60 Economists support delaying cuts.....

nickmason

StevieJ wrote: »

I thought that was obvious, allowing interest rates to be set by the BOE

Independence for the Bank of England was a Conservative policy - it only came into being after 1997 because of the time it takes to make such things happen. One could argue that they had 18 years to implement, but the catalysts for the policy only became apparent towards the end of the Conservative government.

I should know - even as Conservative, I was against it at the time!

Kohoutek

The Treasury decides the method of measuring inflation and sets an inflation target and the Bank of England is obliged to follow that target when deciding interest rates.

The 'independence' of the Bank of England is easy to overstate. Just like when Brown sold the gold - those were assets of the BoE which were sold as the result of a political decision, not the bank's.

ninky_2

Running_Horse wrote: »

What if the cuts are to government jobs that don't really need to be done?

Should those of us in the private sector maintain the public sector, long after our own jobs have been cut?

you still end up with more people out of work. how exactly are those in the private sector maintaining those in the public sector if they are out of work??

nickmason

jetta_wales wrote: »

I think sharp slashing cuts right now would be bad but there's no reason why they can't make a gentle start even if it was just 2 or 3% here and there it would at least have a small affect on how much worse things get before they get better.

But no Brown cares more about votes than what's actualy best for the country in my opinion.

Also since we're all tightening our belts already why wait untill we're all doing better to just kick us in the guts again with taxes and spending cuts? Make a gradual start now while we're still used to it.

There really is no such thing as a gentle cut; even in the area of "non-jobs", actually especially so, there - the accelerator from reduced consumer spending and increased public spending has a pretty nasty effect. And of course, it's not 2 or 3% off everyone; it skews towards certain people. In any event, it's a lot harder to make these changes than anyone might imagine - contracts, spending plans, etc are all in place.

But you're right - we need action before it gets worse - and one of the elements that is clear from these letters is that international confidence in our economy is the big issue. At some stage there is a huge rebalance from public to private economy that needs to be delivered - and it is now recognised by ALL the economists that that cannot be done simply through growth. Private sector growth can reduce the amount of cuts that are required in the public sector.

This is why most of this is a false debate - the reality is that what differentiates the parties is the will to make the tough calls, when (or "for when") the government can. As many have pointed out, even Conservative governments have found it difficult to make serious public sector cuts in the past. But they've been hugely less profligate than Labour at doing so.

Labour are saying "don't worry, it'll be fine, just take a long view". This is simply not true - but is easy to say, because they don't believe they will need to fix it (and if they do, they've never really understood the level of discipline required to make cuts, the way that Conservatives do from having tried so hard - just ask Ken Clarke).

Conservatives are saying "we'll make the tough calls". To some this means they'll cut immediately - which is variously scary or "precisely what we need"; to the more knowledgeable this means that they will set in progress the cuts, which is variously the best that can actually be done or "too little, too late". In either event it is precisely what all the economists are asking for, it's just that some are talking in the simplistic first sense, and some the more sophisticated second sense (chosen by audience, not by their respective economic sophistication).

Either way you look at it, I'd rather a party with a track record of making tough calls - because we ALL (the Labour Cabinet "down") know that's what's required.

nickmason

One last observation about economists (from an economics grad). They are not mathematicians - working in pure logic. Nor are they scientists who can repeat experiments. The academics are typically more like philosophers, using numbers to describe their theories. The more professional economists tend to be weathervanes for the herd (which incidentally is self-fuelling, and driven by the markets), rather than deriving anything from first principles.

It is therefore no surprise that they rarely agree. It is even less surprising that when there is a major event in global macroeconomics, they disagree all the more. As JM Keynes said "When the facts change, I change my mind" - well the point is that with macroeconomics the facts change everytime. In light of what has happened recently, most of the text-books are going to be rewritten (I don’t find too many people talking about non-accelerating-inflation rates of unemployment any more, for example, let alone Phillips curves).

There is one rule in market economics that probably trumps all the others - the law of unintended consequences. The market will typically find a profit-generating possibility that no one had considered.

Nobody will ever know in a scientific sense whether QE was the right call. Nobody will ever know whether the 20 or the 60 were right. Nobody will ever KNOW whether Gordon Brown saved the world, however unlikely it is! These just become articles of faith, correct or otherwise because our proselytising heroes tell us so.



