Monday, 28 June 2010
When Dave met Barack
There was the famously close relationship between Ronald Reagan and Maragaret Thatcher – two leaders whose ideologies had barely a hair’s length between them. Then there was the notoriously bizarre close friendship between Tony Blair and George W. Bush following September 11th - two men on opposite ends of the political spectrum united by their shared Christian evangelism and anti-terrorism crusade. That buddy-buddy relationship didn’t work out so well for Mr. Blair’s political career or for the UK as a whole.
Gordon Brown’s relationship with Barack Obama wasn’t exactly close (their first meeting was notoriously bungled) but the two men were singing from the same hymnsheet: during the economic downturn the best remedy was an injection of public spending and strong state action. Together they were able to convince the rest of the G20 nations that this was the best course of action, resulting in the consensus and unity of purpose displayed at the 2009 G20 summit in London.
This reality was painfully evident this weekend in the division between Europe and America. And this division was personified by the cold relationship between Mr. Obama and Mr. Cameron. The Obama administration has made known its displeasure over the dramatic cuts to the British economy the Conservatives have made since coming into power in May. Obama is of the same mind with Gordon Brown, who warned during the campaign that making drastic cuts to the UK budget now would jeopardise the country’s fragile economic recovery.
But it is the economy, rather than the plan for Afghanistan or beer preferences, that is the biggest gulf between Cameron and Obama. In fact, Cameron is only the representative of a larger conflict between Europe and America. Cameron isn’t the only European leader making drastic cuts and adjustments. Similar cuts have also been announced in Italy, Ireland, Spain and of course, Greece. Less drastic but still severe austerity measures have also been taken in France and Germany. The Obama administration has warned that if all of Europe makes these drastic state spending cuts at once, they could plunge themselves back into recession.
Europe is now Conservative dominated. The big three countries now all have centre-right leaders, and the few Socialist-led countries left in Europe (in red on the map to the left) are paralyzed by their economic problems and have been forced to make Conservative-style cuts that are normally anathema to the left. Before the British election in May Obama still had one strong centre-left voice in Europe backing his call for robust stimulus measures and bail-out packages – Gordon Brown. Now that Brown is gone there is near consensus for drastic state spending cuts across Europe, which is the exact opposite route that the Obama administration has chosen to go in.
We now have an intensely bizarre situation where a centre-right Europe is slashing away at state spending while a centre-left America is increasing state spending. Economists are of two minds over which is the best method to help a country out of recession, but so far the recovery in the United States has progressed much faster than in, for example, the UK. Only time will tell which economic model was best. But with Europe and America having chosen very different roads, there’s no doubt that they will end up at very different economic destinations from where they began.