You wonder if George Osborne’s tears at Margaret Thatcher’s funeral were as much to do with sorrow at having adopted her not for turning mantle, as regret at the passing of a political hero who didn’t feel the need to speak estuary to up her popularity ratings.
Today you wonder whether the tears are flowing more copiously, or have just dried up in resignation on hearing from Goldman Sachs’ boss Lloyd Blankfein, sitting comfortably atop first quarter profits of £1.47bn (1.2% of UK government borrowing in 2012), that Osborne is stuck with his austerity approach, like it or lump it.
Talk about a rock and a hard place. Speaking on Radio 4’s Today Programme, Blankfein fundamentally concurred with the conclusions of IMF chief economist Olivier Blanchard last week, and the thinking behind the decisions of first Moody’s and latterly Fitch to downgrade the UK’s triple A credit rating. If the country’s efforts to escape the downturn are to not to continue to resemble those of a spider climbing out of the bath, it needs an economic plan B.
“You would like it at this part of the cycle not to cut, to push out austerity and not to shrink the economy,” said Blankfein. But, tough, he added. That course is only permitted to countries, which have done their housekeeping, balanced the books and not cranked up an enormous deficit, otherwise the markets will react badly.
“If you have a big deficit, you lose optionality,” said Blankfein. “The choices get taken away from you.”
So no chance then of that preferable loosening of the purse strings to let the economy breathe. Instead, continued snail-paced growth, with the likelihood of the further credit rating downgrades that entails, followed, in turn, by probable higher government borrowing costs and, consequently, even less flexibility for pump priming business and industry.
Reading between Mr Blankfein’s lines, businesses, especially small to medium-sized ones (SMEs), can’t expect the banks to stump up much more of the cash that government can’t provide either. The reason? They’re frightened, poor loves.
“Businesses are starving for cash and banks have cash idle, but they’re afraid, for want of a better word,” said Blankfein. And he understood their anxiety, he added, uttering the words you probably wouldn’t expect or hope to hear from a Jedi master among masters of the universe; that “lending money to businesses is one of the riskiest things you can do”.
Goldman Sachs, however, does a little something for the small business community. It won’t lend them the cash they’re starving for (they’re way too small and it’s way too frightening), but it will teach them new skills. Blankfein is over here to talk up and talk about his company’s programme for improving the general business nous of SMEs and “professionalising” them, an international offshoot of its USA 10,000 Small Businesses scheme.
Participating businesses in the UK do rate the initiative. But facing flat demand in a stagnating economy, those SMEs which have seen their or their customers’ credit ratings cut by the banks are likely to utter a hollow laugh, or shed an Osborne like tear, at any suggestion that such projects are going to do much to lift their or the UK’s fortunes in the near future.