Where has the conference silly season left the debate on economic policy? George Osborne claims to have routed his critics: fiscal austerity has produced recovery. Labour, seemingly amazed that recovery has happened, has promised that a Labour government will continue to cut the deficit, albeit a little more slowly. The Liberal Democrats would join them in the slower lane. The main point of difference seems to be that “Labour cuts” will be fairer than “Tory cuts”.
The budget outcomes tell a different story. Osborne will have failed by a wide margin to meet his deficit-reduction targets in this parliament. The deficit is now likely to be more than £70bn in March 2015, when it should have been zero. This is a prima facie indication thatContinue reading...
Osborne’s half-term report
| Tuesday, December 04, 2012
Budgets are more politically than economically significant. Some fancy financial juggling creates the illusion of activity – a tax here, a hand-out there – and the media decides the winners and losers. The economic trajectory of the government remains unchanged. This time motorists may be the winners with a fuel tax cut; the government will have to find a set of losers less vocal than pasty-eaters.
But this Autumn Statement is also the government’s half-term report.
Two and a half years into George Osborne’s chancellorship, the failure of his economic strategy is plain to see. The OBR has consistently predicted growth higher than independent forecasts, and consistently been proved wrong. Their report will confirm what was alreadyContinue reading...
The first was the belief that cutting down government spending would automatically produce recovery. I know the Government now claim that they never believed anything so simple or idiotic, but they did, and there is plenty of evidence to prove it.
The second has been the Chancellor's failure to distinguish between current and capital spending. This has made the deficit seem more dangerous than it was. The prime example of this blind spot was the £50 billion cut in capital spending.
The third was the Chancellor's belief that without a severe fiscal contraction Britain would go the way of Greece:Continue reading...
The Office of National Statistics recently reported that the British economy has grown by only 0.5% over the past year: private sector demand is depressed by deleveraging and uncertainty, while public sector demand is constrained by the government’s austerity strategy. Britain needs to rebalance its economy away from reliance on credit-fuelled private consumption and towards investment and exports. And the public has lost confidence in banking as a socially useful activity.
A British Investment Bank (BIB) presents a potential solution to these problems. Robert Skidelsky at the Centre for Global Studies and Felix Martin at Thames River Capital invited leading figures from the British private and public sectors, as well asContinue reading...
Is economics bunk?
Tuesday, November 16, 2010
There’s a lot of support for the idea of reforming economics, ever since the Queen of England asked of a group of economists in November 2008, why did no economist predict the credit crunch? Many people, including some economists, have been wondering what’s wrong with economics, whether some time back it didn’t take a fatal turning which made a lot of it wrong or useless.
A huge obstacle to rethinking economics is the view that it is like physics: in the double sense that human behaviour is subject to natural laws and in the sense that economics discovers these laws as it progresses from error to truth. No one really suggests we should start physics all over the again. And if economics is really like physics, we do not need to reformContinue reading...