“Neo-Hooverism” was coined as a phrase by American journalist Matthew Yglesias.
He saw, in John McCain’s response to the US economic crisis, clear antecedents in the policies of Herbert Hoover, the American presidential equivalent of Agamemnon*
What was it that McCain proposed as a response to Economic crisis?
Why, a reduction of Federal expenditure. Sound familiar?
Actually, this is a bit unfair to McCain. McCain planned tax cuts and reduced expenditure. That’s not quite a new deal, but it’s not really a New Hoover either.
However, there is one leading conservative politician whose fiscal policies could be dubbed Neo- Hooverism, as he deftly combines opposition to fiscal stimulus with calls for a sustained long term reduction in Government spending.
So why are the Conservatives embracing a”feel the burn” approach to the economy?
There are three possible arguments to explain it all.
The first is that the leadership of the Conservative party actually believe that the best way out of a rapid, sharp global (possibly) deflationary downturn involves doing nothing to ensure consumers are able to spend.
That’s kind of worrying as it’s more or less what US Treasury Secretary under Hoover, Andrew Mellon, argued for.
“Mr. Mellon had only one formula: ‘Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate’… He said: ‘It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”
That’s Herbert Hoover writing about the advice he got from Andrew Mellon. Hoover himself wanted to do more to help families and businesses, but found himself constrained by both ideology and advisers.
You can hear the echoes of Mellon in the current advice of John Redwood.
“Now the world’s markets are saying enough is enough. Living standards in both the public and private sector are being brought down by a combination of government policy and market reaction. The private sector has to sell more abroad and consume less at home. The government sector has to get closer to just spending what it can collect in taxes.”
Personally, I don’t believe Cameron is a secret Redwoodian. It’s not so much he’s anti-Redwood, (He did, with full warning and fore-knowledge that Redwood was a deregulatory headbanger and a constant campaigner for tax cuts, appoint him to head his Economic Policy commission) but that Cameron is pro-votes. (Which explains why the resulting Redwood report was dispatched with a single shot to the back of the head on a moonless night).
The second option is that Cameron believes that fiscal stimulus might work, but that as a leader of an opposition party, thinks he must do all he can to oppose a government he regards as awful, even if it means, err, stretching the truth about what he might do in office.
There are some interesting antecedents for this idea too.
Hoover’s opponent in 1932, one Roosevelt, campaigned against excessive public spending. Here’s a lovely pledge from the Democratic manifesto of 1932 which sounds rather similar to Cameron’s speech today.
“immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government.”
Not sure quite how well that worked out for him.
However, I reject the idea that Cameron’s Neo Hooverism is either old school Mellon-Redwood inspired hairshirtism or dishonest.
To me, the answer to the puzzle of Conservative economic policy lies not in economic thought, but in short term political need.
Until this year, the leadership of the Conservative party saw it’s job in politics as being to close the percieved gap between itself and the Labour party.
In other words, The Conservative party “brand” had to be detoxified.
The problem was how to do this.
Inspired by President Bush’s 2000 campaign, they spoke of compassion, of liberal conservatism, of progressive ends via conservative means. At press conferences they posed in front of oak trees and scudding clouds, not the flames of liberty and the royal blue of high Thatcherism.
Yet image making could only go so far.
The key policy change of the first two years of Cameron’s leadership was the pledge to match Labour’s spending pledges up to 2010.
This enabled Conservative spokespeople like Andrew Lansley to say they would spend just as much as Labour on the NHS.
It enabled Michael Gove to set out a schools policy that sucked the deadweight cost of “free schools” out of the schools building budget, but did not require cuts to teacher numbers or the current budgets of schools.
It allowed the Conservatives to embrace a Welfare reform policy which would involve pretty heavy upfront costs if implemented properly (Helping the severely disadvantaged find jobs is more expensive than sending them cheques in the short term, sadly).
The aim of all this Tory fiscal loosening was to show that Conservatives did care about improving public services and, incidentally, to remove a strong Labour attack line.
As a political strategem, it worked.
Labour found it far harder to get a “Tory Cuts” message across. When Andrew Lansley is popping up on TV to explain how he’d spend every penny you will, and perhaps even more to keep every hospital in the country open, it’s harder to portray him as a flinty eyed axeman.
Yet this commitment to spending meant that the Conservatives could not then attack Labour too hard for fiscal profligacy. “You didn’t fix the roof when the Sun shone” is a nice soundbite, but it’s less effective when the next line is “and we agree with you completely on that one, so we promise to match you in none-roof fixing pound for pound and make it the centerpiece of our policies.”
So the Conservatives can’t now call for swingeing cuts in public services. Their commitment over the last few years has ruled it out. It would look ridiculous. What would Lansley and Gove say for the next two years?
Unfortunately for them, this commitment to spending means they can’t call for massive fiscal stimulus either.
If I were a Tory strategist, I’d be arguing for huge tax cuts.
You could make the argument that the Government has steered us onto these rocky shores and now it’s vital we get out, and the government is being too timid about it. In darker moments, I’d mention the Bush tax cut, and how popular it was.
But if the Tories were to make that argument, the Lansleys and the Finkelsteins in the Tory party would revolt. Unfunded tax cuts, they’d mutter. The price they would extract for embracing big tax cuts now would likely be severe downward pressure on spending that would have to result in future years real terms reductions in spending.
