Total global debt has increased, growth has been slowing down since the onset of the global financial crisis in 2007 and has been rapidly decelerating after 2012. This may be a sign that the world has arrived at its debt carrying capacity or has even crossed it, meaning that capitalism is probably already insolvent.
Publication this week of the Taylor Review of Modern Working Practices was followed on Wednesday by the latest monthly employment stats from the Office for National Statistics (ONS). These tell us that the number of those in work continues to rise significantly, but that real wages are falling at their fastest rate for nearly 3 years. Yet the CBI claimed in its submission to Taylor that over decades, the UK's flexible labour market has given rise to strong growth in real wages. In fact, the opposite is true.
In June, the Bank of England dictated to the banks in its jurisdiction that they must hold more capital - £11.4 billion more – in reserve in preparation for the anticipated bursting of the growing consumer credit bubble that is undoubtedly forming. In light of this, this post seeks to answer a question posed in the British media recently – can the Bank get Britain to kick its cheap credit habit? – by discussing the societal issues that are affecting the expansion of the bubble.
Britain's total public debt has risen under George Osborne. Does this mean that the British government cannot borrow any more? That increased spending financed by the issuance of government bonds or gilts, will worsen the public finances?
My answer to that is No, No, No. Here is why:
If all five million public sector workers were granted a pay rise of 3%, the EXTRA cost to the Treasury - over and above the government's already-promised 1% - would be just over £3 billion a year. This is not a generous pay rise. It would enable public sector workers to just keep up with inflation. In other words, it would prevent inflation eating into the real value of their pay rise. It would not compensate for years of cuts in real wages.
Last week a cross-party group of MPs tabled an amendment to the Queen’s Speech calling on the government to commit to staying in the EU single market. As a result of their support for the unsuccessful amendment, three Labour shadow cabinet members were forced to resign.
The amendment revealed a possible confusion by its supporters about the nature of the single market and the European Union.
The EU’s hugely complex banking resolution framework is generally supposed to have one key goal – to ensure that failing banks are ‘resolved’ without recourse to public bail-outs, thereby breaking the link between banks and sovereigns… The reality, we have seen today, is quite different – and, it seems, legal.
The EU can just about argue that technically, the rules have not been broken - but overall, the appearance is of a policy in logical disarray once again.
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.