Thursday, January 27, 2011
Consensus Seems tro be Emerging that Coalition's Strategy is Economically Illiterate
One of my regular partisan commenters accuses me in my last post of leaving 'so many open goals in my postings'. Well of course, I don't think I do. But I suppose I'm constantly dealing in an area where opinion is sharply divided so what seems like solid argument to one is an open goal to another. However, sometimes opinion coalesces on issues to provide some sort of consensus. And it looks like just such a consensus is beginning to form over Dave and George's so-called economic strategy. The surprise 0.5% contraction during the last quarter when some had predicted a 0.7 increase has set all kinds of ripples in motion, most of them of a right of centre nature. Let me mention a few of them.
1. Governor of Bank of England Mervyn King, staunch defender of Osborne's dash to austerity strategy, warned that workers were going to suffer 'the sharpest fall in real wages since the 1920s'.
2. 'It certainly adds to the risk of a double dip recession given the coming squeeze on the consumer from higher taxes and prices and reduced welfare benefits' said John Hawkesworth, chief economist at PwC.
3. 'The figures have all but wrecked Mr Osborne's plan to declare victory over both Labour and the dangers of a double dip recession before the local elections on May 5'(Grainne Gilmore and Roland Watson, The Times)
4. Even the Times's much respected and distinguished economics expert Anatole Kaletsky who cxomments on Osborne's 'controversial economic theory'
'This is the idea that private citizens and business will increase spending even as their incomes are cut by higher taxes and reductions in government spending.'
5. Sir Richard Lambert, outgoing chief of the CBI slammed the government not for lacking a strategy on cuts but for lacking a clear strategy on growth.
Rather than a big picture of the kind of economic eco-system that the Government wants to champion, we are left with a few rather vague ideas about the scope for supporting a number of predictable sectors, and the promise that more ideas will be forthcoming at the time of the spring budget".
6. George Soros, the world famed Financial guru seems to think a double dip is inevitabe:
"I think they may be right in embarking on it [the austerity programme] but I think they will probably have the sense that they will have to modify it when the effects are felt, I don't think it can possibly be implemented without pushing the economy into a recession. We will have to see it unfold. My expectation is that it will prove to be unsustainable."
I could go on, extracting quotes from the Telegraph and other right of centre publications but I feel sure Ed Balls is licking his lips as he sees Osborne struggling to excuse his cock up economics by blaming the snow. Already the public seems to be receptive to an alternative message. A Sunday Times poll asked respondents about the speed of expenditure cuts. Only 30% thought Osborne's rate appropriate while 52% thought them 'too quick and risk recession.' Oh boy! This government's troubles are only just beginning. The worrying thing is that we are all going to suffer as a result of these millionaire dilletante politicians' total lack of economic common sense.
And do try to be a little more free based with the economic “pundits” you selectively quote.
Rent-a-quote Hawksworth & Liebore placemen such as Lambert can safely be discounted. The demon Soros is still playing his long currency game & MSM scribblers such as Kalestsky are past their best. King – more worryingly - has been consistently wrong of late. He forecast that global recovery would be "anaemic" in 2010. Wrong. It has been, according to the IMF, a robust 5%. He warned there was a high risk of a double dip recession. Wrong. Even Labour doesn't claim that any more -- just that growth will be a little lower in 2011 and 2012 than it would have been without the cuts. He also predicted that the private sector would not pick up the public sector slack when it came to jobs, claiming "businesses will cut jobs faster this year", including the elimination of part-time jobs. Double plus wrong. The private sector has created around 300,000 new jobs this year -- far more than the public sector loss of jobs -- and about 50% of them have been part-time. Please do try & remember these mis-forecasts come from a Governor who has already a dubious record in predicting inflation, consistently telling us that inflation figures at least 50% higher than the 2% target he is meant to hit were just a blip -- except that this blip is now almost three years old and in his latest forecast he's been forced to concede that the "blip" is likely to last all of 2011 too.
