Articles from The Guardian
When George Osborne took over the Treasury, he decided that fiscal policy would be governed not by the state of the real economy but by the state of the public finances, as measured by pre-set fiscal targets, particularly the rate of deficit reduction. Those targets were designed to reassure investors in government debt that the state was solvent and would remain so.
Halfway through the life of this parliament, it is clear that the effects of that policy in terms of output and growth have been disastrous. Britain, like the eurozone, remains stuck in the slow lane. We did not grow at all last year, and we enter 2013 with a realistic prospect of a triple-dip recession. Despite our freedom to devalue and massive open-market operations byContinue reading...
Why we need weekends
Robert and Edward Skidelsky
| Saturday, September 08, 2012
Did you think that it was only in Victorian England that debtors were forced into the workhouse? Think again. This week a leaked letter revealed that Greece's eurozone creditors are demanding a six-day week as a condition of the latest bailout.
Of all the far-out ideas for solving the Greek crisis, this one surely takes the biscuit. First, it is completely unenforceable. Second, those Greeks in full-time employment already work the longest hours in the European Union. Finally, how does the troika (the EU, International Monetary Fund and European Central Bank) propose to provide work for the 25% of Greeks unemployed? And yet, as preposterous as the demand may sound, it needs to be taken seriously – not least as a symptom of a growingContinue reading...
Cutting public spending when there is no other source of growth in the economy is a sure-fire strategy for recession. As if the lack of recovery wasn't bad enough, the lack of growth also scuppers your deficit-reduction goals – the very reason for austerity in the first place. Like throwing away the engine to trim a car, you have offset the lack of revenue recovery by slashing capital spending. The results are already being seen in the forecasts: there will be no spurt of growth to regain the losses of the recession. The best we can hope for is a slow crawl along the bottom.
Is there a way out? Initiatives such as the National Infrastructure Plan and the Green Investment Bank aim to mobilise private money behindContinue reading...
The deputy prime minister, Nick Clegg, has promised a "massive amplification" of state-backed investments in housing and infrastructure. Words only. But if the words mean anything, they amount to a huge U-turn – a belated acknowledgment that austerity has not brought recovery.
The realisation that austerity is having a dampening effect on economic activity has spread throughout Europe. Everyone has started to talk about policies for growth. This is a marked shift from the previous story which asserted that public austerity was the growth policy – that workers sacked from the bloated public sector would soon find employment in the more productive private sector. But no one in power has admitted that the previous story was wrong.
In his autumn statement today the chancellor claimed it was his deficit reduction plan that enabled the British government to borrow money even more cheaply than the Germans, thus saving the taxpayer £21bn in interest rate charges over five years. Ed Balls rejoined that "he still clings to the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility and not, as they were in Japan in the 1990s or in America today, a sign of stagnant growth in our economy". The intellectual debate between George Osborne and his critics hinges on this single point: what is it that makes a deficit-reduction programme "credible"?
Let's start with the theory of the matter. "Look after unemployment," JM Keynes said,Continue reading...
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