As an aside, the above is about macroeconomics; microeconomics does repeat - and very occasionally microeconomics can be applied in the real world to make macro decisions - for example why economists are agreed that the Tobin Tax that Gordon Brown (and other politicians) have been lobbying for would be a very foolish idea, in that it wouldn't do what it is intended to!

Spartacus_Mills

HAMISH_MCTAVISH wrote: »

http://news.bbc.co.uk/1/hi/business/8523034.stm

There's been much talk on this board of late that most economists support deep cuts immediately, after the letter by 20 of them last week. Clearly, that is false.

It is obvious that growth should be the first priority, ad then the cuts needed will be smaller. You cannot just cut your way into balance, growth will be needed as well.

Economists 4 Labour.

Very convenient on the day Brown makes a speech to a group of European Lefties.

Economists have different views. You can pick and choose according to your views, as you have done.

However when there were cuts in the early eighties and nineties we still grew.

lemonjelly

moggylover wrote: »

Then I hope sincerely that you are one of the first to suffer dramatically from Slash and Burn! I find your post lacking in anything that remotely approaches a knowledge worth exploring.

Slash and Burn was basically what was done when the miners were ousted from work and no inward investment into those areas was undertaken. We are still paying the cost of that Slash and Burn, and the cost has already been FAR in excess of that which would have been involved in continuing production subsidy!

If only people could actually see their own granny being affected by slash and burn then they might actually see that the human cost (and the long term cost to Society) is far, far too high to go that route!

A voice of reason in the wilderness! Lovely to see. Faith in humanity & human intelligence restored!

And also quite correct, the manner in which thatcher utilised her iron lady persona to, regardless of cost, crush the NUM was phenomenal. Similarly, thatcher decided that people would vote tory more frequently if they were homeowners, so brought in the right to buy. All the money that was gained from the right to buy did not go into subsidising house building, & arguably was a precursor to the recent property bubbles (& as an aside, tory voters increased!)

abaxas wrote: »

The problem is that the super-rich and big business built the country, or we'd all be using coal to heat our stone built homes and eating meat once a week.

The super rich don't build countries etc because of their altruistic tendencies. They did it to make themselves even richer! & they don't really care at what cost, as long as they promote their own wealth.

Thing is, that wealth has to come from somewhere. Essentially, it comes from you & me!

Despite this, you're arguing for them, dispite the fact that their growth will make you poorer.

Wookster

I haven't read the letter, though I would be surprised if it mentions the crowding out effect.

Its all well and good to run huge deficits while QE is under way as it does not reduce the funds available to corporates (and individuals) to borrow but after QE is suspended the government will be competing directly with corporates and individuals for the limited funds available to borrow.

Quite how individuals and corporates can compete without a significant increase to the rate, I don't know. I suspect that huge amounts of government borrowing will make it much harder for corporates to borrow, invest and undertake productive activities.

abaxas

lemonjelly wrote: »

And also quite correct, the manner in which thatcher utilised her iron lady persona to, regardless of cost, crush the NUM was phenomenal. Similarly, thatcher decided that people would vote tory more frequently if they were homeowners, so brought in the right to buy. All the money that was gained from the right to buy did not go into subsidising house building, & arguably was a precursor to the recent property bubbles (& as an aside, tory voters increased!)

History has shown that the NUM was right, Maggie wanted to close the pits.

However, history has also shown that it was the actions of the NUM which brough this forward. Ie they move forward their own destruction through greed.

If you cant rely on something, you get rid of it. The more unreliable the miners became the quicker they were disposed of. If anything they sacked themselves.

nickmason

lemonjelly wrote: »

Despite this, you're arguing for them, dispite the fact that their growth will make you poorer.

If you consider your poverty in absolute terms, their growth will make you richer. Only if you consider your "poverty" relative to their wealth, will their growth make you poorer. And frankly, forgive me saying this, but that's a pretty sad place to be looking from.

Incidentally - if you really do want to think in relative terms, then open your eyes to our relative impoverishment against the countries that are booming.

Me - I'd rather be booming personally, knowing that both through growth and taxation I'm helping those around me.