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Economic Growth-Are lunatics running the economy?
Prof Eman
Posted: 15 May 2012 23:20:39(UTC)
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From Paul Krugman-The conscience of a Liberal.. May 13th 2012 9.22am.
"Eating the Seed Corn.
Jonathan Portes is angry, and rightly so. He points out that the Cameron government is systematically starving public investment.

Public sector net investment (%of GDP) v time (2008 to 2014) follows in the article.

There might conceivably be a justification for this policy if Britain were facing an intense cash squeeze. But it isn't-it's able to borrow very cheaply, with near zero interest rates even on long term borrowing.
And given that public investment is, you know, productive, this is almost surely a case of self-defeating austerity : by shortchanging infrastructure now the Cameron government is saving only a trivial amount on interest payments while reducing long-run growth and hence revenues.
The fact that this passes for responsible behaviour is proof the lunatics are running the economic policy asylum."
Do you agree or not?
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pennfair on 27/06/2012(UTC)
Matthew Charles Flinders
Posted: 16 May 2012 09:47:04(UTC)
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Do you have any figures?

Its a hard one to call really, investment is not done by just the government. more areas of industry have become privatised, where they used to be government controlled. So perhaps this is not a surprise to see a fall in investment from the budget?

Its important to realise that a government partys first agenda is to stay in power, not economic growth/stability.
Jeremy Bosk
Posted: 16 May 2012 17:50:45(UTC)
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There is a chart in Krugman's blog here:

The Cameron Gang Slash Public Investment

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Ian Berry on 28/05/2012(UTC), banjofred on 04/10/2012(UTC)
Matthew Charles Flinders
Posted: 17 May 2012 07:55:28(UTC)
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I can only imagine the rest of the developed world has had similar drops in investment. Or we are going to find the next 10-20 years very hard.
Moylando
Posted: 17 May 2012 21:23:15(UTC)
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Prof Eman;14880 wrote:
From Paul Krugman-The conscience of a Liberal.. May 13th 2012 9.22am.
"Eating the Seed Corn.
Jonathan Portes is angry, and rightly so. He points out that the Cameron government is systematically starving public investment.

Public sector net investment (%of GDP) v time (2008 to 2014) follows in the article.

There might conceivably be a justification for this policy if Britain were facing an intense cash squeeze. But it isn't-it's able to borrow very cheaply, with near zero interest rates even on long term borrowing.
And given that public investment is, you know, productive, this is almost surely a case of self-defeating austerity : by shortchanging infrastructure now the Cameron government is saving only a trivial amount on interest payments while reducing long-run growth and hence revenues.
The fact that this passes for responsible behaviour is proof the lunatics are running the economic policy asylum."
Do you agree or not?


Public investment is productive ? No most government capital spending is wasted. e'g NHS systems,
Moylando
Posted: 17 May 2012 21:26:13(UTC)
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No- Governments are good at spending money. They are useless at investing it and achieve little with their capital spending. Leave that to industry
Jeremy Bosk
Posted: 18 May 2012 05:17:57(UTC)
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Building roads, railways, schools, hospitals and such helps people get to work, helps businesses move goods, helps provide an educated workforce, helps keep the population fit. This is useful public investment. Whether it is always spent efficiently is another matter.

Public investment is made via private companies which leads to the creation of jobs and profits. Cut public investment and private companies have lower profits and employ fewer people. Hence a fall in public investment is bad news.

Perhaps those who hate the idea of public investment would prefer to have only fee paying schools, fee charging hospitals and GPs, toll roads and turnpike trusts or maybe pack horses? Perhaps they would like to move their manufactures by canal barge? After all canals were built by respectable, purely private investment.

After all, public investment is shocking, disgusting and immoral. Ask any senile fascist.
Jeremy Bosk
Posted: 18 May 2012 05:44:26(UTC)
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Treasury examines £20bn growth plan
The Government is examining plans to commit more than £20bn of taxpayer money to infrastructure projects in an effort to rekindle flagging economic growth.
Daily Telegraph reports Tory Treason

Shocking, disgusting and immoral. What do this bunch of "pinko-communist pointy-headed intellectuals" think they are doing? This is sheer socialism!

