Jaber Jabbour has a financial advisory business, has worked for Goldman Sachs and was named as one of the 40 under 40 rising stars in investment banking in Britain by Financial News.
As I was logging into my Connect 2015 account recently to start a new phone canvassing session at CCHQ, it occurred to me that I must have said the following line: “the economy is recovering thanks to our long-term economic plan (Oltep)” over a hundred times. I didn’t only say this over the phone, but I also repeated the Oltep line face-to-face while campaigning across the country, including in places such as Trafford, Swindon and Newark. This led me to develop my own modified Oltep line (MOltep?) where I argue that Oltep primarily serves the interest of the most vulnerable in our society.
However, I had not critically and philosophically analysed the Oltep line until I phone canvassed Mr Williams (not his real name). He was labelled as a C – a Conservative. So naturally the conversation was very pleasant. Towards the end of the call, we were chatting about how a Conservative outright majority in 2015 seems more achievable now than at any other time in the past couple of years. I found myself repeating the Oltep line and saying that there is still more to do.
I expected Mr Williams simply to agree, as did the vast majority of people I had canvassed, many of whom were not even C. Instead, Mr Williams, a true Conservative with a healthy sense of scepticism, while acknowledging the importance of Oltep and a Conservative outright majority next May, implied in his answer that the economy is complicated and unpredictable. I agreed and thanked him for his time. We bid farewell and hung up the phone.
This call continued to bother me for a while because I knew Mr Williams was right in his scepticism.
I believe that the economy, like many other aspects of our social life, is very complicated. Not only is it impossible to predict precisely where the economy is heading, but also we cannot be confident of our understanding of its history. We can develop principles that explain the long-term behaviour of the economy. However, we must not be overconfident about our ability to explain what goes on over the short term, while ignoring the hidden risks that could turn into nasty surprises. It is all easier said than done.
Despite the 2008 financial crisis, which the vast majority of economists failed to predict, there are still many research analysts and economists employed by investment banks. They regularly publish their views about financial markets, trying to explain the past and predict the future. Their track record is far from satisfactory.
Yet, many of the most sophisticated clients of investment banks still take these predictions seriously. It just goes to show how desperate we all are to cling to anything that enables us to make more sense of our world and gives us some insight into the future, even if we know that there is little or no basis for it. This also explains why I sometimes cannot resist the temptation of taking a glance at the horoscope page if I have a newspaper in my hand.
When I am drunk with the various short-term analyses about the economy, I try to sober up by remembering some economic and financial principles and catchphrases that I find insightful: stability breeds instability (Hyman Minsky); the economy, like human nature, fluctuates in unpredictable cycles; the more debt a society has, the more fragile its economy is; the longer it takes for a financial crash to occur, the more devastating it is likely to be; there is no such thing as a free lunch.
Based on these principles, I believe that the current ultra-easy monetary policy adopted by many central banks around the world is ultra-risky; those who claim that they ended boom and bust are arrogant and don’t understand economics or human nature. The question is not whether there will be a recession, but when will the recession occur.
Because of the complexity of the economy, I am afraid that we cannot be 100 per cent certain that the success story of Britain’s economy is all down to the Conservatives’ policies only. It is very likely that the vast majority of this success is, but there are many other factors beyond our control.
Therefore, we must remind voters as often as we can that there are many risks to the economy that are beyond our control. We should start explaining this now, when the sun is shining and before it starts clouding over. By doing so, our message will become even more credible and voters across the spectrum will trust us more because of our honesty, scepticism and modesty. This will also enable us to keep the country on our side, firm behind our long-term plan even when it starts raining, especially if the economy changes tack right before the general election.
The simple reality is that if we lose control of our finances, we will not be able to afford the many free things that we currently enjoy: health care, schools, policing, etc. This would not make any difference to the rich, but the rest of us will be affected. The less well-off we are, the more adverse the impact will be. Therefore, for the sake of the most vulnerable in our society, Britain must vote in 2015 to stick with the Conservatives’ long-term economic plan, regardless of how tough or pleasant the journey will be.