Over their five years in power, the Conservatives have claimed their austerity policy saved the country from disaster. This purported economic competence sits at the heart of their election campaign. It needs critical scrutiny.
The coalition government has given two main reasons why austerity – cutting the Budget deficit – was necessary. The first is that its predecessor Labour government, living “beyond its means”, left the nation with a rising mountain of public debt. The only way to restore fiscal probity was to start austerity as soon as possible.
The second reason was that commitment to austerity was the only way to reassure the bond markets that the British government would not “go the way of Greece”: that is, default on itsContinue reading...
The Institute for Fiscal Studies (IFS) has warned that there will need to be “colossal” cuts in public spending to balance the books by 2018-19 – at least £55bn extra. On 4 December, the day after the Chancellor’s Autumn Statement, the director of the IFS, Paul Johnson, said that it wasn’t for lack of effort that the deficit hasn’t fallen. Rather, it was “because the economy performed so poorly in the first half of the parliament, hitting revenues very hard”.
Very true – but what Johnson omitted to say was that the main reason the economy performed so poorly in the first half of the parliament was because George Osborne was busy cutting the deficit. He should have been expanding it!
This is something that expert commentators lack theContinue reading...
| Friday, November 14, 2014
Vladimir Putin’s policies have damaged his country’s standing and economy. When will the owners of wealth decide that he is not Russia?
In 2004, the Valdai Discussion Club was set up “to promote dialogue between Russian and international intellectual elite”. Each year, two or three days of discussions involving foreign and Russian scholars and journalists would climax at Sochi on the Black Sea in a dinner with President Vladimir Putin himself. One qualification, at least for a foreigner invited to join the club, was not to be viscerally hostile to Russia’s foreign policy. This led some superannuated cold war warriors to call its foreign members “Putin’s useful idiots”. This idiot was asked to join four years ago, and this year’s eventContinue reading...
On Wednesday, for the first time in four Budgets, George Osborne will be able to claim plausibly that Britain has come out of the Great Recession. Growth was 1.8 per cent in 2013 and is expected to be between 2.4 and 2.8 per cent in 2014. That’s the good news. The bad news is that the economy is still 1.4 per cent smaller than it was in 2008 and 14 per cent smaller than it would have been had the recession not struck.
That lost output, amounting to £210bn, is gone for ever. Every household is almost £2,000 poorer on average than it would have been; the government’s revenue is £70bn less – that is (say) 70 hospitals, 1,000 schools and 250,000 housing units not built. Or, to take another number: 650,000 people now unemployed would haveContinue reading...
What Makes Us Human?
| Friday, January 10, 2014
Let’s start with an addled view of what it is to be human. According to economists, it is the ability to calculate. Their picture of the human is that of homo economicus ‘economic man’, a calculating machine who is always weighing up the costs and benefits of every course of action.
Economics is about ‘economizing’ –eliminating waste (including waste of time) so that all behaviour becomes efficiently purposive. The task of economics, according to economist Dennis Robertson, is to ‘economize on love, that scarce resource’. We need to economize on love, because we live in a world of scarcity, and cannot afford to spend too much time on wasteful activities such as love. Economics offers us a way of getting what we want without love.Continue reading...