Tag Archives: economy

Why liberals should embrace the Steady State Economy

One of the saddest things about the lurch to extremism and the right wing of the political spectrum over the past few years—and especially these last few months—has been that attention has been taken away from the significant problems with capitalism and its reliance on continued growth that the 2008 crash had exposed.

The Classical Economists, in particular Adam Smith and John Stuart Mill, had already theorised centuries ago that growth could not go on forever and that eventually states would enter the condition of being a “stationary state”.  John Stuart Mill wrote that the “increase of wealth is not boundless….the …

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There are issues more important than Europe

David Cameron famously told his party to ‘stop banging on about Europe’, are we in the Liberal Democrats in danger of doing the same? I fear we are.

With our seemingly exclusive focus on Europe we are missing a more fundamental concern for British voters, to paraphrase Bill Clinton’s campaign message ‘it’s the economy stupid!’

An Ashcroft poll conducted in September this year showed that although most voters agreed that negotiating the best Brexit deal possible was the top priority for the country as a whole when it came to issues facing themselves and their families it came fourth behind tackling the cost of living, improving the NHS and getting the economy moving. This doesn’t surprise me.

Like many I was dumbfounded by the result in June. For the first time I felt there were huge sections of our society that I neither knew nor understood. It would be easy to write off the 17,410,742 who voted to leave as xenophobic, racist, ignorant or just conned by an anti EU media establishment. That would be a mistake.

I have spent the last few months thinking about why, when to me the arguments for remain were clear, we as a nation voted to leave.  My belief is that confused by a torrent of dubious facts from both sides a significant proportion of the electorate assessed the ‘state of nation’ and concluded that it simply wasn’t good enough. With nothing to lose they voted accordingly.

Should we really be so surprised by this? Faced with falling real wages, declining social mobility, greater financial insecurity and government policy that rescued the banks but let the steel industry wither it really isn’t that shocking that so many voted as they did.

As Liberal Democrats we are certainly doing a great job articulating the publics concerns about Brexit. Since June we have become the rallying point for those deeply worried about the implications of a hard Brexit and a recent YouGov poll  showed that we could gain significant electoral advantage in the event of a snap general election. 

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Opportunities? Brexiteers, please specify

The motives and backgrounds of leave-voters are by now sufficiently understood to conclude that many of them cannot afford to and would not have voted for becoming substantially and permanently poorer. Some may, but had it been widely understood that Brexit comes at a high economic price for everybody, the result would have been a different one.

Apparently, most leavers dismissed the economic arguments of remain, and instead of asking for better arguments from leave bought the “scaremongering”-claim (admittedly, leave was much better at creating slogans). And this continues: leave already claims victory on the economy after 6 months in which nothing (apart from a 15% devaluation of the country) has happened. Luckily, consumers so far remain complacent and keep spending.

I know the typical response I can expect from Brexiteers: unsubstantiated claims (“see the opportunities”, “champions of free trade”…), denial (“Q3 was good”), fluffy sovereignty-talk (“Brussels”), and pressure (“how dare you not respecting the will of the people?”). Is that all you have got?

May I challenge you to think a little harder? Specify trading opportunities the UK currently misses because of EU membership, which outweigh the losses from leaving the single market. In other words: How and when will you have replaced the benefits of preferential access to 27 EU member states and the EUs’ 53 third-country agreements with higher yielding UK-deals? How and when will you recover the transitional losses? Will the current generation of young people recover from the damage within their professionally active lifetime? No leave-campaigner has ever presented any such case. Can you?

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Labour did not crash the economy

 

After the financial crash, the Tories persuaded the public that they were the only party who could be trusted with the economy. Osborne’s message went something like this:

“Labour crashed the economy. They did this by spending too much, borrowing too much, and letting the budget deficit get too large. In order to create a strong economy, we need to get the deficit down. And the only way to do this is to implement spending cuts until our deficit reaches zero again.”

