What has the horror at Grenfell Tower to do with economists? And what have the lives lost at Grenfell Tower to do with the government’s budget deficit? A great deal, I will argue here. When on Twitter a few days ago I raised the issue of the shared responsibility that economists have for this ghastly tragedy, I was attacked. So let me explain.
Labour’s shock success in the “snap” general election left poll takers more than slightly embarrassed (except YouGov and Survation), and political commentators scrambling to cover their backsides. In their struggle to adjust to a resurgent Labour Party led by the “unelectable” Jeremy Corbyn, the nominal progressives among the pundits provided a textbook guide to the difference between centrist neoliberalism and social democracy.
The agenda of austerity economics is supplemented with the sale of public assets via privatisation programmes. Neoliberal dogma argues that this ‘structural reform’ aims at ‘reducing the government’s deficit and debt’ and to induce ‘competitiveness’. Orwell would have been impressed by this exercise of doublespeak.
Our “Open Letter” published yesterday has been welcomed widely. In this post, we want to respond to the constructive comments and queries made about the practicality of our proposed strategy, particularly around our ideas for the process of engagement with the EU.
After an exhausting and successful national campaign, it is hard for campaign strategists to think of next steps. But we are at a critical historical juncture, and a range of opportunities present themselves. Choosing the right political and economic strategy now is vital.
If the aspirations of the British people, as expressed in the election result are to be fulfilled by Labour, and to avoid the dissipation of the momentum and energy generated by the campaign, it is urgent that Labour lays out a viable and popular political and economic strategy. We believe that the ideas outlined in this article would attract substantial political and popular support.
In a recent interview, Theresa May was asked by Andrew Neil how the Conservatives would fund their manifesto commitments on NHS spending. Given that the Conservatives chose not to cost their manifesto pledges, May was unable to answer. Instead she simply repeated that the Conservatives are the only party that can deliver the economic growth and stability required to pay for essential public services. When pressed, May’s response was simple: ‘our economic credibility is not in doubt’.
But does the record of the last seven years support May’s claim?
This morning, the OECD has published its latest Economic Outlook, which includes individual country forecasts. It is pretty downbeat about the UK’s near term prospects, and implicitly critical of the Conservative government’s policy plans. It argues that there is "fiscal space", and that higher public investment should be considered
The policies supported by the OECD, in the context of Brexit, are in essence the same as those which the 130 economists have backed in their letter to the Observer – and whom the FT's economics editor Chris Giles thinks should be “disregarded”.
Today's Observer newspaper (4th June), publishes a letter signed by 130 economists, under the heading "Labour’s manifesto proposals could be just what the economy needs". We felt it important to reproduce the contents of the letter here, together with the full list of signatories).
The Observer letter contends that Labour's Manifesto proposals are much more likely to strengthen and develop the economy, as against the Conservatives commitment to maintaining austerity.
The letter, together with the full list of signatories, is available online from the Guardian website.
Since 2010 the ideology of balanced budgets has dominated economic policy debate in Britain, from the micro through to the macro (George Osborne’s “living within our means”).
This policy regime produced its predictable results - slow growth, stagnant wages and for most households falling living standards. It also confirmed that cutting public expenditure is a slow and ineffective method of reducing a fiscal deficit.
The 2017 Labour Party Manifesto, which breaks with this failed ideology, is a game changer.
I was looking at my Tweetdeck this morning when I came across this tweet from the Brookings Institution: "In 2016, 6% of the federal budget went toward paying interest on debt"
Now it is clearly a Good Thing in principle for the US Federal government’s budget to be explained in clear and simple ways, but why – I asked myself – do Brookings choose to concentrate today on interest payments (which form just 6% of outlays) rather than the programs that President Trump wants to cut to shreds?
The “gold standard” for analysis of the economic policies of political parties was set by The Netherlands Bureau for Economic Policy Analysis (CPB), established by Jan Tinbergen, Nobel prize winner.
On 26 May the UK Institute of Fiscal Studies held an invitation-only meeting to announce its evaluation of the taxation and expenditure policies of the Labour and Conservative Parties.
