Vince Cable: “a major disaster has been averted”

By Alex Smith / @alexsmith1982

It’s not often we quote from the pages of the Daily or Sunday Mail on LabourList, but Vince Cable has written a good explanation of the improving economic signs in that paper today:

“There is undoubtedly good news, at least for some. We no longer see big car plants closing and industrial production seems to be reviving. Share prices have been rising. In parts of Britain, notably the South, house prices no longer seem to be on the decline (nice for owners in negative equity; not so nice for first-time buyers). The bankers certainly think the worst is over and a lot of champagne and caviar was downed last week in the City of London after bonuses of £4billion were revealed.

I am often asked to play the part of Nostradamus. Since I had been a reasonably successful prophet of doom, I am now assumed to know when the economy will turn round. I don’t. No one knows.

It does seem likely, however, that a major disaster has been averted. We are no longer in a downward spiral of falling production, falling wages, falling prices and Thirties-style dole queues. Armageddon didn’t happen.

But last autumn the economy suffered a major heart attack, centred on the banks, a year after chronic chest pains at the start of the ‘credit crunch’. The patient has survived thanks to drastic and quick action by the Bank of England and governments (our own and others) and the use of modern economic medicine. There was an emergency transfusion of blood into the banks – the bail-out that some bankers seem to have forgotten as they celebrate improved results with fat bonuses. And there was an injection of monetary steroids, including cheap interest rates, which had nasty side-effects for savers.

The clinicians are still sufficiently concerned to have just pumped in more steroids – the so-called ‘quantitative easing’. What this means is that the Bank of England is buying vast amounts of Government debt from the banks in the hope that they will feel confident enough to lend more. The patient is now sitting up and showing signs of recovery.”

Vince Cable has been a voice of sound and respected judgement throughout this economic crisis. I hope his latest prognosis will prove to be right, and that the darkest parts of recession have been put behind us.

As I said on Friday, Number 10 cannot rely on these signs of economic upturn to revive Labour’s fortunes in the polls. But – if they continue – they might buy some space in which to develop a clear and radical vision for the last year of this parliament and for the next manifesto.