Lib Dems, economics and a surging poll

22 04 2009

Well done Lib Dems! According to the latest Ipsos Mori poll the Lib Dems increased their share of popular support by 8 points and are now up to 22% – just 6% off Labour, while the Conservatives stick around the 40% mark.

Why the big change in Lib Dem fortunes?

The Mori Economic Optimism Index suggests widespread belief that the downturn is bottoming out.  Most people (60%) believe that things will stay the same or improve over the coming year. Consider this – 85% of adults believe the economy is in a poor state, and yet 68% of adults believe the economy will be in a good state over the next five years. This does not suggest L-shaped recovery – slump then same, same for years to come. This suggests expectation of better times ahead.

The economy is of course still the big issue (page 4). But the fear of redundancy is coming down. It seems as if the Conservatives benefitted as the slump hit and Labour pedalled hard to try to change things. But now that things are changing it is the Lib Dems who are benefitting from increased optimism. A lose-lose scenario for Labour.

So consider this – in economics there are two types of goods: a normal good, and an inferior good. A normal good sees demand increase as incomes increase (people want more of it because they have more money). Take income to be ‘sentiment’. When people feel better about the future and optimism increases, they support the Lib Dems.

An inferior good is one where demand increases when incomes decrease. When people feel less optimistic on the basis of experience, they support the Conservatives.

This poll is the snapshot of a period when the UK (slowly) began to move out of recession. The effects of crisis remain, but future prospects look better. In my view, when people are optimistic the Lib Dems gain support. And when people feel threatened (by the effects of crisis), they support the Conservatives.

Perhaps supporting the Tories at times of crisis (historically the party’s last period in office began with IMF interventions/Winter of Discontent, and ran up to the limits of the 90s recession) means they have:

  • fixed (if divisive) ideas
  • strong leadership
  • a credible alternative vision.

Maybe at times of threat, it is not a time to go for a punt and give the other a guy a nudge. The Tories were once trusted on the economythat trust is surely returning.

Perhaps supporting the Lib Dems when we’re beginning to emerge from economic crisis (historically it’s growth coincided with the NICE – Non Inflationary Continuous Expansion – decade) means they:

  • pose no threat to the arc of emerging sentiment
  • are conciliators/non-divise
  • are likable, pretty straight kinda guys.

Perhaps polls like the Ipsos Mori tell us something of our emotional state and our practical needs. Yes, we feel better about the future and so some people feel the need to reward those  who reinforce those sentiments (Lib Dems). On the other hand, yes, these remain serious times and so some people feel the need to reward those who have a practical vision to change things (Conservatives).

In both these scenarios, I think Labour are seen as the reason why we feel bad about ourselves and clueless as to how to change things.

Now imagine something called the substitition effect. In economics, this measures the rate at which people substitute one good for another when there is a price change. So for example, if the price of rice rises then demand for something like bread might increase. People substitute away from the more expensive good to another less pricey alternative.

I look at the Lib Dems generally, and wonder if they are (in political terms) a normal good that people could substitute to. As the governing party becomes less attractive to voters, then you can see a substitute effect to an attractive, alternative governing party. At 40% of the Ipsos Mori poll, that alternative governing party is called the Conservatives.

So the Lib Dems are not a substitute for an unpopular governing party. They are not seen as a government in waiting. So I can understand Clegg – he is asking himself how can the Lib Dems be seen as a substitute? How can he be seen as more practical and serious? How can Lib Dems be more like the Tories?

The Lib Dems should note from the poll that ‘on balance, more people think that a future Government should raise taxes (53%) rather than reduce spending on public services (35%) if it has to reduce its debts’. So their recent tax plan (stepping away from income tax cut) might reflect the popular mood a little better.

Lib Dems, in my view, should not threaten their emotional attraction to voters by proceeding with unnecessarily divisive policies. Clegg should not confuse  contentiousness with strong leadership, and his abandonment of the 4p plan seems to show that he is intuitive on this. Mutating from emotional agents into strong (divisive) planners might unbalance a dynamic which seems to be working in the polls.

What is a best-case scenario for Lib Dems at the next general election? S’pose this is one theory – enough polls tell us that the Tories are destined to be the next government and voters stay at home simply waiting for them to turn up in Downing St. If turnout slips and the Tories don’t swing far enough to make the gains they need, then up comes a hung parliament (Balls! passim)… and a possible working relationship with Lib Dems. Nick Clegg’s gentle positioning over time won’t harm prospects for a working relationship. So, maybe Nick Clegg is a much better leader than people give him credit for.

Tories provide a vision for practical change and Lib Dems benefit from optimism/hope that better times are to come – where on earth do Labour go from here? Combine the party’s internal meltdown with these external social/political conditions, and the conclusion must be that Labour are finished.

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