Where does that leave you? Yup, back at public service cuts.
There’s a second point here too. From a political tactics point of view an opposition argument for tax cuts just opens the door to your opponents to trump you. If Cameron says “the finances can take a 2p income tax cut, we’ve got more than enough in the kitty” what is to stop the Government then saying “actually it’s 3p, here’s the cheque, who’s the daddy?”
So what options does Cameron actually have, politically speaking?
He can’t call for cuts in current spending on services, because it would look ridiculous given what he’s said for the last three years.
He can’t call for major tax cuts, because he’d be attacked for planning future cuts in public services, and because by now, he’s tied himself so hard into the strait-jacket of “fiscal responsibility”.
In other words Cameron’s trapped between Redwood’s Scylla and Lansley’s Charybdis.
To embrace Mellonite liquidationism would be politically suicidal. “Vote for us”, Cameron would say. “We won’t cut taxes and we won’t help you if you fall on hard times – because we can’t afford it.”
To embrace stimulus would be equally fatal. “We’re able to cut taxes and maintain spending on services, because the economy will recover just fine.. err. Hold on.. let me just check that last bit”
So Cameron fudges.
His speech today contained two main elements.
First was a commitment not to match Labour’s spending plans beyond 2010, underlined with the message that this would not effect services as the money would be found by reducing the burdens on the state, reforming public services and cutting waste.
This is entertaining nonsense. Cameron’s welfare reform and education reforms require more money from the state, not less, in the short to medium term.
If you’re paying for new “free schools”, helping the severely disdvantaged into jobs and err, well, not reforming the NHS is any way but keeping every single Cottage hospital open, you’re not going to find too much in the way of savings.
As for waste, well, ”cutting Government waste” is an ever present friend to the opposition politician, as FDR can tell you.
The other key element is a rejection of fiscal stimulus on the grounds that “it won’t work”.
Which is sort of confusing really, since apparently, smaller forms of fiscal stimulus do work and are vitally needed. We desperately need an NI and VAT holiday, for example.
But if short term fiscal stimuluses don’t work, why support an NI and VAT holiday? Won’t they do the same as what Labour is proposing “pile up Tax increases for when the economy is recovering”, but just on a smaller scale?
So this point has to be elided. The Tories are now forced into saying “The economy needs help, but not large scale help, because we can’t afford urgent help because things are far too bad for that. ”
The only answer to this conundrum is a sort of policy deus ex machina- targetted small scale help which will fix enormous problems quickly at low social and financial cost paid for by savings that will also be achieved painlessly.
Amazingly enough, this is what Cameron has decided is the answer to our problems.
He proposes small scale fiscal stimulus, combined with long term structural spending reductions funded from pleasingly painless sources.
All of which means Cameron’s Neo-Hooverism is precisely that.
Like Hoover, trapped between the outdated economic arguments of the low tax right and the political realities of the need for action to help the demand side of the economy, Cameron has reached for piecemeal, irrelevant and fudging policies that will neither reduce spending, cut taxes or relieve the burden on families.
Why, he’ll probably be talking about the need for volunteerism to solve the nations social problem’s next.
Oh, wait, hang on….
* call none blest until he has died, and all that. If Hoover had died on the day of his inauguration, he would be remembered as a great engineer and a great humanitarian. As president, he was decent man utterly unmatched to the times he faced.
3 Comments
December 9, 2008 at 11:41 pm
‘“Neo-Hooverism” was coined as a phrase by American journalist Matthew Yglesias.’
Wrongish – http://languagelog.ldc.upenn.edu/nll/?p=884
December 10, 2008 at 11:05 am
The UK is not America and it is not the 1930s ….its not that hard is it ? There is almost nothing to link time and place except rhetorical convenience and then you talk about outdated economics ? Ha !
The Conservative Party is not by any means perfect and but harping on about a commitment to match spending is pure sophistry , similar commitments were made certainly by Thatch and Blair the latter successfully so. Over time it is less meaningful than is supposed. You may well be right that both Parties are quietly dropping cherished plans and not being too public about it but whose fault is that ? Brown and his tax and spend years.
You , Hopi , have no idea if we can sustain borrowing at the levels that we are going to. You have no idea when and how much interest rates will have to rise and at what rate we will have to start paying it all back . Why do you imagine that Brown went on about his golden rule, was that all a game ?
Low interest rates , increase productivity shake out the public sector and reduce taxes as much as possible sustainably, that is the sure and best way to return the country to prosperity .With the levels of borrowing that we are at the argument that we are in need of fiscal loosening seems positively bizarre to me .Try to imagine that you are directly spending your own money and then think what you would do ? Try to imagine you work for small company and then think about the borrow and hope the best strategy?
I know less if anything about the future than you do but the fact that you employ such obviously irrelevant analogies I assume for effect encourages me to believe my instincts are right and New Labour are simply clinging onto any line that floats nearby to justify the collapse of everything that has been said for ten years about prudence and boom and bust .
December 10, 2008 at 1:13 pm
http://www.independent.co.uk/opinion/commentators/hamish-mcrae/hamish-mcrae-the-idleness-of-debating-statistics-1059357.html
Reality check