Lack of understanding of the credit crunch is magnifying its damage
THE BBC’s “Today” programme is the main current-affairs show on British radio. Last year it recruited a new presenter, Evan Davis, who is also an economist. An amusing pattern has since developed. Quizzed about the credit crunch, a politician delivers some carefully memorised remark about, say, quantitative easing. Then the guest experiences an audible moment of existential horror, as Mr Davis ungallantly presses him for details.
The tide has gone out and, with a very few exceptions, Britain is swimming naked: almost nobody appears to know what he is talking about. The havoc of the financial crisis has stretched and outstripped even most economists. The British political class is befogged. Ordinary people are overwhelmed. And just as the interaction between banking and economic woes is proving poisonous, so the interplay of public and political ignorance is damaging the country’s prospects.
Start with the government, whose ministers are still oscillating between prophesying economic Armageddon and gamely predicting the best of all possible recoveries. Gordon Brown is learned in economic history–indeed, he is at his most animated and endearing when discussing it. But the prime minister’s grip on the history he is living through is less masterful. The government’s implicit strategy is to try something and, when that does not work, try something else: the approach modestly outlined by Barack Obama, but rather less honest.