This week I appeared on Newsnight with Gillian Tett of the FT and Louise Cooper of BGC Partners. We discussed our graphs of 2011 (see mine below) and wider questions around the global financial crisis this year – and how ecnomists and policy makers need to respond.
The Autumn Statement reveals but one thing: the Chancellor and his advisers are both ill-advised and dangerously ill-prepared for the forthcoming prolonged Depression. (And if you think I exaggerate, let me remind you that 20 years after the Japanese debt bubble burst, Tokyo house prices are still falling, and the stock market is worth 60% less than 20 years ago. And the Japanese economy was in a healthier state then, than the UK is today, thanks to an export surplus.)
Today’s penalising of the innocent – public sector workers, pensioners and those hundreds of thousands of young people entering the labour market - is a result of a deeply flawed economic analysis by the Chancellor of the causes of the global financial crisis.
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.
Read about my speaking tour of Australia below – from the SEARCH Foundation:
The SEARCH Foundation is currently touring eminent British economist and author Ann
Pettifor around Australia and she is visiting our shores with a warning; the GFC inducing credit
crunch is not over and Australia’s banking sector is vulnerable.
Ms Pettifor is visiting Adelaide, Sydney, Melbourne, Canberra and Brisbane for speaking
engagements over the next fortnight.
“Before the Credit Crunch of 2008-2009 Brits and Americans were convinced that the good
times could last forever. Our orthodox economists, central bankers and politicians encouraged
us in that delusion. Today millions of the unemployed, homeless and bankrupt are paying
a heavy price for the failure to understand the role of the private banking system in causing
systemic and widespread economic failure.” Ms Pettifor said.
“Australians would be well advised not to fall into the same trap.
I am staying with my hostess in an old homestead like this one in North Adelaide….
31st August, 2011. G’day from sunny Adelaide. I am here on a short lecture tour organised by the Search Foundation, and supported by the Don Dunstan Foundation, Catalyst , the think-tank in Sydney, as well as trades unions in Melbourne, Brisbane, Canberra and Sidney.
It’s an interesting time in Australian politics, not only at national level with the controversy around the new carbon tax, and yet another political sex scandal….but also here in Adelaide, the home state of Don Dunstan, progressive Labour Premier from 1967-79. Dissatisfaction with the current Labour leadership has forced the resignation of Mike Rann, the premier. And today, the Australian Supreme Court has ruled illegal the government policy of deporting refugees to Malaysia…..So interesting times…
But arriving at Adelaide airport, and standing in the slow and long passort queue, more than a little dazed after the long flight from London, I was confronted directly with the crisis back in Europe. There was only one customs official clearing our long queue, and so it moved very slowly….Next to me were a couple with two restless kids, so I handed over my phone and offered to teach them how to play my favourite game: “Angry Birds”. (Although to be honest the reason I really love it is for the sound effects and those had to be turned down in the queue….) We soon got chatting, and it turned out that they were a family from Ireland. Mum and Dad, they told me with shock written all over their faces, had both lost their jobs in the past few months. Four years ago, they raised a mortgage and built their own home. Now they have abandoned both their home and their families to start a new life in this strange city. The father had found a job, and they had rented a home somewhere in Adelaide – they had no idea where and hoped that the Satnav on the hired car would get them there. They know no-one in this city, and the pain of leaving behind her family was etched in the face of the mother…The teenage daughter looked sulky, and the younger boy grumpy….There was clear anxiety in the father’s face. And incredulity as they discussed the way that private Irish bankers are being bailed out, while they are obliged to pay the cost of the crisis….I wished them well, and hoped that Australians would welcome them….
It’s a bad old world….but great to be among Australians determined to do something about transforming it.
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.