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‘Killing Britain’s interpretation of Mervyn King’s comment on the recession.

… That’s the opinion of Simon Wren-Lewis, writer of the Mainly Macro blog.

It’s his response to the oft-asserted claim that Labour crashed the economy; he can’t deny it altogether because Labour’s failure to regulate the banks does make it partly true, in his eyes (we’ll skate over the fact that the banks had a certain responsibility in that area themselves. Now we know they’ll never behave responsibly it makes the future a little easier to navigate – or at least, it should).

Professor Wren-Lewis writes: “That is I guess why Ed Miliband seemed to respond to this accusation by saying something like: “yes we did get financial regulation wrong, but …”. That may be an honest reply, but it is not very effective, because many will read it as admitting Labour caused the recession.

“A better reply would be: “Everyone knows that the recession was caused by the global financial crisis and insufficient regulation, but the recession would have been worse if the Conservatives had been in power.”

“As Mervyn King says, “the real problem was a shared intellectual view right across the entire political spectrum and shared across the financial markets that things were going pretty well”, a view which he of course shared.

“I think the claim that the recession would have been worse if the Conservatives had been in government can be justified on two grounds. First, the Conservatives did accuse Labour of too much financial regulation, not too little. Second, they were against Labour’s fiscal stimulus in 2009.”

Why is it important that Labour combat this charge effectively? “When it comes to a contest of macroeconomic competence between the last Labour government and the current coalition, Labour wins hands down.”

The reason? “The coalition made such a bad mistake with austerity… Losing the equivalent of at least £4,000 per household is a big deal.

“Even if we were prepared to forgive this as a genuine mistake, to plan to make exactly the same mistake again either suggests a complete inability to learn, complete incompetence, or a duplicitous pursuit of ideology over social welfare.”

Read the full article on Mainly Macro. It is plainly written and even shows how you can measure up the Coalition’s performance against Labour’s for yourself.

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