This is the second of three posts looking at the party’s messaging. The first was published here yesterday; the last and final post will appear tomorrow.
The first half of our message emphasises economic competence: bringing back (as David Laws once put it) Gladstonian Liberalism to the Treasury and setting us up to be competitive in a fast-changing, globalised economy.
So far, much of the focus has been on our willingness to take “tough decisions”. Here, for example, is David Laws speaking to the Independent recently: “in the past people have known we stood for a fairer society but have wondered whether we could take some of the tough decisions on the economy. After this parliament, they will not be in any doubt…”
I think David is absolutely right, and I agree in broad terms with the coalition’s economic strategy. What I think we have to do, though, is put our decisions on the economy into some context.
Over the decade and a half before we entered government, growth in the British economy was to a large extent fuelled by debt, both personal and public. In the face of an economy that was at a stage in its development where maintaining previous levels of growth would be more difficult, we borrowed our way to the sort of economic growth and increases in living standards that we thought we deserved, and to which we had become accustomed.
The financial crisis – in large part a consequence of such policies (though not just in the UK) – brought that abruptly to an end. That is why the correct response to the crisis is not to go back to another debt-fuelled bubble, as Labour argue, but to face up to the economic reality as we should have done a decade earlier. By delaying that reckoning it becomes more painful – it’s always more difficult to cut back than to not spend in the first place – but it is made all the more necessary, too.
Only in an economy where the level and drivers of growth are sustainable can we create long-term prosperity that can bring the sort of opportunities we want to see. And only by reversing the policies of Labour’s time in government – by stopping our addiction to borrowing-fuelled consumption – can we begin to do realise that sort of sustainable growth.
But there has to be more to it than bringing down the deficit. The inherent nature of capitalism means much of the adaptation necessary for us to continue to remain competitive will happen automatically. But that is not to say government has no role to play.
For example, one of the key things the Lib Dems should be banging our drum about is trade. One would almost be forgiven for thinking that the argument for free trade had been won, and that there is nothing more to do. Far from it. And who better to make the economic argument than us?
Reviving the Doha round of trade talks will be difficult, but it doesn’t mean we shouldn’t try. More feasible is a transatlantic trade deal between the US and EU, with signs the Obama administration is warming to the idea (£). More trade means more sustainable jobs and increased prosperity. Estimates vary but there can be no doubt that such trade deals can add several percentage points to national income and lead to the creation of tens of thousands of jobs.
We shouldn’t pretend that these sorts of deals are easy, and we would have to sacrifice some things that we may not wish to in the process of reaching compromise, but the arguments for free trade made by our forebears are just as sound in the 21st century as they were in the 19th.
Sustainable prosperity through fiscal discipline and distinctively liberal principles like free trade can be a winning message, and if we remember and communicate the economic context as well as our inheritance we needn’t define our approach to the economy merely with reference to Labour’s economic incompetence.
Tomorrow, I will turn to the other side of the coin: social justice.
* Nick Thornsby is a day editor at Lib Dem Voice.