Saturday, April 30, 2005

Will the UKay be OK after the election?

The UK general election now enters the final straight. Consensus forecasts expect a 80 seat majority and a return of the Blair-Brown team. Since campaigns are so regimented and risk-free, barring a Madrid 3/11 incident, no one will be surprised if on Friday May 6th they awake to a "I-feel-humble but grateful" speech from Mr. T.
Expect to hear a lot of cheering if instead there is a late swing or low turnout that reduces the majority to only 20. Unlikely? Yes but would it not be just? That famous 'bloody nose'. Despite the access to information, the electorate seems remarkably un-informed. Perhaps it takes time for them to accept new realities.
The debt and housing troubles are about to start. Hence the timing of this election. If the election had been held in 2006, then things could have been different. But it isn't next year, it's now .
So the worst "Tony" can expect is see the already written victory speech drastically re-edited on thursday night, becoming "I hear the British people loud and clear. I will therefore not see out the whole of this term...and I am truly humbled.". But he will remain PM next week, next year and the year after that.

Whatever the size of the majority, there will be a host of New Labour aspirants who will be worried about their future. Will they be the "right-man-ten-years-too-late-Michael Portillo" of the Labour Party?
Is 2005 for New Labour what 1992 was for the Tories?
Then, the grey now-forgotten Prime Minister John Major was at the helm of an economy deep in recession. In this cycle, it may be a year or so before it begins. Unlike the US system, the British Prime Minister can choose the date of the election. It is being called over a year early. Why? With a three-figure majority in Parliament and no new Big Idea, there is no urgent need to seek a fresh mandate from the people. It is a case of "cut and run".
The economic figures so far in 2005 bear out all the worst fears of the administration. Retail sales are down as consumers realise they are heavily indebted. House prices are on the wobble and also on the way down. How far, no one knows but the go-go years are definitely over.
So whoever wins and by how much, Blair (& equally responsible Brown) will be handing over a poisoned chalice to the next generation of New Labour hopefuls.

The 2005 election to date has been dull in the extreme. In fact, extreme is probably the right word to describe a Tory Party which has nowhere else to go. After all, the economic philosophy is shared by both major parties. They can only spin out a yarn that they are radically different from each other. In economic management terms, we have seen 'coalition government" for about 15 years.
But with race (it's not about immigration) the Tories have shown they are capable of crossing a bridge too far.
It will be to no avail. This time round, only the Liberal-Democrats could have benefitted. Unfortunately for them, they seem to lack the ambition and (probably) will miss the opportunity. The Tory Party should soon be searching for a new leader and will accept their status as the "blue-embittered-little-england" look alike of the UK Independence Party. Depending on their performance, perhaps they will even merge with UKIP.

What about the legacy?
The New Labour project will not be reviled because it will not even be remembered. How many people remember Y2K or the e-economy or dot-com? As they are fast fading from our collective conscienceness so will the Third Way ideal. In fact, when do you last hear about the Third Way? Ten years from now, we will still recollect that a certain Margaret Thatcher set us all off on a crusade. Hated, seldom liked, she was nevertheless respected. That was indeed a kind of revolution. Its impact is being felt in the Third World today as state entities become privatised and free markets spread globally.
New Labour stole her ideas but will always remain "the Pretender".
The next New Labour government will be in a state of permanent crisis. The inevitable housing collapse will hit the consumer-driver economy for six from 2006 onwards. The downturn will last for the rest of the decade. US Federal Reserve's Alan Greenspan cannot build another global credit bubble to get us out of this one. By 2008, expect to see another "once-a-generation-sterling-crisis". At the same times as the bubble bursts, investors will no longer perceive sterling as a petro-currency as the decline in North Sea oil production coincides with Britain becoming a net oil importer. Technically this point was reached in 2004, but the gap between production and import will widen significantly and be noticeable.
Once again (as in the early 90s), tens of thousands of supposedly wealthy Britons will be forced to sell their holiday homes in Spain and Greece. Even some of the more expensive French properties may go too.
We should keep an eye on what the big financial institutions do. After all, the London Economy is supposed to reach as far as Northern England's humberside. Will the City permanently shed 50,000 more jobs under cover of this gloomy environment? Will they see this a chance to export jobs to India in the higher value back office occupations of research? A lot of money shuffling activity in the second decade of this century may no longer occur in London, staffed by commuters from Essex or the Home Counties. In other words, though the City always culls, as its profits go down and hires new blood a few years later, will they fire but forget to hire this time?
These scenarios have been prematurely predicted before but now telecommunications, the Internet and a ready supply of educated Asian graduates has made this possible. Change may always be technically possible but it takes a decade or more for it to become normal. We have now passed most of that decade. The historic shift of manufacturing industry to Asia is now an expected fact but also seemed impossible in the seventies. Replaced by a high-value services industry (it was not all about Big-Macs!), society was cushioned and was able to enjoy another bout of prosperity. There were casualities as many manual workers were not able to adapt, but the majority did not notice.
The Finance Minister, Gordon Brown, did state recently that the big challenge is the inevitable rise of China and India. This is what would expect to hear in an intelligent election campaign. Of course, this is the last thing any one wants. This debate will only come once a crisis knocks out the collective complacency and people can think the unthinkable.
Still, London will remain a financial centre for years to come> They will have the front office but need less employees as they shift the back office abroad. There will also be inward foreign purchases of property - domestic prices will dip by 30% while sterling's drop will account for another 20%. It will be very cheap if you hold yen, yuan or Swiss Francs.

It will be a different picture for "Middle England". So dramatic, that it could change the face of British Politics.

Is the future black?
In the election of 2010, the result should be a minority government. With the implosion of New Labour, will come a series of unstable party coalitions. There will be no overriding project, not even a european vision, that will be able to take centre stage. Old Labour will never return since it was based on manufacturing labour - the original working class. That "description" ceased to exist years ago. New fads such as Respect will go by the wayside and never enter the mainstream. The Right will always be there but remain a minority magnet for Little England and never reclaim the "natural government" of the Conservative Party. Possibly, regionalism will be the likely beneficiary of this vacuum.

Most of this week, we will have our eyes on the election of 2005. In the minds of the ambitious, the next campaign starts on Friday, May 6th. A British Prime Minister once said "a week is a long time in politics". How right he was.


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