By Ann Pettifor and Douglas Coe, 15th April 2013
Originally published in the New Statesman blog
Margaret Thatcher’s economic legacy was prompted by the 1976 Labour government’s capitulation to the IMF – but she took it much further.
It is ironic that Margaret Thatcher’s funeral is to take place at St. Paul’s in the City of London. The world around Wren’s great monument is beginning to unravel as a result of the liberalisation forces she helped unleash. Banks are bankrupt, thousands of jobs lost, and the City’s hard-won reputation for honour and fair play is now in tatters.
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By Jeremy Smith, 13th April 2013
Last week, we pulled together and tweeted a set of charts (including a few screenshots of charts we found) about the Thatcher government’s economic record. They show that on all key fronts, her government failed, absolutely or by comparison with other UK governments over the last 60 or so years. We have now added some more charts, and offer the information they contain as an antidote to the British establishment’s evidence-lite but ideology-heavy eulogies of her government’s economic performance.
We look at the record on unemployment, GDP changes, manufacturing employment, inflation, current account… and note that her government had the political good fortune of near-peak UK North Sea Oil, whose benefits were thrown away in plugging short term economic gaps, rather than invested for the long term.
Above all, her deregulation of finance and the City of London (continued alas by her successors) set the UK on a false path, one that has severely damaged the UK’s economy and social fabric. And continues to do so. Near the end of this blog, you can find a chart on private sector (especially financial sector) indebtedness which -far outstrippping public sector debt – started to balloon in the late 1980s.
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By Michael Burke
Political parties in Britain have once more begun to talk about immigration, especially in the wake of the Eastleigh by-election. Unfortunately the debate is usually an all-informed one and typically just a cover to introduce racist notions about the impact of immigration. Therefore it is useful to examine some of the more important economic aspects of immigration.
There are a number of countries in the world which have a higher per capita GDP than Britain. There are also a number of countries in the world who have a higher proportion of migrants as a proportion of the population. Both those facts are worth stating simply because discussion in Britain often seems to be dominated by the implicit assumption that Britain is both uniquely attractive to migrants and that it alone experiences immigration.
The chart below shows the countries with higher levels of per capita incomes than Britain. It also shows those countries proportion of the population which is migrant, that is not born in the host country. The table below specifies the data shown in the chart.
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By Jeremy Smith, 26th March 2013
Exactly a year ago today, Jens Weidmann, President of the German Bundesbank, made a really important speech at Chatham House, London, on “Rebalancing Europe”. It was clear, concise and to the point. It is also utterly contemporary – could have been given today. And it said loud and clear – don’t expect Germany to budge one centimetre. The whole burden of adjustment rests on the deficit countries.
This issue also came through in the last few days in the extraordinary negotiations over Cyprus, with newspapers reporting on differences and friction between the IMF and German government (on the one hand) and the European Commission.
In our view, the differences are not merely tactical but divide even the pro-austerity camp and pose the question - is the burden of adjustment in the euro area to fall solely on debtor/deficit countries? Or do the creditor/surplus countries have their own responsibility to adjust policies in the interests of the whole zone?
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(Photo source: USA Today)
Ann Pettifor was invited to appear on the Today show with the BBC’s business editor Robert Peston to analyse the economic situation in Cyprus. Banks on the island have already been shut for ten days, and are to remain closed until Thursday to prevent a run on savings.
Listen to the discussion here until April 2. We start at 2:54:40.
By Ann Pettifor, 25th March 2013
(Originally published in the Huffington Post UK; Photo source: The Guardian)
George Osborne, the British Chancellor, has publicly disagreed with his prime minister on a fundamental issue of monetary policy – in an official Treasury report.
The prime minister recently argued that “There’s no magic money tree to fund” what he called “this ever more wishful borrowing and spending”.
But his Chancellor, George Osborne, disagrees.
The disagreement is aired in one of the documents tabled by the Chancellor on budget day. It’s titled: “Review of the Monetary Policy Framework.” – and is tucked away in the bundle of documents issued last Wednesday.
In paragraph 3.34, the Treasury makes plain that the monetary authorities could finance increased government spending on infrastructure “through the creation of money”.
