Reining in Public Debts or Challenging Democracies?

Last week I gave a talk in Brussels at a debate moderated by Pierre Defraigne, Executive Director of the Madariaga – College of Europe Foundation. It was A Citizen’s Controversy with Lars Feld, Professor of Economic Policy at the University of Freiburg and Member of the German Council of Economic Experts.

Below is my slideshow from the talk:

Osborne: Speaking truth to wealth and power? Really?

George Osborne was presumably aiming at himself and his friends, when he vowed “to speak truth to power and wealth” at the Tory party conference this week, but dare he speak economic truth to the rest of us? – simultaneously published on Left Foot Forward >

On the narrowest of bases, he might still claim he spoke “truth” to the weak and powerless when in the House of Commons debate on the economy on August 11th he made this challenge:

“Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year?”

It was a ‘brave’ claim when he made it, and it’s looking even ‘braver’ – and more disingenuous – now.

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My verdict on Ed Balls’ conference speech – apologies are not enough

Published in the Guardian Cif alongside responses from Jonathon Freedland and Sheila Lawlor:

Ed Balls said sorry for Labour’s record on ultra-light-touch financial regulation, and that must be acknowledged.

But apologies are just not enough. He and Ed Miliband must stop attacking his electoral base, “hardworking families”, many of whom are trades unionists.

As Balls recognises, unless urgent action is taken, this may be the gravest economic crisis in history – given the global integration of finance and the growth of world population.

So Balls must go further.

First, he must declare loudly and forcefully that Labour will never again be captive to neoliberal central bankers like Alan Greenspan; or private bankers like Sir Fred Goodwin of RSB.

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ABC daily report – ‘Let them default’

While I was in Australia I recorded this interview with ABC’s daily show. This went out on 15th September. Watch it above or on ABC’s website here >

What a financial tailspin may mean for you and me

Wall Street plummeted as concerns over European debt and the US economic downturn spurred a broad sell-off. Photograph: Shen Hong/Xinhua Press/Corbis

Read my article from Guardian Cif, Friday 19th August:

As bank shares and stock markets plummet, and investors flock to the safety of government bonds; as obstinate EU leaders crucify their countries in a futile struggle to defend today’s equivalent of the gold standard; as British and American politicians adopt austerity policies and drive their economies closer to the cliffs of depression; and as most professional economists stand aloof from the escalating crisis – what lies ahead for ordinary punters like you and me?

First, let’s take look at the big political picture. This crisis is already sharpening the divide between left and right in both the EU and the United States. Studying a precedent – the implosion of the 1920s credit bubble in 1929 – we note that four years after that crisis erupted, the political divide sharpened decisively. The United States and Britain moved to the left. Germany chose a different path. After 1930, Germany’s Centre party under Chancellor Brüning adopted austerity policies that resulted in cuts in welfare benefits and wages, while credit was tightened. At the same time the German government engaged in wildly excessive borrowing from the liberalised international capital markets. The ground was laid for the rise of fascism.

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Financing the Green Transition – why we can afford it

Last month I gave a ‘Green Talk‘ in Bristol, organised by Climate Works.

It was wonderful to be, first of all at such a professionally and well organised event (congrats to Mark Letcher and his team). It was also fantastic to be amongst such an interesting array of speakers including John Gapper ‘the secret gardener’ who has spent the last 35 years propagating wild flowers in Brighton and Hove (watch his talk here) and Alice Ferguson and Amy Rose – two mothers with a simple but brilliant idea to get children playing outside (watch their talk here).

My talk was on how we can afford to finance the Green Transition – watch below:

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Savings and the alchemy of credit - my article for Aviva

Aviva has brought together a collection of prominent thinkers to provoke renewed debate and fresh ideas about future prosperity and creating a culture of sustainable savings. The group, names the ‘Future Prosperity Panel‘, published their report ‘Big picture thinking – Towards sustainable savings’.

My article is called ‘Savings and the alchemy of credit’ and is published alongside valuable work from Alain De BottonSimon TayPaweł Świeboda and Diane Coyle.

Read a summary of my essay on the Aviva site and watch a video interview with me here… >

Why Krugman’s ‘Keynesianism’ is controversial

Some of our friends were irked by my observation this week that Paul Krugman is:

“an extremely controversial figure for Keynes scholars. He champions a mainstream interpretation of Keynes’s work known as the neo-classical synthesis”

Many rightly applaud him for using his platform at the New York Times to defend further fiscal stimulus in the US – against a hostile political crowd, not to mention the downright opposition of neo-liberal economists – and we commend him for that.

However, because he has such an important platform, it matters more that he lacks a proper understanding of the nature of credit. Our beef with him – and the vast array of neo-liberal economists –  is well expressed, and evidenced by Steve Keen in his latest blog: “Dude! Where’s my recovery?” Namely that:

“Neoclassical economists ignore the level of private debt, on the basis of the a priori argument that “one man’s liability is another man’s asset”, so that the aggregate level of debt has no macroeconomic impact. They reason that the increase in the debtor’s spending power is offset by the fall in the lender’s spending power, and there is therefore no change to aggregate demand.

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Greeks refuse to party...

The olive grove harvest. Image source: www.oxfam.org

As a follow-up to yesterday’s post on Greece: the Greeks are doing the one thing that hurts bankers most – they’re turning down invitations to their party.

In my book, ‘The coming first world debt crisis‘ I tried to spell out what actions individuals could take to defend themselves against the predations of voracious lenders.

“After all,” I wrote, “the finance sector depends on us, the world’s debtor-spenders, to come to the ball. We can turn down the invitation. We can decline the credit card, overdraft or loan. We can refuse to dance to Finance’s tune. We can live within our means.”

Well the Greeks have taken the advice, but gone further. They are taking their money out of banks.

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Austerity: OECD economists show clear signs of ‘cold feet’ for austerity

(Photo: REUTERS / Yiorgos Karahalis )
A Greek riot policeman stands in front of graffiti written on the wall of a bank during violent demonstrations over austerity measures in Athens, May 5, 2010. Greece faced a day of violent protests and a nationwide strike by civil servants outraged by the announcement of draconian austeristy measures.

Dear readers….Recovering from ‘flu and a trip down to Hay on Wye…Thought you might be interested in this piece I have written for Prime.

“We should note recent developments in political economy, that – while understated – are, we hope, of significance. Last week, the OECD published their latest World Economic Outlook, which features chapters on each developed economy as well as an assessment of the world economy as a whole.

The report is schizophrenic. It clumsily offers an outlook of excessive optimism; makes a selective assessment of ‘risks’; but continues adherence to an economic policy doctrine that is clearly making OECD economists very uncomfortable.

While the OECD report contains the expected justifications and support for the ‘austerity’ approach, nevertheless the organisation’s ‘cold feet’ are becoming apparent, even before the full extent of austerity programmes has begun to impact. There is no better example of this unease than their approach to the UK.

The report commends UK policymakers for their “current fiscal consolidation (which) strikes the right balance and should continue.”  At the same time, OECD economists hedge their bets by urging the UK government to embark on “higher infrastructure spending (that) would lower the short-term negative growth effects of consolidation without affecting its pace.”   At a press conference last week, the OECD chief economist warned that the UK should be prepared to cool austerity in the wake of weaker growth.

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