Tagged with Investment

“Butskellism” versus Keynes and Marx

Corbynomics1The debate is continuing on the purpose of government borrowing and the role of ‘balanced budgets’ – which was started by John McDonnell’s position of balancing the budget on current expenditure but borrowing for investment. This is not surprising given that economic policy has to be the core of the programme for a Labour government.

A thoughtful addition to the debate is this piece by Jo Michell in the Guardian, who asks for a real alternative to Osborne, which SEB has provided in relation to the Fiscal Responsibility Act. But an important misunderstanding should be clarified. That article argues that advocacy of a balanced current budget over the business cycle would be to ’emulate Ed Balls and austerity lite.’ That is incorrect. It would only be the case if the level of government investment were maintained at current miserably low levels. Instead what is proposed here is a transformational increase in public investment, sufficient to foster a sustained recovery led by public investment. Far from this being ‘austerity lite’ it makes state driven investment a key to economic policy – entirely unlike the policy of Ed Balls.

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The politics of Tory pledge-breaking

Tory-manifesto-coverPolitical gravity is starting to assert itself on the Tories’ ridiculous manifesto. You will recall that this gang of scaremongerers, who spent the entire election trading on economic competence, getting the deficit and public sector debt down, and “strong leadership” promised £28bn in unfunded spending commitments – presumably with the view that they’d never get chance to implement them because coalition negotiations, etc. There’s a lesson there: one should avoid tempting fate. You may also recall the fright UKIP gave the Tories all throughout the last parliament, the one that gave CCHQ willies enough to make a rash in/out referendum pledge on European Union membership. It’s been fewer than 50 days since the general election, so let’s take a look at how our overlords are doing. Continue reading →

Tory own goal on debt and the deficit pledges

thatcher on debtThe Tory Party has decided to make public finances a key battleground for the election. Key supporters of austerity such as the FT’s economics editor Chris Giles have echoed that, arguing that the “defining battle of the 2015 general election [is] over borrowing and public spending“.

It is only possible to stake out political ground on the issue of public finances because of the distortions surrounding them. The level of government debt is rising. This is because the government is adding to its annual levels of debt stock with new public sector deficits. Continue reading →

The economy should be Labour’s turf, not the Tories’

A pound symbol sinking in the wavesIt is astonishing that the Tories have opted to fight the coming election on their economic record (maybe because fighting on any other issue would be even worse?) – and equally astonishing that Labour has made such a poor fist of retaliation. The simple truth is, there is nothing at all about the Tory economic record since 2010 to be proud of:

  • Wages will not recover their pre-crash level for a decade (if then?)
  • Productivity continues in the doldrums
  • Business investment has never recovered (because the FTSE-100 companies, the real money men, have no confidence in the Osborne ‘recovery’)
  • Household debt is rising dangerously
  • And to cap it all the deficit (the reduction of which is supposed to justify the austerity and impoverishment of the last 6 years) is now starting to rise again at about £100bn, not fall.

What is there to write home about a record like that? Continue reading →

Pain, no gain: the Austerity scam

15. Austerity 2To coincide with the Autumn Statement, PRIME Economics has published an excellent short pamphlet  Pain, No Gain: the Austerity Scam by John Weeks (Emeritus Professor of Economics, SOAS, University of London) which explains just why the deficit is not a problem – indeed is a necessary part of the solution – for the UK economy. In examining the history of the deficit and its causes, Prof Weeks not only explains the folly of austerity, but also the mistaken blame doled out to Labour for “causing the crisis”.

In fact, Gordon Brown had done much to bring Britain out of the crisis and, until the 2010 election campaign, was himself rejecting cuts in public budgets. On the other hand, apart from his Bloomberg speech, Brown’s protégé and the next would-be iron chancellor, Ed Balls, is now an enthusiastic advocate of austerity – whose differences from Osborne are described by Prf Weeks as “ones of emphasis not principle“. Indeed, in a week full of comment on how history might view Gordon Brown, we might well wonder whether future historians will conclude that Brown’s protégé exerted a negative influence on him – his best performance having been in the period when Ed Balls was assigned to non-economic duties. Continue reading →