Darling Interview : Economic times are ‘arguably the worst they’ve been in 60 years’

Not being a Guardian reader, I missed the now famous interview in which Alastair Darling described the economic outlook as the worst for sixty years. But since it caused such a furore and has pulled the rug out from underneath Sterling, I thought that I should look it up and see what he actually said.

It was a long article and there, half-way down, were the fateful words. The economic times we are facing, in the view of the Chancellor ‘are arguably the worst they’ve been in 60 years. And I think it’s going to be more profound and long-lasting than people thought.’

Although I fail to see any room for misinterpretation, colleagues in the Labour Party have been queuing up to explain that he did not really mean what he said. And economists have subjected Darling’s words to lengthy critical analysis. They ask why he chose sixty years and not some other length of time – twenty-five years since the early 1980s might have been more appropriate. They question whether things are really as bad as Darling would have us all believe.

Darling spoke out without thinking of the consequences

To me his words look like the sort of unconsidered remark that we all make from time to time when we are happy to sacrifice a little accuracy for the sake of saying something sonorous. Not that this in any way excuses a senior politician from saying something that he should know will be thrust into the headlines and picked over unmercifully.

But more interesting than this attention-grabber alone is the total lack of any supporting evidence. Darling does not seem to be much of a student of economic history. Indeed he admits that when he joined the Labour Party in 1977, ‘he was enjoying becoming a lawyer.’ Since then, in the bewildering way that no sooner do politicians grasp one brief than they are moved to a new job, he has held a number of different positions. Clearly he got the job as Chancellor on the basis that he was a safe pair of hands and good at getting things done, rather than because he had any deep interest or academic knowledge of economics and finance. Contrast this with the United States where, say what you like about the Delphic Alan Greenspan or his successor Ben Bernanke, nobody doubts that they are experts in their subject and know what they are talking about.

Of course he should have known!

Had Darling been taking a keen interest in economics before he became Chancellor he would not now come out with comments such as this: ‘We knew that the economy was going to slow down…but we had no inkling that a financial crisis was about to unfold. No-one did. No one had any idea.’ I beg to differ. Many people for many months had been warning of reckless lending practices, overvalued properties and a dangerous credit binge. If anybody should have been hearing these minority views and taking them seriously then it should have been Alastair Darling and, of course, his predecessor Gordon Brown.

But the fiction that today’s economic problems somehow came out of the blue is being spun furiously. There is some truth in the assertion this country has no control over the price of oil and other commodities, but we certainly do have control over domestic lending. Labour politicians are now desperately trying to bundle these two quite distinct matters into one big economic tsunami that rolled upon our helpless and indefensible shores.

They are not alone. The other day I heard a director of one of our leading building societies assert that the only thing holding back the housing market is the collapse of the supply of wholesale funding – the result, he was quick to add, ‘of the global credit crunch that began in the USA’. Such an explanation conveniently absolves building society bosses from having approved risky business models and sat back as they indulged in foolish lending. And it also dodges the issue of which came first – the decision of wholesale funders to withdraw lines of credit or the realization that UK house prices were far too high and set for a fall.

Shameless historical revisionism to pass the buck

So we are now into a period of shameless historical revisionism, the main purpose of which is to blame our economic problems on others, especially if they are foreigners, and on forces beyond this country’s control. The Government wants to portray itself as the crew of a ship in rough waters, selflessly trying to give what help it can to sick passengers. Bankers are talking about ‘learning the lessons’ of the crisis, rather than considering whether the loss of billions of pounds of shareholders cash is a matter for resignation. Indeed only this weekend I heard one from HBOS saying that ‘taking responsibility and resigning are two different things – and we have taken responsibility.’ So that’s OK, then!

Gordon Brown is desperately trying to steer a course between saying that the crisis is out of his hands and beyond his control, while also giving the impression that he can do something about it. And we have a Chancellor who explains the fundamentals of the job in words that one might use to a child of five. ‘Becoming chancellor is completely different from any other appointment. Even when times are easy, it’s important, because you’re dealing with money and money affects how everything works. When times are far from easy, it’s even more difficult.’

The whole spectacle does not really inspire confidence, does it? No wonder Sterling has been on the slide. Are you ready for this? Take a look at this brand new report from my colleague, Ben Traynor, for one smart way you can protect yourself before it’s too late.

Kind regards,

Tom Bulford
for The Penny Sleuth

P.S. If you want to follow the tales of a small company investor, and uncover the hidden gems of the stock market, then sign up for the Penny Sleuth e-letter. It won’t cost you a penny…

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Darling Interview : Economic times are ‘arguably the worst they’ve been in 60 years’

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