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Keep Watering The Green Shoots

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Tim Fernholz

Last week, the UK got some good news. According to the National Institute for Economic and Social Research, your recession is over – congratulations. In the United States, we can only shake our heads and wonder when it will be our turn. (Answer: things will probably turn around in the autumn). But despite the pleasant news that Britain's economy is no longer shrinking and the US is also poised for a turnaround, economic troubles are far from disappearing. Which is why I hope British voters will keep Labour around for a little longer.

The economic definition of recession is, of course, a contraction in national output. But as gross domestic product (GDP) starts growing again in both Britain and the US, there are so many other indicators, especially unemployment, that won't turn around quickly – and the GDP growth that does appear will be weak at best. Even though the recession will technically be over, the problems that came with it won't end for the mass of people affected by the downturn in the first place. Strong growth will be very hard to find without the distorting power of the global housing bubble and strong US consumer demand.

However, we can take a moment to celebrate our shared heritage in the form of the British economist John Maynard Keynes, whose ideas have come back into fashion alongside other recession favourites like bank runs and stock crashes. Keynes's thinking underpins the combination of fiscal stimulus and loose monetary policy that in both the UK and US is leading to faster recoveries while our European friends, who have declined to pursue as aggressive a fiscal or monetary policy agenda, are facing increasingly bad news. Some countries on the continent will be dealing with a contracting economy well into next year.

Following Keynesian principles isn't the easiest move for a politician; though running a deficit and increasing public investment is smart policy during a recession, it's not exactly intuitive to the outside observers, giving conservatives in both countries an opening to criticise the two governments' free-spending ways. But both Gordon Brown and Barack Obama are wise to ignore the critics in political establishments, since their only electoral hope is demonstrating their ability to manage the economy – that is, if Brown has any hope at all, with the mass of troubles Labour faces and the fact that his Conservative opposition is far more credible with voters than the American equivalent.

Adding to the British prime minister's difficulties are the speed with which his re-election approaches: Brown must call an election in less than a year, while Obama has 18 months until Congress will be held accountable for his agenda. Obama himself won't face voters until 2012, giving him time that Brown simply doesn't have to pursue new policy situations and carefully manage expectations.

Liberal Americans have watched the economic crisis strike their ideological friends in Labour with barely-contained queasiness: as the management of Brown and Blair demonstrates, the kind of crisis that built under a Republican administration in the US would likely have appeared under Democratic policymakers, who are similarly enamored of the market, although it would perhaps have hit with less force. Economist Paul Krugman summed up this view succinctly, putting the words into American policymakers mouths: "There but for the disgrace of Bush v Gore go I."

The question is whether or not liberal policymakers who have the best recipe for getting out of recessions can convince voters that they've learned a lesson about also avoiding them in the future. In America, we're watching as our government puts forward new financial regulations, and it looks like we're going to be disappointed by the weak result. While many had hoped the crisis would give impetus to those who want to restructure the institutions of global finance, it seems that the early signs of recovery are enough to dampen bad memories of last fall.

Now, though, the global priority must be recovery, and it's still too soon to reel in the aggressive policies the two governments have used to try and stem the tide of recession. While scandal, fatigue and restructuring might make the Conservative party an attractive alternative in Britain, its promises to cut spending doesn't bode well for the country's economy or the international system. One of the challenges of our present moment are the deep entanglements within the world economy; that's why the US Treasury secretary Tim Geithner has been criss-crossing the globe, advising leaders – including those in the UK – to adopt Keynesian policies. "We need to reinforce the improvement in global demand and continue to lay a foundation for a durable recovery," he remarked at a meeting of the world's eight leading economies last Saturday. "It is too early to shift toward policy restraint."

Yet that's exactly what David Cameron is offering. On behalf of the global economy, please, don't take him up on it. If you're tired of Labour, have you considered the Lib Dems? They're an alternative, right?

Excellent, I'm convinced.

All you doom sayers don't know what you are talking about.

Long live the recovery.

And remember to vote Brown he's an economic genius leading us all to the promised land.

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Which is why I hope British voters will keep Labour around for a little longer.

Well, he's got a choice between 'no' and 'Bob', and the latter's dead.

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