The news from the ONS is pretty bad for the UK economy, but there was a big hit from necessarily reduced Government spending and a big gain of over 1.4% for Manufacturing. As the economy rebalances perhaps we will see more of this. But in reality it’s difficult to pin it on the current administration because the shrinking economy is almost certainly a hangover from the previous government’s stimulus package.
I see no British politician speaking as though they understand the scale of the bind the UK is in. It isn't Miliband & definitely not Blinky “Second choice” Balls, whose policies in government did so much to create this crisis in the first place. Balls likely relishes the idea of having a go at Osborne. The problem is he lacks depth when it comes to economic policy (and he is in no way an eloquent speaker – somewhat surprising, given his privileged schooling & elite Uni background).
Brown could just about be excused as an arrested-development inadequate, dreaming his pompous, deluded Labour dreams, and then he met Balls, the brilliant economist, the biggest brain in Westminster. A genius, with all the economic jargon he needed to make him look good, which fitted his dirigiste, Marxoid, statist dogmas perfectly, and together they ensured the UK had had a structural deficit (i.e., not related to prevailing economic conditions) for the seven years before the recession even began. The UK under Labour entered the financial crisis with a larger structural deficit than France, Germany, USA, Japan, Italy and Canada. The vast majority of the deficit - £123bn of the £156bn borrowed in 2009/10 - was structural. By the time Brown, Balls - and Miliband left office- , Britain had the largest deficit in the developed world. National debt doubled during the Labour years. And I haven't touched on the hundreds of billions in debt kept off book (in the best traditions of Enron) by PFI. Now THATS cock-up economics.
Kind regards from Planet Reality.
Decline in GDP figures - inevitable given weather conditions and fiscal outlook/vision. UK growth figures have been surprisingly resilient given this outlook, and forecasts(international forecasts, not Gordon's fairytale style Treasury-era forecasts) remain sunny.
As for King. He said it himself, if you had only listened. A fall in real wages is inevitable one way or the other. We can either kid ourselves that there is no problem, and refuse to deal with the deficit and award ourselves pay rises...interest would then rise, inflation would soar, and the pound would plunge(remember that, last plunge seen in May when Labour looked...for a second...like hanging on).
As for George Soros. One of the great Liberal economists of his time. But not a faultless record and a clear and open political bias that would make his agreement with the Tories real news(which most of this article isn't).
You could go on I'm sure, but I wouldn't if I was you. Labour messed up the economy, creating a massive deficit in boom times. If I were them(and thank Christ I'm not), I would shut up and hide, hoping that people forget the mess that we created, rather than advertising my stupidity by advocating 'head in the sand' economics. Markets would crucify Britain if Labour got anywhere near Government in the circumstances we are in.
Am sorry you are taking the change of Government so badly. It comes across as a bit graceless to be honest.
I fear I cannot disagree with that. But from their effusions I think we can assume, that, if their two supporters are any guide, the Tories are rattled. As they should be.
The Coalition will be in power for five years. Any Liberal anxiety will be soothed by the realisation that it will take five years for the reforms to bear fruit, and any election before then will be suicide for them. So please stop flouncing around and just accept this is going to last a long time. All this hot air will just leave you a tired boy by 2015.
By 2015, who knows. I have learned never to take the British public's intelligence for granted. Labour have made an appalling start to their five years or more in opposition by electing an unproven and divisive baffoon, with questionable legitimacy. But just calm down and stop being such a sore loser. It makes you look bad.
As a (commendably) assiduous reader of my blog you'll know I conceded electoral defeat almost as soon as Gordon took the helm. And he did cock things up big-time as PM in many respects. However, that's not to say Labour did not achieve many good things during their time on office nor to say that the deficit was the fault of reckless overspending. The fundamental reason for that was the recession caused by the US housing crisis.
As for appearing a 'sore loser', well, we'll have to see how this plays out.
I don't blame you and your right-wing chum, David Morris from getting a bit hysterical in the wake of the disastrous growth figures and rubbishing your own side's pundits, but figures for this present quarter and the rest of the year will go some of the way to settling the argument with which I am engaged.
