A demand interpretation of productivity since WW2 and across the world

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. 

How Polanyi best explains Trump, Brexit and the over-reach of economic liberalism

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.

UK Budget 2017 & OBR forecast: PRIME & Treasury Select Committee

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. 

It's simple: [Great Crash]+[Tory austerity] = productivity decline

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 Shadow Chancellor and the government’s debt interest payments

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.

It can be downloaded here as a pdf

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).

IPPR's UK Industrial Strategy: focus on demand, not just supply

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.


Taking back control

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”. 

Those who helped break the economy cannot fix it 

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.

The deficit & the IFS: a black hole between a rock and a hard place?

In its latest true-to-form report, “Between a rock and a hard place”, the IFS discovers to its horror that the Tory Chancellor badly missed his borrowing target and is unlikely to balance the central government’s budget. Apparently gobsmacked by the report, the Guardian reproduced many of the IFS charts, sounding the alarm of a “new budget black hole”, its default moniker for a fiscal deficit

Time for a paradigm shift?

The orthodox approach has not prescribed economic policies which have been able to deal with the multiple problems we now face. We desperately need a new approach - both to economic analysis and to policy. You could say, indeed, that we need a new paradigm.

This is the conclusion reached by the Interim Report of the IPPR Commission on Economic Justice, published last month. ‘Time for Change: A New Vision for the British Economy’* argues that the structural problems of the UK economy are so deep that ‘fundamental reform’ of economic thinking and policy is needed. Such reform needs to be of the magnitude of the two economic paradigm shifts of the 20th century.

How to weather the Brexit storm? Focus less on trade, more on investment

“Strong and stable” seems of a world so far, far away.  The recent Daily Mail headline “PM slaps treacherous Chancellor down” portrays a government in political chaos. Thanks to open, unresolved intra-Brexiteer warfare, ministers are unable to agree the basics of how to exit the European Union. This state of uncertainty intensifies just as the risks to British jobs and living standards are becoming starker and more potent. Ironically, just as we teeter towards the cliff, ONS data reveals that exports of goods to the EU grew over the last three months, while those to the rest of world fell back, a fact not devoid of dark humour.

Italy: the (ir)relevance of economic theory for leaving the euro

There is no doubt that the current institutional architecture of the Eurozone and the austerity policies implemented in recent years are irrational - leading to very significant increases in unemployment, waves of business failures, a drop in the growth rate and increases in the public debt/GDP ratio, not only in Italy.

The question, however, is whether or not it is advantageous for a single country to go back to its own currency and, more generally, whether the question of a potential return to the lira is actually relevant.  

Ten years after: is the system "Safer, Simpler & Fairer"?

The shadow money banking system in its use of continuously repriced collateral is reliant on opacity, leverage and global interconnectedness. It is therefore highly pro-cyclical. Will the next systemic crisis occur when markets lose confidence in the 'fair valuation' of collateral used in shadow banking? 

The UK since 2007 - an economic record of comparative mediocrity

We know that the UK economy has remained in a rut, plagued by foolish austerity and declining real wages, since the great financial crisis.  

So I thought it might be interesting to look, in a simple way, at the performance of a set of mainly developed economies, in Europe and a few from other parts of the world, and compare their progress – or lack of it - over the 10 year period 2007 to 2016. And then see where the UK sits in comparison with others.