Prof Eman
Posted: 18 May 2012 10:37:35(UTC)
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Cannot help wondering where the growth in the current climate is going to come from.
Not from exports with the EU in deep trouble.
Not at home.
Not the bottom income group at the sharp end of cuts, killing off their high propensity to spend effect.
Not middle income UK with job losses and job uncertainty.
Not small business with their funding problems.
Not big business, preferring to sit on their cash mountains and wait and see approach.
Not banking/financial services with their job losses and problems.
That just about leaves the Government to spend and invest in the hope of kick starting the economy.
The real problems are best summarised in the in income distribution such as Pen's 'parade of Dwarfs' with their matchstick people, and the Lorenz Curve which keeps bending out more and more from the straight line.
i.e Those who want to spend are getting less and less to spend, those who do not need to spend are getting more and more income.
The net effect is lower aggregate demand and more and more recession.
Jeremy Bosk
Posted: 18 May 2012 11:42:19(UTC)
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Even in the EU, some countries are still growing. The horrific economic destruction that lunatic austerity is causing in the periphery is a small proportion of total EU activity. The rich still consume their luxuries, being largely unaffected by the travails of the poor. Even the poor will continue to consume the basics until suicide or starvation kill them. The British car assembly plants are thriving by exporting.

Exports to the emerging markets are largely unaffected and the UK has ample opportunity to gain market share. The USA has not indulged in quite such severe hair shirt policies - although the poor are victimised there as here. Japan has not suffered anywhere near as much self inflicted pain.

Having mentioned some reasons for hope, I have to agree with the implications of the last post. Life for us all is being made unnecessarily difficult by the right wing ideologues.
Prof Eman
Posted: 18 May 2012 17:44:22(UTC)
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Just came across an interesting article in The Independent on line to-day. though I would share it with you.
By Owen Jones : Hatred of those on benefits is dangerously out of control
(Taking away support can only be achieved by demonising recipients as scroungers in mansions)
Helps to explain some of the shift in the Lorenz Curve.
Impacts on the the poor get poorer and the rich get richer, and the current problems some of which arise out of lack of aggregate demand.
Jeremy Bosk
Posted: 18 May 2012 19:37:00(UTC)
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Tories study old newsreels of Josef Goebbels for inspiration.
John Osborne
Posted: 19 May 2012 00:02:11(UTC)
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Jeremy,
Really, suggesting any of our mainstream parties would go to Goebels for policy is not a joke.
Jeremy Bosk
Posted: 19 May 2012 10:39:02(UTC)
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John

I was not joking but was unclear. I actually referred to the style, not the substance. That is the use of the big lie. Although their policies are clearly less evil, both parties are shameless liars and use rabble rousing techniques to get votes from the less intelligent.

But both main parties are morally bankrupt. The Tory extremism on austerity is creating mass unemployment, misery and squalor which will blight the lives of generations to come. The Blair administration got us into two losing wars costing hundreds of our people life and limb, hundreds of thousands of foreign lives and billions in mere money. The second Iraq war was clearly illegal and nobody can trust any politician who does not admit that. Which goes for the Tories who supported the war in Parliament as well as the New Labour vermin who were in office.
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banjofred on 04/10/2012(UTC), Guest on 02/03/2014(UTC)
Prof Eman
Posted: 19 May 2012 15:53:49(UTC)
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In to-day's Citywire Saturday papers, there are three interesting articles relating to growth in the Guardian. Worth reading-
UK 'may never fully recover' if Greece exits Euro
(Top forecaster says Britain would face long recession as key Greek politician frames crisis as people v capitalism)
The Jamaicanisation of the eurozone
(By imposing budget cuts and austerity, the ECB is condemning countries like Greece and Spain to an economic twilight zone)
The G8 and the euro: make this one count
(Europe needs to go in for proper restructuring of its banking sector along the lines of that executed by Gordon Brown and Alistair Darling in 2008-2009)
Amazingly the suggestion is that they got some things right.
Prof Eman
Posted: 20 May 2012 19:36:30(UTC)
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Just to add to my Not's at #9
-Not the construction sector, on latest showing
-Not the housing sector private or public (social housing)
-Not cash strapped charities or Mr Cameron's Big Society
Anyone else would like to add to my Not's?
Jeremy Bosk
Posted: 21 May 2012 10:57:49(UTC)
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Prolonged unemployment and wages below any standard of decency for many of those with jobs lead to misery, squalor, despair and loss of self-respect.

