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Stephen Beer (www.stephenbeer.com)

Monday, September 29, 2008

It may not be as quite bad as you think

From the Tribune website:

THE conventional wisdom is that Gordon Brown will not recover in the opinion polls and is doomed to lead the Labour Party to a catastrophic defeat in 2010. However, the conventional wisdom, as JK Galbraith who first coined the term pointed out, is usually wrong.

The political chatter has it that Gordon Brown is facing a situation similar to John Major in 1997 or James Callaghan in 1979. The 1970s have particular resonance, since that, too, was a time of rising inflation and sluggish economic growth after an oil price shock and a war in the Middle East. Governments found they could not inflate economies out of trouble, since inflation rose but sustainable economic growth was increasingly elusive. Callaghan famously renounced Keynesian economics and an era of Thatcherism began. Labour lost the ’79 general election and was out of power for 18 years.

However, if we are looking for parallels, there are good reasons for focusing on the late 1960s. Yes, Labour lost the general election of 1970 to the Tory Party led by Edward Heath whose economic policy was rapidly discredited, but the point is that Labour should have won it. Harold Wilson called the election because he thought he would win. A combination of a lacklustre campaign and a rogue balance of payments figure were in large part to blame for defeat. Yet that the party even expected to win at all in 1970 seems incredible, given the unpopularity of the Labour Government and its leader only a year or two earlier.

There is probably no better summary of this turnaround than that written by Ben Pimlott in his biography of Harold Wilson. According to the late historian, Wilson’s leadership appeared under serious threat between April and June 1969, just a year away from the general election. “It was widely felt, and frequently suggested in the press, that the Prime Minister could not survive until the election.”

Wilson had been seen as an election winner, but when that was in doubt, speculation of a leadership coup grew intense. Pimlott noted that: “Since 1967, the Tory lead had been almost continuously in double figures (according to Gallup) and frequently above 20 per cent. In August 1969, Wilson’s personal rating touched rock bottom at 26 per cent.” He added: “Many MPs in marginal seats had begun to feel that, facing certain defeat, they had nothing to lose [by a change in leadership].” It is still difficult for us to appreciate how febrile those times were, with almost constant rumours of plots, although the parallels are obvious.

However, by the summer of 1969 Labour’s position had improved sharply. Pimlott wrote: “Labour’s national deficit fell to 2 per cent in October and Wilson’s rating rose to 43 per cent, restoring a solid advantage over Heath.” Labour had suffered a serious economic blow with devaluation in 1967 and its economic policy appeared to be in tatters. However, with a competent Chancellor in Roy Jenkins, the economy began to turn around (benefiting from devaluation) and with it Labour’s standing.

Particularly allowing for contemporary swings in public opinion, something similar could happen again. The talk now, up to two years away from the general election, is of recession and world growth may indeed be sluggish for some time. But in 12-18 months’ time, the focus may be on recovery.

We live in very different times to the 1960s, but the central lesson is clear. Political prospects can change very quickly. Of course, Labour needs to do more to spell out its politics with a firm direction. Every activist needs to take the fight to the Tories to expose the holes in their economic policies. Our economic message must be clear and consistent. But above all, we need to hold our nerve if our party and our leader are to benefit from a political recovery.

Stephen Beer is chair of Vauxhall CLP and a City investment manager. This article represents his personal opinion
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