Severe as it has been for the welfare of the British people, eight years of so-called austerity under three Conservative governments are but the most recent manifestation of Tory assaults on public services. Since Margaret Thatcher became prime minister almost forty years ago, contracting the public sector has been a constant theme across Tory governments.
Given the catastrophic nature of both the 2007-9 crisis, and the many, and increasingly frequent crises that preceded it- society demands to know why economists have not “discovered how the economy really works”. We believe, perhaps vainly, that with a better understanding of the ‘tectonic plates’ that underpin the economy – we may, as a society, be able to prepare for a collapse. We might be able to protect ourselves, our families and firms from economic failure, job losses, collapses in living standards, housing insecurity and the impact of these failures on social life: divorce, depression and in some cases, suicide. Not to mention the disastrous politicalimpact of economic failure.
The biggest danger facing the British economy is this: at their meeting in May the Monetary Policy Committee of the Bank of England is very likely to raise rates – despite a warning from the governor - because of the ongoing fear of inflation. Raising Bank of England rates at this point of fragility, would be like deliberately and repeatedly pointing a sharp dagger at a bubble of household, corporate and financial debt.
In her new short book, Rachel Reeves reflects that the economic winners of globalisation “are asset rich elites and the metropolitan professional class of creative, media, knowledge and finance workers, and opinion formers.” Her major concern is for Britain’s “old established working class, many of whom are now excluded from high-skilled sectors”.
“Purposeful and dignified work defines what the Labour Party stands for, whilst good wages are the principal means of distributing the rewards of economic prosperity,” she writes.
The policy prescriptions of the 5 Star Movement can be found in two main documents, published in 2012 and 2013. The most important is that of 27 December 2012, which has been posted on the website of the leader of the Movement, Mr. Grillo and thus can be conceived as the official programme of the Movement.
Two basic remarks are in order. First, the class dimension of political decisions are ignored; second the restructuring of Italian capitalism in the years of the crisis are not taken into consideration.
The British people are calling out for progressive leadership. Labour could lead the nation out of the chaos created by UKIP and the far Right of the Tory party. But only if Labour’s Lexiters face up to the risks they are taking with both their own party, and the nation’s future.
On 5th January 2018, Professor John Weeks gave this year's David Gordon Memorial Lecture
at the meeting of the American Economic Association in Philadelphia, USA. It was hosted by the Union for Radical Political Economics, and we are pleased to publish the text of the lecture, below.
Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We disagree.
Over the past decade in advanced western economies, the rate of improvement in prosperity has ground to the lowest point of the post-war period.
It is argued in this article that productivity has been the result of aggregate demand rather than supply conditions. And that the strength of demand follows global monetary conditions that are the result of deliberate policy interventions.
he Financial Times questioned economists for its annual publication of economic forecasts: “With unemployment at a 40-year low, how much of a pay rise will British workers get in 2018?” (See here:) PRIME economists responded thus:
The Financial Times asked economists the following: How far will the Bank of England raise interest rates next year? Do you think they should? PRIME economists responded in this way:
PRIME (Policy Research in Macroeconomics) economists were asked by the FT “How fast do you think the UK economy will grow in 2018 and how will this compare to other countries?” (See here).
It’s good to see the latest (21 December) New York Review of Books give space to a review – by Robert Kuttner of American Prospect– of a biography of "Karl Polanyi: a Life on the Left" by Gareth Dale. For as we have been arguing for a long time, it was Polanyi who better than any other historian / analyst got to the heart of the contradictions of free market globalised liberalism, and saw that it was such economic liberalism, pushed too far, that is likely to lead to authoritarian, or even fascist, outcomes.
Savings are not needed for investment. Ever. There is absolutely no need for example, for the Chancellor to rattle the tax collection box, or cut government spending - to build up savings, before the government is able to invest. No need whatsoever.
On Wednesday 29 November 2017, PRIME's director, Ann Pettifor, gave evidence at the Committee's invitation to the UK Parliament's Treasury Select Committee, together with Professor Jagjit Chadha, Director, National Institute of Economic and Social Research and Paul Johnson, Director, Institute for Fiscal Studies. A verbatim report of the discussion can be found on the Select Committee's website here.
For the last several years the media have carried reports of a crisis of low productivity plaguing the British economy, both in terms of level and rate of change. Almost two years ago, PRIME's Jeremy Smith provided what I considered the definitive refutation of the existence of such a crisis. But, far from ending, the “crisis” discussion has gathered pace to become a recurrent media theme.
The following is a statement in response to recent media comment on the public finances, signed by 37 economists as at 30th November, 2017. It has been updated since first posted on 26th November (by then signed by 22) to include the further signatories.
Andrew Neil of the BBC Politics programme recently challenged the Shadow Chancellor, John McDonnell, on the likely cost in interest payments of additional public borrowing. He suggested that current debt interest payments are estimated at £49 billion, and rising. His use of £49 billion was misleading, as it included £9 billion owed by the Treasury to the Bank of England (BoE).
The British economy is simply not performing the way we need it to. As the Interim Report of the IPPR Commission on Economic Justice shows, the UK has the weakest performance on investment, productivity, trade and geographical imbalances of any major European economy.
It must be about more than the ‘supply side’. There’s little point improving the conditions for investment when demand is so weak. Since the financial crisis private sector investment has flatlined. There’s a vital need for Government to increase public investment to pick up the slack. In our report we call for an injection of £20bn in additional annual public investment spending by 2020-2, or 1% of GDP. This would take net public investment to 3% of GDP, its OECD average.
In the latest edition of the Times Literary Supplement, I review a range of new books that converge around the theme of responsibility. My opening theme of generalized irresponsibility was challenged by Harvard's Yaschca Mounk, who in his book The Age of Responsibility argues that "the notion of personal responsibility has become central to our moral vocabulary, to philosophical debates about distributive justice, to our political rhetoric, and to our actual public policies”.
Yesterday’s increase in interest rates was a big deal. Painful as it might be for many, the real point is that the Bank is signalling the end of a particular phase of monetary policy.
Since 2010 the counterpart to self-defeating austerity policies has been expansionary monetary policies. These have inflated assets - enriching the already-rich, while failing to stimulate wider economic recovery. Yesterday the Bank of England’s Monetary Policy Committee signalled an end of this dangerous game.
But this technocratic realignment makes no difference to the fact that Bank and Treasury economists have failed to revive the economy.