A recession would remind us that even Mr Blair is human

RECESSIONS are like thunderstorms. They begin as distant rumbles, only to wreak their destruction before we can bring the tender shoots inside and batten down the hatches. In an age when we can dissect, explain and predict so much, there is something mysterious and awe-inspiring about recessions. Like the Book of Genesis, they have clear beginnings - the Wall Street crash, the oil price hike in the 1970s, failure of monetary policy in Britain in the 1980s. Economists can argue for ever about what causes them, but they rarely predict with any accuracy when they will finish and what the cost in terms of forfeited prosperity and human misery will be.

Governments fear recessions because they confirm what they are loath to concede: that the really powerful forces in our lives are outside their control. The German Marxist economist Jurgen Kuzcynski adored recessions, the bigger the better. He died last year at 93, still promising a world slump which would cause the rebirth of socialism. That is what economists would call an improbable scenario. But he was right to point out the uniquely unsettling effect of recessions. A bad one can tarnish the most radiant leaders.

As Japan falters and Britain experiences the scary twinges of giddy pay rises, missed inflation targets, a likely further interest rate rise, a stubbornly high pound, and the first increase in the unemployment figures in two years, Tony Blair must be feeling the chill of fear. He gave the first indication of nerves last week in his letter to the Low Pay Commission, explaining the low threshold of the minimum wage and rejection of the pounds 3.20 an hour recommendation for younger workers on the grounds that this "could result in job losses at this critical point in the economic cycle".

This is an unusually gloomy tone for Mr Blair, who prefers to leave the task of sounding dour warnings to his Chancellor. Gordon Brown has the voice and the face for them. Until now, Mr Blair has founded his entire political project on optimism. His has been the style of a Prime Minister made for a continuation of glad, confident mornings. New Labour chose "Things Can Only Get Better" as its election mood music. Both its strengths and weaknesses are bound up with positive thinking. Its commitment to guaranteeing the most vulnerable in the workforce a minimum wage, its determination to create a culture of work in place of dispiriting dependency, the forging of a peace deal in Ireland - all of these reveal a Tiggerish temperament.

This has its accompanying weaknesses of over-excitement. Like a lot of driven people, Mr Blair finds it hard to accept that there are limits to his effectiveness, or that he should sometimes proceed with a little less fanfare. The six months of his EU presidency did not noticeably change the monolith. He created an anti-climax by suggesting at the start that it would.

On the whole, though, this government's faith in the ability of men and women of good sense to shed the corsets of ideology and act for the greatest good of the greatest number is part of the enduring appeal of New Labour. That's the good news.

Now let us dim the lights to save electricity, re-use the tea bag and look on the bleaker side of probability. A sustained recession is no longer unthinkable. Whoever is to blame - Ken Clarke for not raising interest rates at the end of his tenure, the Bank of England for raising them too fast now, employers doling out pay rises to buy a quiet life - it would destroy much of this government's flair with one cruel blow.

"It soon became clear that the recession was a worldwide phenomenon, differing in intensity from country to country, but similar in character ... the downturn was remarkably similar in degree to that of the early 1980s with real growth declining from 3.5 per cent in 1989 to roughly zero in 1991, virtually identical with the experience a decade earlier..."

Nigel Lawson's memoirs of his days in No 11 are dead-pan in tone, but the frustration of a Chancellor watching boom turn to bust and his own credibility and ambition evaporate is deeply felt. I like Lawson's observation that recessions, once begun, have a horrible tendency to look exactly like the last one you came to office pledging never to repeat.

Mr Brown might heed this warning when he intones his signature denunciation of the "boom and bust of the Tory years" and comforting reassurance that his strategy is "for the long term". These two phrases have been drilled into the heads of even the simplest backbenchers so that they are trotted out in response to any question on economic policy to which they do not have an answer. In a recession, no one will give a monkeys about the long term. Extremely short-term worries about the next rate rise and missed inflation targets are already snapping at the Chancellor's ankles. Any credit for long-termism that Mr Brown received for giving the Bank independence will evaporate if its short-time interest rate policy fails to fend off disaster.

Recession would be particularly destructive for New Labour because its flagship policy, Welfare to Work, is threatened by hard times. It is a prosperous society's answer to a social problem: it costs a lot of money to do well. The associated childcare costs are huge. This remedy for unemployment worked in America, where the economy is in fine fettle. In Britain, the very places where a culture of joblessness really needs to be addressed are the ones that are most likely to shed jobs in a downturn. Without solid growth, Welfare to Work cannot work.

As Robert Skidelsky pointed out in his essay The Economic Decline of Britain, "Every British government this century has promised, and to some extent implemented, reforms intended to improve efficiency ... Politicians of all parties have been inspired by a desire to bring Britain up to date. Balfour, Macmillan, Heath and Mrs Thatcher harnessed Conservatism; Asquith and Lloyd George, Liberalism; Attlee, Morrison, Dalton and Harold Wilson, Socialism, to the cause of efficiency."

The trouble, according to Skidelsky, was that the various attempts led to the British perpetuating their bad habits in new settings. In 1985, when this essay appeared, he concluded that Thatcherite labour market reforms were the best escape from the trap. Alas, the very managers freed to manage by the retreat of trade unions are the ones blamed today for failing to restrain pay, and feeding inflation. There is no obvious way to stop them doing so. Again, the Government is at the mercy of outside forces.

For better or worse, we are locked into a system of expectations in which growth in wealth is considered more important than other forms of progress. New Labour understands more readily than its predecessors that there are more things in heaven and earth than are dreamt of in the relentless philosophy of accumulation. At the same time, it cannot deliver the Britain it has promised - a more stable, less divided and more meritocratic place - without a sound economy over which it ultimately has far less influence than it dares admit to itself or to us. EMU-philes will argue that rapid entry into a single currency is the best remedy. This is short-termism of the worst sort. It will tie us into a system that is no more immune to crisis than our current condition, but far less flexible in its responses. Recession is thus the slave who stands at the ear of even the most powerful modern Caesars and whispers the words: "Remember that you are mortal".