The latest in the cuts saga: Trichet v Bernanke

Which of the two is more familiar with “depression economics”?

There has been much discussion of the op-ed by Jean Claude Trichet, the French governor of the European Central Bank, in today's Financial Times. The Tories will be pleased to see Trichet wholeheartedly and passionately backing the draconian "austerity" measures adopted by European governments in recent weeks, writing:

With hindsight, we see how unfortunate was the oversimplified message of fiscal stimulus given to all industrial economies under the motto: "stimulate", "activate", "spend"! . . . there is little doubt that the need to implement a credible medium-term fiscal consolidation strategy is valid for all countries now

Trichet's comments cannot be ignored and will, as I said, bolster the deficit hawks on the right. But, for me, the more significant and fascinating contribution to this debate has been from Ben Bernanke, governor of the US Federal Reserve. Speaking yesterday in front of the House financial services committee on Capitol Hill, Bernanke spurned the UK and the eurozone's approach to the deficit, rejecting immediate cuts and instead urging legislators to maintain support for fiscal stimulus.

From the Guardian:

In a second day of testimony to Congress, Bernanke said the Obama administration should delay measures to reduce Washington's record budget deficits by cutting spending or increasing taxes.

"I believe we should maintain our stimulus in the short term," Bernanke said, as the latest batch of economic data from the world's biggest economy showed an increase in weekly unemployment claims, a drop in home sales and the second easing of activity in three months.

Bernanke's opposition to fiscal retrenchment until economic recovery has been assured is in contrast to the approach favoured by Britain and the eurozone countries, where governments believe action to reduce budget deficits cannot be delayed.

Bernanke is not your run-of-the-mill central banker, and his views on "depression economics" carry special weight in a way in which Trichet's do not. He spent much of his pre-Fed, academic career immersed in studying the causes and consequences of the Great Depression in the 1930s, publishing essays and books on the subject.

As Dennis Cauchon wrote in USA Today, "Bernanke, a former Princeton University economist, is considered the pre-eminent living scholar of the Great Depression. He is practising today what he preached in his book: Flood the system with money to avoid a depression."

So who are you going to trust on avoiding a rerun of the 1930s? The American central banker or the European central banker? I know who my money's on.

Meanwhile, if you want to read a rebuttal to Trichet's piece, check out this op-ed from the US economist Brad DeLong, also writing in the Financial Times. DeLong writes:

History teaches us that when none of the three clear and present dangers that justify retrenchment and austerity -- interest-rate crowding-out, rising inflationary pressures on consumer prices, national overleverage via borrowing in foreign currencies -- are present, you should not retrench and austerity: don't call the fire truck when there is no smoke. And history teaches us that when economies suffer from high unemployment, enormous excess capacity, incipient deflation, businesses terrified of a lack of customers, and an enormous excess demand for high quality assets, then is the time for expansion and stimulus: when the deck is awash, start bailing.

Yet Jean-Claude Trichet rejects these counsels of history. He seems to me to place himself in the position of, as British interwar bureaucrat R.G. Hawtrey described his precedessors at the start of the Great Depression, somebody: "crying 'Fire! Fire!' in Noah's flood."

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.