Economists versus the Economy
| Friday, December 23, 2016
LONDON – Let’s be honest: no one knows what is happening in the world economy today. Recovery from the collapse of 2008 has been unexpectedly slow. Are we on the road to full health or mired in “secular stagnation”? Is globalization coming or going?
Policymakers don’t know what to do. They press the usual (and unusual) levers and nothing happens. Quantitative easing was supposed to bring inflation “back to target.” It didn't. Fiscal contraction was supposed to restore confidence. It didn’t. Earlier this month, Mark Carney, Governor of the Bank of England, delivered a speech called “The specter of monetarism.” Of course, monetarism was supposed to save us from the specter of Keynesianism!
With virtually no usable macroeconomic tools,Continue reading...
Autumn Statement: Economy
| Tuesday, November 29, 2016
My Lords, it is always a great pleasure to follow the noble Lord, Lord Desai. I will take up one or two things he said, but a preliminary question that occurred to me is: if the private sector is so flush with money, why is it not investing more of it? Why does it need government help to do so? The answer that occurs to me is that the private sector does not see sufficient demand to justify the kind of investment that would employ those funds that are sitting idle. I will come to another point made by the noble Lord on the OBR in a moment.
As a long-term critic of the Government’s economic policy, I recognise that the Chancellor’s Autumn Statement has some good news in it. He has relaxed the absurd commitment to balance the budget byContinue reading...
My Lords, I, too, thank the noble Baroness, Lady McIntosh, for making this debate possible. The most dramatic economic effect of the United Kingdom’s Brexit vote has been the collapse of sterling. Since June, the pound has fallen by about 16% against a basket of currencies. Mervyn King, the former Governor of the Bank of England, has hailed the lower exchange rate as “a welcome change”. Indeed, with Britain’s current account deficit in the order of 7% of GDP—by far the largest since records started—depreciation could be regarded as a boon. But is it? That is the subject of our debate today.
There are two things to consider. The first and most urgent is the effect of sterling depreciation on our payments to, andContinue reading...
Keynes and Brexit
| Wednesday, November 16, 2016
John Maynard Keynes would have been conflicted by the referendum. Culture pulled him towards Europe; politics and especially the continent’s current austerity economics would have pushed him increasingly away.
Churchill talked about the “three majestic circles” of the Commonwealth, the United States and Europe. But over Keynes’s lifetime, the reality was that Britain was firmly locked into only two of them: the special relationship with the US, and its own imperial preference system. Keynes resented Britain’s dependence on America and he never saw imperial preference other than as a bargaining chip, but he did not see Europe as replacing either of them.
Like Churchill, Keynes supported the idea of some sort of European Union to avertContinue reading...
Slouching Toward Trump
| Saturday, November 12, 2016
LONDON – The Republican establishment has gone into overdrive to present President-elect Donald Trump as a guarantor of continuity. Of course, he is nothing of the sort. He campaigned against the political establishment, and, as he told a pre-election rally, a victory for him would be a “Brexit plus, plus, plus.” With two political earthquakes within months of each other, and more sure to follow, we may well agree with the verdict of France’s ambassador to the United States: the world as we know it “is crumbling before our eyes.”
The last time this seemed to be happening was the era of the two world wars, 1914 to 1945. The sense then of a “crumbling” world was captured by William Butler Yeats’s 1919 poem “The Second Coming”: “ThingsContinue reading...