Taxpayers, the Treasury makes clear, are not the only source of finance for governments – as neoliberal economists would have us believe.
There is a money tree, and it’s called the Bank of England.
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Ann Pettifor was invited by Newsnight to comment on the Budget together with Liam Halligan of the Daily Telegraph. Sparks flew!
Watch the segment here for the next week. We start at 27:54.
By Ann Pettifor, 21st March 2013
[Originally published on the blog for the Centre for Labour and Social Studies.]
Ed Davey’s announcement (on behalf of the government) on the eve of the Budget was a little breathless. All agog, he painted a picture to the BBC of cabinet ministers listening gratefully and with relief to the chancellor’s announcement at cabinet that morning.
The Treasury plans to cut £2.5bn of current spending from several government departments – and transfer the money to another pot, for investment in infrastructure (probably housing).
This investment will be welcome to the construction industry. Total construction work in the UK between November and January 2013, was 10% down on the same period a year before, according to the ONS. Taken on an annual basis this loss to one industry in one year, is roughly equal to the £2.5bn the chancellor intends to invest in ‘infrastructure’ over the next two years.
“What was really noticeable around the cabinet table” according to loyal Ed Davey “was people supporting the overall approach not only of the chancellor but the Chief Secretary to the Treasury Danny Alexander.”
Davey and the cabinet appear to believe that these meagre savings, which do not represent additional spending, when applied to ‘infrastructure investment’ will help restore Britain’s economy to health.
To believe this they have to be oblivious to the scale of Britain’s economic failure – and to the steepness of the gradient to be climbed to get back to where we were before.
It’s as if the cabinet has been blinded by the blast that was the 2007-9 financial failure – and can’t see past the extreme intensity of the light flash that is our prolonged and painful recession. Continue reading… ›
By Ann Pettifor, 19th March 2013
“The economic [monetary] transmission system works to create the finance, which is then spent [fiscal] in productive investment in infrastructure. This sound investment in turn generates economic activity, i.e. employment. Employment in turn generates wages, incomes and profits – and these in turn generate tax revenues with which to reduce the deficit and pay down the government’s debt.”
Thanks to the forthcoming budget, economic commentary has intensified. There is now a cacophony of advice for the Chancellor: commentary that reveals only how messed-up, as a discipline, economics has become.
Part of the reason for muddled thinking is that the profession has stratified or compartmentalised different parts of the machinery that make up the capitalist economy. Economists and policy-makers choose to discuss these parts in isolation – as if one part exists and functions independently of another working part.
So we are asked to consider and discuss monetary policy as if in isolation from fiscal policy.
The Chancellor announces that he is a “monetary activist and fiscal conservative.” As if monetary policy alone – without complementary action on the fiscal front – can get us out of this mess. Continue reading… ›
By Jeremy Smith, 18th March 2013 (updated 19th March)
We’ve been trying to trace who exactly was responsible for the crazy own-goal proposal to levy a tax on Cyprus’s smaller depositors. Tonight, the European Union’s political establishment is busily tracking backwards as fast as it can go from this element of what might ironically be called a rescue package. But too late. The damage is done.
The President of the Eurogroup of Eurozone Finance Ministers, Jeroen Dijsselbloem (Finance Minister of the Netherlands), issued a statement this evening (Monday 18th) on behalf of the group which included the following:
“The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below €100,000. The Cypriot authorities will introduce more progressivity in the one-off levy…provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to € 10 bn.”
This neither changes nor explains anything – the under €100,000 deposits will be fully guaranteed in case of bank failure, but not in case of bank rescue! The Eurogroup Finance Ministers’ only concern is that the amount raised yields the “targeted reduction of the financing envelope”. No issue of fairness, justice, solidarity is seen to arise…
Well, that is not quite fair. Mr Dijsselbloem has indeed raised the issue of justice. What he said on March 16th was this:
“As it is a contribution to the financial stability of Cyprus, it seems just to ask a contribution of all deposit holders”.
Yes, it is just to ask a contribution from all deposit holders, which means the small and the poor as well as the rich and economically strong. Continue reading… ›