A slow-burning revolution is starting to overturn neo-classical economic orthodoxy

KeynesAs the world struggles to deal with threatening outbreaks of violence – most dangerously, in the Middle East and the Ukraine – another less dramatic and slower-burning revolution is getting under way. This revolution does not threaten violence – but it does promise change, and almost certainly change for the better.

The revolution that is gathering pace is a shift in understanding and increasingly in policy. What we are now beginning to see is the painfully slow and invariably reluctant abandonment – in the face of evidence that is now impossible to ignore – of an economic orthodoxy that has dominated the global economy for nearly four decades. Continue reading

If the god Janus were an economist, he would work for the IMF

In July 2010, Prof Victoria Chick and I said: “fiscal consolidation does not ‘slash’ the debt, but contributes to it.” Last month, the IMF said: “we find that forecasters significantly underestimated the increase in unemployment and the decline in private consumption and investment associated with fiscal consolidation.”

In our report (The economic consequences of Mr Osborne), we warned explicitly and on the basis of a century of publicly available data, that in a slump, fiscal consolidation increases unemployment and cuts private investment. An institution with a staffing of about 1100 professional economists (most of whom have PhDs) and an overall personnel budget of about $800 million) failed to make that correct call. Continue reading

Be angry at bankers, be angrier at economists

Like millions of others I am outraged by the LIBOR scandal; the wrongdoings of the ‘submitters’ and other traders at Diamond’s Barclays Bank and their fellow travellers at the British Bankers Association. Which is why we at PRIME economics launched a government e-petition calling for a judicial public inquiry into the wrongdoings of banks, and for the inquiry to have powers to summon witnesses and question them under oath. Continue reading

An open letter to the leaders of Europe: abandon the Euro’s ‘gold fetters’

On May 15th, in what can only be described as an act of coercion, an impoverished and effectively insolvent Greece acceded to the handover of a bond payment – €436 million – to private financial ‘vulture funds’. The Greeks had little choice. However, in acquiescing to this handover – facilitated by its paymasters,‘the Troika’ – impoverished Greeks protected reckless private wealth from the consequences of their risks. Namely: losses and bankruptcy, and the discipline of market forces. Continue reading