♠ Posted by Emmanuel in Europe at 10/03/2008 05:14:00 PM
The reaches of the credit crunch are engulfing the world. California faces the prospect of being unable to pay state workers due to tight credit and a lackluster rating to the tune of $7B. India's nascent consumer culture is taking a hit. Even Asia, the world's fastest growing region, is feeling the pinch. The French do everyone one better, naturellement, in the pessimistic scenario category by depicting a world on the edge of the abyss. So much for the subprime crisis being "contained"--or even being contained to America for that matter.
The British press is all agog that erstwhile EU Trade Commissioner Peter Mandelson is coming home to Blighty to try and revive the UK's economic fortunes as Business Secretary. This will be his third go-around as a cabinet minister To put things mildly, things have not gone very well for PM Gordon Brown since taking the reins of power from Tony Blair. Like Blair and Brown, Mandelson is, of course, one of the principal architects of New Labour (or whatever is left of it). Way back in 1994, Mandelson throwing support to Blair was instrumental in making the latter New Labour's standard bearer before Brown, causing Brown's continuing dislike of Mandelson.
Brussels is, in many ways, European political purgatory, a place to send friends of dubious allegiance or foes with excess ambition to in order to rid them from domestic politics. It is an indication of how bad things are that Brown is effectively recalling Mandelson from Brussels for what looks to be New Labour's last stand: if it doesn't get its act economic act together in the British public's eyes, the Tories look more than set to consign New Labour to the dustbin of history.
It's front-page news: the Telegraph, Times, Financial Times, Guardian, and Independent are all over it. So too is the BBC, among others. As Mandelson was twice a Labour cabinet member under Blair, resigning both times for controversial reasons, he is not exactly the most calming political choice. News of Brown's cabinet reshuffle is sort of drowned out by the continuing Mandelson / New Labour soap opera, but when the going gets tough, the tough get going. There are few remaining Labourites with a measure of clout with the Confederation of British Industry (CBI) and other business groups as Mandelson, so he is the last roll of the dice for Brown in attempting to shore up confidence in his economic management.
The US has in recent years been driven by a housing boom and excessive consumer spending, with the former fueling the latter via home equity loans and the like. There is likely no country which so mirrors the US in its political economy than the UK. Deflating housing bubble? Check. Slowing debt-fueled consumption as household finances hit the wall? Check? Highly developed financial infrastructure facilitating both? Check. It will be interesting to see what Mandelson can do to remedy the damage done. I wish him well, but like the US, I think the UK cannot avoid a long, hard spell after years of partying like there's no tomorrow.