Tag Archives: economy

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. 

Posted in Op-eds | Also tagged and | 34 Comments

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.

Posted in Op-eds | Also tagged | 35 Comments

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.

Posted in Op-eds | Also tagged and | 36 Comments

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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Tim and Vince write for the Times on the need for ministers to provide leadership on Brexit strategy

Tim Farron and Vince Cable have written for the Times’ Red Box website setting out what they think should happen in negotiations with the EU and in economic strategy as we face a self-induced Brexit recession.

As Nick Clegg said before the referendum, so called Project Fear was understating the impact Brexit would have. We are also suffering a void of leadership and some very unrealistic thinking from the Brexit camp who, as we discovered, didn’t really have a plan.

We can’t hang about, they say:

Business and investors won’t wait around forever to see leadership.  Many first tier organisations will simply pack their bags and go unless they see a path ahead.  Meanwhile our smaller businesses, and particularly those in high risk/ high innovation sectors will feel the squeeze as bank lending dries up as it did in 2008.

Two things need to be done. You get the feeling this was filed before yesterday’s extraordinary events:

The first can only be done by leaders of Leave – those who wish to lead us into the new unknown – and in particular, Boris Johnson and Michael Gove.  They must now show his vision for the UK and provide a clear plan for Britain’s relationship with the EU.  To reassure the market they, and other potential prime ministers, need to make clear that membership of the single market is the priority ask for any negotiations.  Businesses need to know that, whatever else, their key relationships will not have to fundamentally change.

It will require real leadership, rather than populist platitudes.  It may mean securing a deal which pleases no one and does not address many of the concerns raised by leave voters about immigration and freedom of movement.  Leading is about making choices, it’s now time for Boris and Gove to tell us theirs.

The second urgent priority must be the responsibility of the current government.  There is now every likelihood of a Brexit recession.  If the government acts now, by abandoning its already unnecessary financial straitjacket and allowing capital investment and stimulus support to flow into precarious parts of our economy, we might avoid the worst impacts on jobs and livelihoods. The economy could be stimulated through the Network Rail Capital Project and local authorities being allowed to borrow to build houses. The £250bn the governor of the Bank of England has put aside could be put into the Funding for Lending and the Regional Growth Fund.

Of primary concern must be our most innovative industries.  Those businesses on the cutting edge are likely to see funding from traditional financial institutions dry up as banks revert to their core business model.  Giving serious financial help and stability to these industries is vital to ensure their long term future in the UK.

The British Business Bank, set up by the Lib Dems in Government, is a crucial part of the support for business that’s needed:

Posted in LibLink | Also tagged , , , , and | 14 Comments
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Recent Comments

  • User AvatarMark Goodrich 9th Dec - 3:49am
    With reference to my earlier comment and seeing the result, I don't think UKIP can really claim to be happy either. Vote share down in...
  • User AvatarDavid Evans 9th Dec - 3:31am
    ... and Congratulations to Ross and the Lib Dem Team.
  • User AvatarManfarang 9th Dec - 3:31am
    Some crumbs of comfort.
  • User AvatarEddie Sammon 9th Dec - 3:24am
    The result from Britain Elects: CON: 53.5% (-2.7) UKIP: 13.5% (-2.2) LDEM: 11.0% (+5.3) LAB: 10.2% (-7.0) LIND: 8.8% (+3.6) I thought Caron was talking...
  • User AvatarDavid Evans 9th Dec - 3:22am
    Third place with 3,606 votes, 243 ahead of Labour, but sadly 820 less than UKIP. Even more sadly, the Conservatives got 17,570. How any party...
  • User AvatarTynan 9th Dec - 3:04am
    DJ, you are right to raise this,but you might be surprised. I started my current career as a full time volunteer in a hostel for...