Tuesday, 21st April. Guardian round table: The CBI thinks the worst is over. Gordon Brown says Britain is overcoming the problems of recession. In budget week, we gauge the levels of optimism
Ann Pettifor “My rating of green shoots is at zero – if ideologically driven attacks on government spending by all political parties persist. Its striking this intense focus on the public sector deficit. Why so little mention of the backdrop? The historically unprecedented meltdown of private sector finances.
The savage Credit Crunch meant that demand from heavily indebted consumers and companies collapsed. The crisis forced thousands of companies and households into bankruptcy. The fall in consumption and industrial production delivered a massive shock to the economy, with still-rising job losses, loan defaults and bank failures.
With the collapse in demand from the private sector, where is demand to come from if not government? And as the weakening body of the economy gradually deflates, what private stimulus is to revive it?
Finally, what of that long-forgotten instrument, the multiplier? If government revives the deflating body of the economy – with spending on the Green New Deal – consumers and companies will perk up, and the multiplier will kick in. Government income and tax revenues rise automatically, to restore public finances to health.
In other words, as sure as night follows day, the government’s finances will recover – but only if, and when, the economy recovers.”
Ann Pettifor is executive director of Advocacy International