Pestonomics: Painful certainty or chronic uncertainty?
“Which would you prefer...the painful certainty of 2007 or the chronic uncertainty of 2016?”
This was the provocative final question posed by Robert Peston, the debonair, floppy-haired and self-proclaimed ‘marmite’ of British broadcasting, as he drew his talk on the theme of uncertainty to a close at AIMA’s spotlight event in London on the 29th of December.
Considering time travel is currently not an option, I thought it might be useful to delve deeper into Peston’s vision of uncertainty and what might be around the corner…
“We are living in the most uncertain times ever.” This was Peston’s uncompromising first statement. He accredits this to the disappointingly slow recovery from the post-war recession and recent financial and economic upheaval, which has culminated in an underlying instability now evident in the fragmentation of the global political landscape.
Peston believes that former UK Chancellor George Osborne misunderstood the fundamental re-balancing necessary for the economy. He said he was profoundly concerned by the UK economy’s overreliance on “short-term painkillers” like QE rather than dealing with the roots of its economic flaws. He argued that the UK is too dependent on consumer spending and the services industry. The economy is weakened by our poor productivity and propped up by unsustainable overseas financing. We lack the strong fiscal framework and industrial policy needed to generate greater growth, and he is deeply skeptical about what Phillip Hammond might unveil in his first Autumn statement.
The Brexit result, in his opinion, is a direct result of monetary policy inflating the gap between rich and poor. The less fortunate have felt the pain of the financial crisis, while the effect on the wealthy has been cushioned, leading to the sense of disillusionment and abandonment that was so effectively channeled in the reactive Brexit vote.
So what’s next for Brexit? The lack of clarity and communication from the revamped Tory administration has magnified the uncertainty of the situation. Peston commented that Prime Minister Teresa May’s approach, from a self-proclaimed straight talking politician, has been remarkably evasive and non-committal! He said he wouldn’t be surprised if Article 50 was triggered early next year (he has since been proven correct).
Labour…what’s going on there? A destructive civil war is raging within the party, further provoked by Teresa May’s move to end the ban on grammar schools, this infighting has distracted and diverted attention away from the important issues (e.g. Brexit) leaving the Tories unchallenged. According to Peston, an opposition that is not performing its role and challenging the government causes a dangerous and fundamental imbalance in the machine of government. This, therefore, gives May an unprecedented amount of power and makes her next move much harder to predict.
Jumping to his view of the global economy in his characteristically erratic style, Peston forecasts that China will be the next big economic shock. China’s debt is growing faster than its GDP, they are not generating enough growth and accumulating unrecognized bad debt… “it’s a ticking time bomb.”
However, it is the unstable future of global politics which is keeping him up at night. Trump, Boris Johnson and Marie Le Pen, the ‘blonde takeover’ as Peston calls them. Peston attributes the rise of the radical right as a direct consequence of economic uncertainty. He predicts that Marie Le Pen is very likely to win the first round of presidential elections in France. If she won the presidency, then the fiscal and political union of France and Germany would be deeply threatened, potentially unravelling the support structure of European politics and the basis of the EU. For Peston, the results of this upcoming election and the rise of the far right more broadly, is the greatest threat and the most dangerous factor in all this uncertainty.
Background: Robert Peston is Political Editor at ITV News and formerly Economics Editor at the BBC. Peston became known to the wider British public for his anticipation and leading analysis of the financial crisis and later his decision to challenge the broadcasting establishment by foregoing a tie when interviewing then chancellor George Osbourne.