Keep taking the tablets.
Just checked four comments from both on my Dashboard containing accusations of selective publication of your comments. Not so. Don't know how comments get 'trapped' in this way and I don't always check such messages are more often they are spam. However, rest assured, I only ignore comments when they are in my opinion excessively impolite either to me or another commenter. I always try to be polite myself as you have n o doubt noted
As for selectively posting comments, I refer you to your "Tax Haven" post. I asked whether you had heard of the Laffer Curve & whether you believed it hypocritical for the Graun to have adeptly avoided CGT in the sale of its stake in TradeIt ? Unaccountably, this comment did not make it through to being posted. Shome mishtake shurely ?
Tho You are right I did not publish your Laffer Curve comment as it was so ridiculously patronizing in tone. It is, after all the prerogative of the host blogger to ignore insulting comments should he/she choose. I was aware of the Laffer Curve by the way and did not think it covered it embraced an active policy of NON payment of taxes as a strategy. Nor could Arthur Laffer have complained of an especially high US tax rate in the 1970s; seems to me it does not apply unless the tax rate is well over 50%.
I have been in political education for nearly 40 years and, as you for one must appreciate, have been happy to publish highly critical comments on my blog. I enjoy good argument and feel that testing them on opposing views is the essence of democratic politics. I welcome your points on Laffer for example.
However, I have occasionally encountered students -young and older- who have been keener on ad hominem approaches in the mistaken belief this is as valid as addressing the argument itself. It isn't and it can also be disrespectful or offensive. When occasionally it is I reserve the right, as a last resort, to withhold publication. It's not what I do this blog for and anyone who wants to rely on the slag-off approach is better off slagging off another blogger, or, setting up their own blog and taking some more personal responsibility for such blogosphere debates
The danger is that we just have a semi-farcical debate where some views have been expressed and are known only to the blogger and the aggrieved would-be poster. Better always to publish and let readers decide.
As I've said before, Your Blog, Your Rules.
Nevertheless, hiding behind the spurious cover of decrying “ad hominem” approaches doesn't wash, not the least because they are not a one way street on this Blog. I could have taken offence as being identified by you as an “anonymous” commenter, being associated with “flapping white coats” & not least of all as being of the “Right Wing” - but I did not. Your posts are a good read – not the least because they are invariably way off the mark in political terms. We are shown in the U.K. by teachers & lecturers the world operates according to fixed rules that, if followed, can lead the student to qualifications and success in the world. It is little wonder that those who graduate would believe that the way to govern a country is to have a headmaster in charge with a staffroom full of advisers. The institutional approach to governance, is very attractive to the child because it is all that they know.
What the student misses is that, in free societies, the institutional government in schools is a creation of those who live in the world of business for the protection and development of their children. They divert the profits that they might make from their struggles with the apparent randomness of nature into a safe environment but the actual world is not safe or predictable.
If institutional governance is applied to whole countries they must inevitably collapse. This was very evident for anyone who visited the ex-communist countries in the nineteen nineties. The reason for the collapse was that they were based on the belief that the world could be predicted and the economy commanded from the top. Clearly an impossibility.
I see the persistence of socialist ideology as a form of Stockholm Syndrome where the child, having been captive in the protected and regulated education system, adopts its values as if they could be applied to all of their life. Any problems in the world at large lead the child to retreat to the institution rather than to find a real solution.
Perhaps the strangest aspect of the symbiotic relationship within the U.K. of the education system and socialism is the way that so many political comedians and academics from the humanities espouse this faith. The average political comedian would be arrested in any socialist state and any uppity academic would find all paths to advancement blocked. Perhaps all U.K. schools, colleges and civil service offices should have a sign at the door that reads "Not to be confused with a viable way of life"......
Mind how you go.
I do publish the vast majority of comments, as I'm sure you are aware but where the tone of a comment is offensive I rresereve the right to refuse it. Rude intemperate comment helps nobody and subverts democratic debate. I don't put up with it in my classes and it's presence in blogging has given the blogospere a bad name.