with the not always comfortable bedfellows the Liberal Democrats.

The last five years have been quite good in terms of an economic recovery - not great, but not bad, and certainly astronomically better than things would have been with a government like Miliband's Labour that thought increased borrowing and increased spending was the answer.

But after a fairly successful Conservative/Lib Dem period in government, where the response to the financial crisis was to look to the free market and private job creation as the answer, what then happens is that the opposition party seems to be able to pull the wool over much of the electorate's eyes by promising to redistribute much of the wealth that has been created. Stephen Hawking's comment hints at this too when he says "The city needs a Labour government to get the kind of investment we need again"

It's quite easy to see what is happening with this kind of thinking. When standards have improved, employment has risen and inflation has been fairly well managed, instead of voting for a party that is likely to continue with this growth, many people vote for the opposition party that promises to increase taxes, increase spending and have greater inference in the free market (through things like minimum wage increases and rent controls, and a cap on NHS profits).

And that's the crazy pattern of voting cycles: very often an opposition left-centre party that builds its pre-election promises on redistributing the wealth the right-centred party helped create appeals to the average voter more than keeping power in the hands of the right-centre party that helped create the wealth they want to redistribute.

Then, after they get elected and the promises soon turn out to inimical to increased growth, the electorate loses its amnesia and remembers the party that helped the economy grow. Consequently, instead of the kind of steady growth we'd see with the continuation of a party that looks to the free market and private job creation as the answer, we get a staccato rhythm, where periods of growth are punctuated by periods of inertia – otherwise known as Tories in/Labour out, Labour in/Tories out cycle. Now, sadly, it looks to be Labour's turn again.