Which all amounts to a job creation scheme for police, courts, prison and probation services, private security firms, prison builders, manufacturers of burglar alarms and security shutters, replacement glaziers...

Every cloud has a silver lining. :-(

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Prof Eman on 21/05/2012(UTC)
Prof Eman
Posted: 21 May 2012 20:35:34(UTC)
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Jeremy
Thank you for your responses.
Your statement 'some countries' in Euroland in recession is actually seven out of seventeen, not mentioning UK. Overall growth anaemic, especially after removing Germany from the equation.
On exporting, we have not done very well, hope that will change? Will it?
As for guns v butter, as you point out guns seem to have had the upper hand, as supported by both major parties. I wonder how much of our debt can be attributed to guns? Maybe the extravagance was wars rather than living beyond our means?
As for every cloud has a silver lining, I think we need a lot of clouds, for the sun to come out after the recession.
Prof Eman
Posted: 22 May 2012 10:11:16(UTC)
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Has anyone seen anywhere - what the objectives of the current Afghanistan war, and the previous Blair war were, and achievements against objectives?
Has any-one seen a cost/benefit analysis of these wars?
This also impinges on the view that it does not matter who you vote for, the policies stay the same, as accentuated by the FPTP (First past the Post) system, based on a few marginals.
A complete turn off for a lot of the electorate. There are few real choices to make via the ballot box. Those who vote seem to do so on the basis of screamers like the Philpotts, as if they were the major economic consideration.
Prof Eman
Posted: 22 May 2012 22:18:15(UTC)
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Had an interesting discussion, wanted to share it with you.
Christine has breezed into town and given the thumbs up, except for growth.
So what is it all about.
Austerity is a brilliant medicine, except that it has side effects i.e. lack of growth and recession. And, side effects have been known to kill the patient. Greece?
So what is necessary?
Creating demand without printing money (QE) or reducing interest rates which are at a record low of 0.5% (not much of a leeway there).
You have to be kidding!
No there is something that can be done. Well look at the Lorenz curve, how it is bowing out more and more. Another way of looking at it is the figures from The Which in to-days Citywire Wonga article. 57% of households on income below £30,000, next 27% on £30,000 to £50,000, next 10% on £50,000 to £75,000, next 6%above £75,000. Hardly a normal curve, definitely skewed towards the richer end.
There is a need for some redistribution towards the lower end to boost demand and help the flagging High street.
Easier said than done.
No, there is a way. It is the FTT (Financial Transaction Tax), which could be used to withhold some of the benefit cuts. This in effect would give a redistribution of income from what is planned.
Nick Clegg keeps harping about social mobility and equal opportunity. I am surprised he has not cottoned on on the above. Especially as the argument can be couched in equality of the North/South divide. London and SE growing on the backs of The Queen's Jubilee and the Games, whilst most of the rest of the country is in recession, especially the North West, whilst having to accommodate London's reject poorest. They then have the audacity to shout about what a wonderful contribution they make to the regions.
The other aspect is investment, tax incentives for manufacturing investment would help us become more competitive, help bring about the shift from financial services to manufacturing,and lift us in manufacturing competitiveness, in which we are way behind our German competitors. After all labour competitiveness is just one aspect of the equation.
What do you think-Agree or disagree?
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