This narrative was a huge political success. Even now that we have a new Chancellor, and a supposedly new approach, the Conservatives still hold onto the reputation of being the only economically sensible party, built on the foundations laid by so-called Osbornomics. The problem is that it is absolute nonsense.

Their economic narrative is flawed in three ways.

Posted in Op-eds | 125 Comments

Is austerity working? And do all debts have to be paid?

 

These questions invite binary “Yes” or “No” responses. More considered approaches exist. We need to consider the economic consequences of debt repayment, structural and attitudinal causes and contributions, responsibility for debts both particular and general, beneficiaries and losers, and, how they may be prevented in the future. Also, can such enormous debts be paid?

This requires analysis and accurate, accessible language. In Economics and Finance, that which has different labels is sometimes not significantly different and that which is under one label has significant differences. For example, money consists mainly of credit creation since loans create deposits and loans are debts.

Debt is a form of relationship: financial activity connects and affects people.

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What is monetarism and what happened to it?

In the late 70s and early 80s economic monetarism was espoused by Margaret Thatcher and Sir Keith Joseph  who wanted a radical alternative to the prevailing Keynesianism of previous governments. The theory seemed to be simple enough. The idea was that the money supply was a key parameter of our economy. Therefore, if we wanted to control inflation, and it did need to be controlled at the time, all Government needed to do was control the supply of money. Inflation would then fall and all would be well. Very quickly the Government and Treasury economists learned that they could not actually do that. It was difficult enough to define what money actually was let alone control the amount of it. Is it base money M0, which is just the amount of notes and coins in circulation? Or is it M1 which includes travellers’ cheques and demand deposits? Or, maybe M2 which includes savings deposits? Or M3 or M4?  For anyone who cares to look it up they can find out what MZM means. There are lots of ways we can create money and lots of ways to try to define it. If I write out an IOU that is a form of money. As Minsky famously said, anyone can create money. It is getting it accepted which may be the problem.

But if we think about it, we can see that the money supply, no matter how we define it, does not tell us anything much at all. If the Bank of England were to, say,  create £10 trillion of banknotes and keep them securely in their vaults they would have absolutely no effect at on the economy. But if they were stolen and scattered around the country by dropping them from a proverbial helicopter then they certainly would have an effect. They would be spent. So it is not so much the amount of money that exists that matters. It is the amount of money that is spent.

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Workers’ Councils – one way to take back control of our economy

When Theresa May suggested that businesses ought to set up workers’ councils, she was said by many commentators to be moving to the centre ground, perhaps to hoover up centrist voters put off by Labour’s leftwards drift. Whatever the political motivations, it is an extremely interesting idea. Is it one that liberals should support? Absolutely, because it can help people take back control — in a meaningful way.

A lesson from the EU referendum was that many people are dissatisfied with the economic system. The slogan “Take Back Control” was vague to the point of meaninglessness, but psychologically potent for people …

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Recent Comments

  • User AvatarThomas 21st Jan - 2:49am
    David Evershed - 19th century liberal economic policies, while reduce costs and prices, had led to British industrial decline because new industries, which were unprotected,...
  • User AvatarGeoff Reid 21st Jan - 2:29am
    Yes, sad we were not there to confuse things in Bromsgrove. But without us there was a striking symmetry in the performance of others. Labour...
  • User AvatarGeoff Reid 21st Jan - 2:14am
    Yes it was sad that we did not stand in Bromsgrove. But it offered an interesting glimpse of how the other parties did without us...
  • User AvatarMichael BG 21st Jan - 2:04am
    Caron as you are a member of the Federal Board, you are part of the body which should make the decision to support this march....
  • User AvatarLorenzo Cherin 21st Jan - 12:42am
    Caron Thank you for returning but I cannot agree with your comparison and am surprised you make one. What Sir Vince did was marvellous. Just...
  • User AvatarDavid Pocock 21st Jan - 12:07am
    Good job Antony! :D