Tag Archives: economists

Labour spending plans are backed by leading economists

Yes, that’s right – it is Labour that has won endorsement for its economic plan.

You wouldn’t believe that if you were reading This Writer’s Twitter feed, though.

After neoliberal mouthpiece Kate Andrews appeared on the BBC’s Politics Live, spouting drivel in opposition to Labour, I tweeted in support – and received what seemed like hundreds of indignant responses from armchair economists across the UK.

But here are the hard facts, courtesy of The Independent:

Labour has received the firm backing of 163 prominent economists who say the party understands the nation’s deep-seated problems and has devised a “serious programme” for dealing with them.

The group said Labour’s plans to invest in homes, schools and infrastructure make “basic economic sense”, partly because borrowing costs are at a historic low.

The government must step in to invest where the private sector has failed to, directing capital towards the rapid decarbonisation of energy, transport, housing, industry and farming, they said.

“As the IMF has acknowledged, when interest payments are low and investment raises economic growth, public debt is sustainable.”

The 163 economists who signed the letter pointed out that a number of Labour’s proposals are considered orthodox in other wealthy social democratic countries.

Germany has a successful national investment bank, for example, and most European countries – unlike the UK – give workers some form of representation on boards and a stake in their employer.

“It seems clear to us that the Labour party has not only understood the deep problems we face, but has devised serious proposals for dealing with them.

“We believe it deserves to form the next government.”

I don’t know if Simon Wren-Lewis, author of the Mainly Macro blog, is among those 163 economists, but it seems he supports Labour too – and has attacked what he calls the “standard excuse” for opposing its plans, which is how to pay for them:

The figure for the increase in current spending and taxes is large. I personally would not call it colossal but it is large. I would argue that reflects the extent of the squeeze we have seen on the public sector since 2010.

But what about the argument that it makes the share of government current spending in GDP the highest since the 1970s? A much better comparison is to look at other countries.

What Labour’s plans do is to move the UK from the bottom of the league table in terms of the size of the state to somewhere around the middle.

Who is going to pay for getting us to the average of European countries. Under Labour’s plans it is the rich and corporations.

There is no ‘black hole’ in Labour’s costings.

Most analysis misses the elephant in the room, and that is Brexit.

I think it is highly likely Brexit will not happen under Labour, and even if it did it would be far less costly than either the Tories plans, or the effects embodied in the OBR base numbers that many people use. For this reason the LibDems have talked about a ‘Remain bonus’ (in the incredible event they could form a majority government). Labour will also get this bonus.

As to the investment part of the programme, the key issue is once again whether the investment is needed and well spent.

We should not be talking about whether it is safe to borrow it.

There is virtually no chance that this money will not be available at low long term real interest rates.

No one should be scared of investing in the future of our economy and the planet, whether its by adding 2% or more to the deficit.

If you read some people there will be an immediate run on sterling as capital takes its money out of the UK. Of course if enough people believe this nonsense it might happen, for a day or two.

But the one area where Labour are not radical is macroeconomic policy design. We will have Bank of England independence and a solid state of the art fiscal rule. As soon as that becomes clear any depreciation will be more than reversed, and I suspect there will be an appreciation from day 1. Sterling will appreciate on the expectations of an end to a hard Brexit and rising interest rates.

We should ignore the tired old discourse about whether we can pay for it, and focus on the benefits each individual spending increase or investment project might bring, and on the revitalisation of the economy that this manifesto will generate.

My critics were certainly thinking in ways outlined – and dismissed – by the 163 economists and Professor Wren-Lewis.

Do they have any arguments that can survive the analysis above? I doubt it.

Until they provide some, the economic opinion is clear: Vote Labour.

Source: General election: Labour’s spending plans backed by more than 160 economists and academics | The Independent

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Academics attack George Osborne budget surplus proposal

French economist and author Thomas Piketty has signed the letter to the Guardian that accuses the chancellor of gimmickry. Photograph: Eric Piermont/AFP/Getty Images

In a letter to the Guardian, coordinated by the Centre for Labour and Social Studies, 77 of the best-known academic economists, including French economist Thomas Piketty and Cambridge professor Ha-Joon Chang, said the chancellor was turning a blind eye to the complexities of a 21st-century economy that demanded governments remain flexible and responsive to changing global events.

Piketty, who rose to prominence last year after his book Capital became a bestseller, signed the letter alongside eminent economics professors from many of Britain’s top universities.

Other signatories of the letter include former Bank of England monetary policy committee member David Blanchflower, Diane Elson, emeritus professor of economics at the University of Essex and chair of UK Women’s Budget Group alongside professors of economics from Oxford, Leeds and London universities.

In a swipe at what they said was a “risky experiment with the economy in order to score political points”, they argued Osborne was guilty of adopting a gimmick designed to outmanoeuvre his opponents.

Source: Academics attack George Osborne budget surplus proposal | Business | The Guardian

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Don’t expect any U-turns from our blinkered Chancellor

There’s absolutely no possibility that George Osborne will give in to the latest calls for him to ditch his ‘deficit reduction strategy’ and adopt a more moderate plan.

Firstly, people need to understand that the Coalition government’s fiscal strategy isn’t about reducing the national deficit at all. If it was, we would not have had a big tax break for the richest in society as part of the last budget. It’s a strategy to axe public services, selling off to rich corporations any that might be capable of yielding a profit. George W Bush followed this policy in the United States a few years ago; it’s called ‘starving the beast’ – look it up on Wikipedia.

Secondly, a more moderate plan, mixing appropriate savings in government costs with growth-creating measures, is something Mr Osborne could never palate for one reason: It’s the policy put forward by the Labour Party before the 2010 election. Adopting it would mean that he was admitting Labour were right; the Conservatives were entirely wrong to put forward their ideologically-driven austerity plan as an alternative; and that he had wasted everybody’s time and tax money for the past two and a half years.

At least we get the joy of watching all his support flow away, drip by drip. The current story shows nine of the 20 economists who signed a letter supporting austerity back in February 2010 (just before the general election) have had a change of heart. Others have already done so.

Furthermore, Boris Johnson merrily stabbed the part-time Chancellor in the back, at the same time as the economists. He called for David Cameron to “stop pussyfooting around” and invest in major infrastructure projects in London.

His outburst was an outstanding achievement as he managed to shoot himself in both feet at the same time – putting himself at odds with the Conservative leadership and showing the country as a whole how out of touch he really is.

London has just received £9.3 billion worth of investment for the Olympic games, along with related infrastructure investments worth a further (reputed) £16 billion. Other parts of the UK are desperate for investment on a fraction of that scale!

For example, the people of Scotland might reconsider whether secession from the United Kingdom was a good idea, if the UK government invested a little cash in their country; as might the people of Wales.

Oh! But then, Scotland and Wales don’t vote Conservative, do they?