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The coming election will be dominated by the economy. Anything else would be nonsensical; of all of the issues that face Britain today, the economic downturn is the one with the greatest capacity to cause long-term harm.

Such is the prevailing mood, anyway. But in truth, the pendulum of public debate may have swung too far into pessimism. The important thing to remember about economic crises is that, while the immediate pain of sharp inflation and redundancies that they cause is real, they do not intrinsically determine the overall fiscal health of a nation’s finances. While they can exacerbate, or be exacerbated by, underlying weaknesses, they can also be ameliorated by sensible policies. Quoth the Economist:

Britain has always paid its debts; investors don’t yet doubt the ability of a British government to get a fiscal grip after the election; and Britons tend to pay their taxes.

Despite the reverses of the past couple of years, the British economy retains important strengths, not least its openness to trade, capital flows and, more recently, migration. There is much talk of rebalancing the economy, of finding new sources of growth now that financial services and the housing market have taken a hit. Yet Britain’s economy is already surprisingly varied. It is still the world’s sixth-biggest manufacturer. The outlook for financial services may have darkened but London’s streets are no less thronged with lawyers, management consultants, accountants and ubiquitous marketing types. Cultural output is strong, with films and video games and edgy fashion pouring forth. Foreigners still want to buy British businesses—and Britain usually does well by it.

[...] The prospects for growth look reasonable. Britain’s record on improving productivity before the crunch was better than its neighbours’. Flexible labour markets have helped restrain wages, so unemployment has not risen nearly as much during the recession as was once feared. Although unions can still damage companies and disrupt public services, they are comparatively small and weak. And, whereas the weaker members of the euro zone are shackled to the stronger countries, Britain has been able to regain competitiveness by allowing its currency to fall. Growth will probably settle down at somewhere between 2% and 2.5%—well below its rate during the long boom, but not that bad historically.

Add to this a high level of informational integration – Britain has a higher level of home broadband and more wi-fi hotspots than any other country – and the advantage, at present, of not being in the Euro, and it seems that Britain has fundamental advantages that make it a strong candidate for a rebound after the election. A U-shape (when the economy goes down, stays down for a while, but then recovers to something like its previous shape) is still far more likely than an L (when the economy goes down and stays down, effectively continuing its normal pattern of growth from the new, lower base). Of course, it still needs to be underpinned by some hard, sensible choices by the incoming government. But the signs are good.