The media and a surprisingly high proportion of business leaders, financiers and economic analysts seem to believe that policies which are dishonest, intellectually inconsistent or obviously self-interested in their motivation are ipso facto doomed to fail or to damage the public interest. But this is manifestly untrue. The effectiveness of public policies and their ultimate desirability is in practice judged not by their motivations, but by their results.
In the British budget announced on March 20, George Osborne, the British finance minister, announced a spectacular pre-election giveaway: a program of highly leveraged mortgage lending guaranteed by the government with the stated intention of pumping up British household debt by up to £130 billion.
George Osborne based his entire economic program on deficit and debt reduction. To tempt British consumers into taking on bigger debts would therefore be intellectually incoherent and blatantly hypocritical. And even if Osborne did want to tempt mortgage borrowers he would fail, because people would recognize his efforts as electoral manipulation and refuse to take the bait.
Economic conditions are gradually improving around the world despite government and central bank policies that seem to be incoherent or self-serving in many different ways. But that is the normal course of human affairs. So as the world pulls out of its five-year slump and gradually returns to normal economic conditions in response to limitless printing of money and unprecedented government borrowing.
In short, Osborne’s transparently political plan to create a housing and mortgage boom in time for the 2015 election seems to be working already, even before the gusher of credit from the Treasury and the Bank of England has begun.
It is cynical, manipulative and hypocritical – and it looks like it is going to work.
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