Last weekend, I attended the Just Banking conference in Edinburgh, organized by Friends of the Earth. I gave a talk titled, “Five Tools and Six Steps towards global economic recovery: Making finance servant, not master of the economy” and have posted my speech notes below:
Last year, on the 13th December, 2011 Newsnight asked a group of economists to identify the most important chart of the year.
I chose this one, which had appeared in the first paragraph of the British government’s Budget Report of 23 March 2011. It shows, as you can see, the extraordinary high levels of UK private debt – but makes no reference to public debt.
This week, I was interviewed by the Renegade Economist. We discussed regulating the banks, the rise of the far right in France, economists as “hired guns,” and what we can do about it. Watch the video below to view the whole interview:
I have posted below my contribution to the New Statesman Current Accounts economic blog, in which I discuss the lessons we can learn from Iceland’s crash and recovery:
Let’s confess, it felt good to see a Prime Minister criminally charged for the financial mismanagement of his country, as happened to Iceland’s Geir Haarde. But it also seems fair that he was convicted only of negligence.
After all, he and his government had full policy cover from mainstream economists like Richard Portes (ex-President of the Royal Economic Society) in the bubbly lead-up to the banking collapse in October 2008. Professors Portes and Baldursson co-authored a November 2007 report for the Icelandic Chamber of Commerce, in which they concluded that:
I have posted below my contribution to the Left Futures blog, where I discuss in more detail my criticism of Budget 2012:
Since 2009 the economy has struggled to recover from the mire of a slump caused by the banking sector. But each time economic activity quickens, it hits a series of buffers. These buffers are well known , but denied by the Chancellor: a vast overhang of private debt now slowly being de-leveraged; a banking sector whose financial transmission system is broken; falling real incomes, rising unemployment, high energy costs and a collapse in investment.
In conditions of uncertainty, without the steady and cheap availability of credit, firms and individuals wisely refuse to spend and invest. And so the private sector is stuck, and the economy stagnates.
I am posting below my contribution to yesterday’s Guardian ‘Comment is Free’ panel on the budget:
George Osborne today reconfirmed Britain’s prolonged collapse in economic activity, and thrashed around for supply-side “solutions”. He announced a long list of measures: taxpayer guarantees to banks reluctant to lend; tax cuts for the very rich; loans for youthful entrepreneurs; a kite-flying pilot on Sunday trading hours; deregulation of public sector pay and planning; incentives for private investment.
The chancellor expects these supply-side measures to stimulate recovery – on their own. Given that Britain has the highest levels of private debt in the world, given the broken banking system, high unemployment and sustained economic weakness, he appears to anticipate little real opposition to these measures. The British public have quietly accepted that incomes are falling in real terms, and there is little resistance to rising unemployment.
Yet all the supply-side solutions in the world will do little to aid recovery in the absence of growing demand for goods and services. Nothing will happen if customers (of banks, firms, shops) simply cannot or will not walk through the door.
Today the chancellor resolutely refused to address falling levels of demand. The budget’s sound and fury signifies, macro-economically, nothing but sustained stagnation.
Newsnight’s Paul Mason put together a package about a company in Lincoln that is doing really well and about a community that shows every sign of emerging from the credit crunch. I was then invited onto the show to comment on whether or not this latest outgrowth of green shoots is sustainable.
As I have emphasised before (to no avail it seems) Britain’s crisis is one of a vast bubble of private sector debt.
These private debts eclipse – by a huge margin – our public sector debt as a share of the national cake. They help explain why the economy struggles to recover from the shocks of 2007-9, and why the banks still pose a grave systemic threat.
The fact is Britain’s household, corporate and financial sector debts are vast, and may well never be repaid. As the McKinsey Global Institute points out, British banks, corporates and households are only beginning to ‘de-leverage’ these debts – pay them down, or write them off.
The more is paid down, the less is available for spending. The more are written off, the greater the losses for banks.
Yet our government has skilfully led public opinion to believe that the crisis in the private finance sector is over (bar the odd spat over bonuses), and now centres on public sector debt – a point of view endorsed, according to Twitter, by Angela Knight of the British Banking Association last week.
The following is about the Ukraine, hardly a model of transparency, accountability and democracy. But it is interesting for what it tell us about the thinking of the great imperial powers (GIPs). On the one hand today’s GIPs make a great to-do about the need for democracy, often insisting that it is a condition for aid or IMF financing. On the other, they choose to ride roughshod over Greece’s democracy…and demand, e.g. that Greece’s forthcoming elections be cancelled, or postponed – in case they reject the demands of the GIPs. (See Wolfgang Munchau’s piece ‘Greece must default if it wants democracy’ in the Financial Times of 20 February, 2012.)
And so we read about the Ukraine, which it seems is just not democratic enough for the GIPs. As a result, and again according to the FT (14 February, 2012)
“It’s looking less and less likely that Ukraine, its fragile economy bracing for a eurozone-driven slowdown, will get a boost of confidence and cash any time soon from the International Monetary Fund.
In a weekend interview on Ukraine’s TVi television channel, Philip H Gordon, US assistant secretary of state, said:
“Typically the IMF will focus in on more narrow criteria that are solely in the economic area. Those conditions are hard enough to meet. But I do think that in reality if a country is seen to be violating its democratic obligations, it becomes more difficult for international institutions to support them, especially in this climate where there’s a lot of pressure on funding and a lot of countries that need support.”
Our advice to the people of Greece: it would be unwise to alienate one of the Great Imperial Powers by “violating..democratic obligations”. If Greece were to do so, it would become “more and more difficult for international institutions to support them…..”
“The main opposition candidate for the French presidency has spelt out his intention to reopen discussions on the new European treaty with all signatory countries if he wins the election, a move that would throw into doubt the results of months of negotiations by his opponent Nicolas Sarkozy and the German chancellor Angela Merkel.
“In France the treaty is ratified by parliament, not the head of state … We have a window of opportunity [to renegotiate],” (Françoise Hollande) said.
“Having secured parliamentary approval against a backdrop of violent protest across Greece, Athens must ……produce written commitments from the main party leaders that they will stick to the programme before and after elections which could come as soon as April.”
I appeared on Al Jazeera’s ‘Inside Story’ yesterday to discuss Greece and was joined by Greek Journalist Matina Stavis and Political Analyst George Kapopoulos. During the panel discussion I stated that:
“The Troika are trying to ensure that the money goes straight to the creditors to prevent Greece from defaulting, but in doing so they are stripping Greece of her economic and political sovereignty. They hope to stabilise the situation and make sure that the bankers and hedge funds get paid, and that pensioners and the poor don’t take priority over them.”
