Dr Cable: the Cassandra within Cabinet?

Vince Cable seems to be occupying a somewhat awkward role in Government as the Coalition enters its second year. While continuing as Secretary of State for Business, Innovation and Skills, he appears to be acting as agent provocateur-in-chief of the new style Lib Dem “opposition within government”. He popped up as the surprise guest at the recent Fabian Progressive Fightback conference. And ConservativeHome placed him squarely at the top of their Yellow B**tards Premier League.

Yet, while this role appears rather awkward from the point of view of cabinet unity and collective responsibility, you get the sense that it is more congenial to Vince personally.

Vince is at it again in an interview in the current New Statesman.

He has followed up his comments of a few days ago regarding the need for Britain to face up to the fact that it is a poorer country with a stark warning that we cannot be complacent about the possibility of a second global financial crisis:

“I’m concerned that there is a lack of popular understanding about how serious the problems are . . . the sheer magnitude of the crisis we’ve got, and particularly the long term impact of the collapse of the banking system …

I was very impressed with that Warren Buffett metaphor that asset-backed mortgage lending was the atomic bomb, and that there are hydrogen bombs out there. I just don’t think that collectively governments have got to grips with this at all.”

The comments seem unlikely to enamour him to his Treasury colleagues. But Vince has got to be right. The Global Financial Crisis was a product of deep structural problems and regulatory failures. Very little has been done so far to address those problems. Even the reforms that have been agreed are accepted by informed observers – at least those who aren’t too dependent on being looked upon favourably by the banking industry – as unlikely to prevent a reoccurrence of the sort of problems witnessed in 2008 and its aftermath.

So Vince appears simply to be returning to themes that were very prominent in his public pronouncements on the economy in the pre-coalition era. He was, after all, one of the first to sound the alarm over the unsustainable debt-fuelled bubble of the mid-2000s. And his speech to the 2010 party conference unequivocally identified the threat posed to Britain by the banking industry.

He evidently speaks from an informed position – not surprising given his previous career as a professional economist. It is obvious that his understanding of the topic is far more profound than the majority of politicians, who are quite clearly parroting lines prepared by speechwriters. Most politicians speak economics like a package tourist’s third language, whereas Vince is fluent.

Economics is a self-styled science. But in reality it is more of an art. It is about having a feel for, and qualitative appreciation of, economic relationships. It is about being able to read the economy. Vince’s track record suggests that his readings of the economy are worth listening to.

Some might see him as a Cassandra within Cabinet. But Cassandra was cursed to be disbelieved and ignored. Vince is now better placed to influence the way governments both nationally and globally act than he was when winning plaudits for puncturing Gordon Brown’s over-inflated reputation for economic competence.

If returning to this theme means it is possible to stiffen the Government’s resolve over banking reform and catalyze global action to reconstruct the architecture of global financial regulation then that will be of profound long-term value. Not just to this country but far beyond.

Vince is right to look beyond the short term pressures of Cabinet conformity and continue calling it as he sees it. There are bigger issues at stake than whether some Conservative noses are put out of joint.

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2 replies »

  1. Hi Alex.

    A good post, and I agree with you.

    As he now essentially admits, I think Vince got the politics of the tuition fees issue appallingly wrong. And while that revealed some flaws in him, as a politician, this article demonstrates what an asset he is to the party.

    He has been consistently right to adopt a cooler tone in his attitude to his Conservative colleagues. His phrase, “a business relationship”, is one that should be borrowed by his Lib Dem colleagues. And he is 100% right to talk about the very serious economic problems facing the country.

    I particularly like the measured way he describes Brown: “The “big, interesting question”, he says, is why Brown allowed the boom to get out of control; why he allowed the economy to be built on a foundation of debt.”

    This is not just true, it’s also good politics. There may be further crises, and even if there aren’t, things are going to continue to be extremely difficult over the next few years. Trying to pretend that deficit reduction will be relatively painless, and that there aren’t going to be other serious problems on the way, is a guaranteed way to lose credibility when those problems hit.

    And, if it’s off message for the coalition, the coalition needs to change its message.

    • Thanks for the comment George. At one level I find it hard to believe that there hasn’t been more concerted regulatory reform to reduce the risk of a further crisis triggered by the banking system – given the consequences. But at another level I guess I am not surprised. My concern is that now that the acute sense of ‘crisis’ that was felt in late 2008/early 2009 has receded the sense of urgency has gone as well and complacency returns. The window of opportunity for far-reaching change may already have closed because the political momentum is no longer there. In that context I think it is a good thing that someone is giving things a bit of a stir.