But in place of the rigorous modelling in the tradition of Tinbergen, the IFS presentations gave the audience an exercise in arithmetic that is not fit for the task - no more than educated guesses about budget balancing with no apparent link to broader economic effects.
Today the Institute for Fiscal Studies produced a review of political manifestos prepared for General Election 2017. Predictably, the respected, and largely independent IFS researchers review the tax and spending proposals of the different parties with little regard for the wider economy.
This skews their perspective, and their approach to analysing the economy. It is as if IFS staff consistently peer at the British economy through the wrong end of a telescope.
The assessment of the impact of the policies in the election manifestos in the media is rather static as comments mostly ignore their positive impacts on growth, investment and productivity. This policy brief on the Labour Party's manifesto brings the forgotten macroeconomic principles into this debate. The manifesto's economic policies can lead to higher private investment and productivity, and help to rebalance the economy.
This essay articulates the reason behind the prolonged deflationary bias of euro area policies by means of a simple (“T-shirt”) model where private spending depends on desired savings and sustainable indebtedness. The EU Commission’s belief that it is possible to create jobs without creating new debt underscores a serious conceptual fault and a delusion that the savings-debt constraint to spending can be ignored. As long as a cap on public debt remains, the euro area will continue to live dangerously and remain vulnerable to shocks.
The Daily Mail shrieks at us today: “Tories claim Labour wants to drop a spending bomb of unfunded promises worth £45 BILLION that would wreck the economy and hit national security”. The story is complete rubbish - but aims to deflect attention from the Conservatives's own stunning record of fiscal failure.
Over the last 26 years - 13 years Conservative, 13 years Labour governments - the average annual overall deficit under Labour is less than half that under Conservative governments. And the average annual current budget deficit under Conservative governments is around four times as large as that of Labour.
While globalisation, or financial liberalisation is not dead, it is in decline, and deeply unpopular. Unfortunately, public anger and concern focuses on the tangible outcomes of free, unmanaged flows of capital, trade and labour, and not on intangible, invisible and unaccountable global finance. Advocates of globalisation as well as their opponents continue to draw attention to flows of trade and labour, thereby deflecting attention from that which is most causal of instability and insecurity: financialisation of the global economy.
In the wake of the formal invoking of Article 50 by Prime Minister, no one knows with certainty the impact on the UK economy of leaving the European Union. Claims of imminent damage and possible disaster should be treated at best as informed speculation and at worst as more of the dysfunctional fear campaign that proved such ineffective argument for “remain”.
In this anxiety-inducing context calls for calm are both rare and largely ignored
It is generally considered by lawyers and political scientists who study the EU that the Union has all or most of the attributes of a “constitutional order”, and that its Treaties are to be seen as providing a constitutional framework.
But many key economic and social policies are decided not through debate and elections, but via inflexible EU Treaties which lay down a specific economic ideology and policy framework. No matter how they vote, citizens are not allowed to choose a truly different set of economic policies. In the economic domain above all, there is a mismatch between the EU's constitutional democratic principles and the Treaties' detailed provisions.
The Bank of England have just updated their incredibly useful historic data resource, not only adding another six years of figures to 2015 but also expanding greatly the range of information included. Of particular interest is a measure of UK corporate interest rates that extends back to the mid-1840s.
Looking back over the 170 years, the only precedent to the dear rates of the second financial liberalisation (post 1979) are those of the first liberalisation in the 1920s - rates which Keynes warned should be avoided “as we would hell-fire”.
Joint press release from PRIME & the Rosa Luxemburg Stiftung Brussels Offce on the launch of new report : Bringing democratic choice to Europe's economic governance
The 60th anniversary of the Treaty of Rome offers an opportunity to reflect on what the European Union has achieved – and how problems can be solved. We share the European idea, and express our aspiration to work for a European Union which in the coming decades is truly a force for peace, prosperity, democracy and social progress.
But despite its commitment to democratic values, one crucial area in which the European Union does not permit legitimate democratic choice is the economic sphere.