Menu

09.06.14

Piketty makes an argument for John Lewis

I had this on the Demos blog in May.

JM Keynes’ General Theory was published seven years after the New York stock market crash of 1929. Thomas Piketty’s Capital in the Twenty-First Century was published six years after the financial crisis of 2008.

READ MORE

26.03.13

Pushing on a piece of string

I had this reaction to Budget 2013 on the Progress website soon after the Chancellor made his statement.

George Osborne is a mountaineer, scaling Mount General Election 2015. It was all going broadly to plan until budget 2012. Today he sought to recover the ground lost through the missteps, especially the cut to the top rate of income tax, of a year ago.

READ MORE

17.01.10

The Economic Consequences of Peace in the Cod Wars

“The best books … are those that tell you what you know already”, wrote George Orwell in 1984. While, pace the likes of Henry Porter, our country isn’t Orwellian, there is a lot of truth in this line. And so it was when I read Martin Wolf on Iceland last week. He powerfully and intelligently argues for that which I have always instinctively felt about events there.

The British and Dutch governments are seeking agreement with the Icelandic government for the repayment of debts, which now amount to 50% of Icelandic GDP, owed to British and Dutch savers in now collapsed Icelandic banks. If we attempt to see things from the Icelandic perspective, this observation from Wolf is particularly striking: “In the UK context, this would be equivalent to a demand for £700bn. It is not hard to imagine how far Mr Brown would get with a suggestion that the UK should accept such a debt to refund depositors in foreign branches of bankrupt UK banks.”

READ MORE

29.12.09

Yes, we still can (but leadership and disciplined support are needed)

The striking thing about the most powerful person in the world, as he approaches one year in office, is how, err, lacking in power he appears.

Disappointed and, according to Mark Lynas, insulted by the Chinese in Copenhagen.  A Health Care Bill that isn’t yet on the statute; is much delayed on his original timetable; and, by his own admission, is only “nine-tenths of a loaf” – some would say that half a loaf is nearer the mark and it comes with lashings of pork barrel whatever way you look at it. An Afghan strategy that even he doesn’t seem wholly convinced by and the backdrop to which Andrew Sullivan commented upon by saying:

READ MORE

10.04.09

We should all be worried about David Cameron, not just the Foreign Office

The Foreign Office is worried about David Cameron, apparently. It is “most concerned about the effects Cameron’s anti-EU European policy will have on the UK’s chances of effecting outcomes”, the Guardian claims. Labour Councillor Bob Piper has also spotted this claim reported on the Sky News website.

We should all share the concerns of the Foreign Office. It is only in and through the EU that the UK can best serve our national interests and values. Bizarrely, Tory MEP Roger Helmer describes it as “indefensible, humiliating and wrong” that David Cameron has not yet fulfilled a promise to form a new grouping in the European Parliament with other parties that have been described as “openly and unashamedly racist and homophobic”. This promise suggests an inability to understand modern British values, let alone take them forward within the EU.

READ MORE

14.12.08

Smart Keynesianism

Andrew Rawnsley writes well on responding to the recession today in The Observer. Lucky countries will be those that have leaders “who turn the emergency of the moment into an opportunity to equip their countries for the future”. Similarly NESTA are trying to focus debate “on the short-term measures we can take to combat the recession which will feed our longer-term strength as an economy and society”. Rawnsley also appeals to this notion of turning a short-term crisis into a response to long-term challenges. 

“We know this recession will end one day. The oil price is not going to be low for ever. To prepare for the day when it soars again, to make good on commitments to reduce carbon emissions and to be free of dependency on the likes of Russia and Saudi Arabia, we have to get much more ambitious about renewable energy”.

READ MORE

03.12.08

The UK's world "role" under Cameron

Professor Michael Pettis offers a persuasive global economic overview. He notes China’s status as the leading current account surplus country. Ultimately, fiscal expansion, such as that recently taken forward by Alistair Darling and Gordon Brown, in deficit countries, like the UK, can only be “a temporary measure aimed only at assisting the transition among China and other major current account surplus countries from an over-reliance on exports to absorb capacity”. He, therefore, continues to be haunted by John Maynard Keynes’ nightmare: surplus accounts. Where does he think we will end up if these surplus accounts go uncorrected?

“The world cannot support indefinitely continued debt-financed overconsumption on the part of the US, whether this consumption takes place at the private or public level, and it cannot support continued growth in Chinese capacity without more rapid growth in Chinese consumption.  To continue in this way almost certainly means little more than to postpone a larger and more difficult adjustment on the part of both countries, and will probably eventually lead to a collapse in international trade”.

READ MORE

03.12.08

The UK’s world “role” under Cameron

Professor Michael Pettis offers a persuasive global economic overview. He notes China’s status as the leading current account surplus country. Ultimately, fiscal expansion, such as that recently taken forward by Alistair Darling and Gordon Brown, in deficit countries, like the UK, can only be “a temporary measure aimed only at assisting the transition among China and other major current account surplus countries from an over-reliance on exports to absorb capacity”. He, therefore, continues to be haunted by John Maynard Keynes’ nightmare: surplus accounts. Where does he think we will end up if these surplus accounts go uncorrected?

“The world cannot support indefinitely continued debt-financed overconsumption on the part of the US, whether this consumption takes place at the private or public level, and it cannot support continued growth in Chinese capacity without more rapid growth in Chinese consumption.  To continue in this way almost certainly means little more than to postpone a larger and more difficult adjustment on the part of both countries, and will probably eventually lead to a collapse in international trade”.

READ MORE

01.11.08

The Keynes Debate

Keynesianism suddenly seems back in policy vogue, which delights some and irritates others. It seems, however, a simplistic cant to think that increased public spending must be a good thing in itself, as the does the opposite view that it must be a bad thing. Much public debate about the policy utility of Keynesianism seems defined around these contours, however.

Lindbeck and Snower have written an excellent paper that has the potential to move the debate beyond this. It investigates the central Keynesian claim that product demand changes are transmitted to the labour market. The solution to the unemployment problem, therefore, does not lie in the labour market in itself but in a dearth of demand in the product market. Thus, public spending to correct this dearth transmits itself to the labour market in the form of reduced unemployment. Lindbeck and Snower examine the means by which such a transmission mechanism can exist. The paper should appeal both to those with an interest in theoretical economic questions and to those concerned with practical macroeconomic policy questions. I recommend giving it a read and confine myself here to reproducing one of the policy implications that Lindbeck and Snower see as following from their work.

READ MORE