Christine Lagarde's attack on Osbornomics is damning

The new IMF boss's comments make awkward reading for George Osborne.

By David Blanchflower Published 16 August 2011 14:49

On 6 June 2011, George Osborne said that he had been "vindicated" in a debate over spending cuts after the International Monetary Fund backed his austerity measures. Launching the fund's annual assessment at the Treasury, the Chancellor positively swooned over the verdict and the acting managing director of the IMF John Lipsky's support for his failing policies.

"The IMF have publicly asked themselves the question of whether it is time to adjust macroeconomic policies -- in other words, 'Is it time to change course?'" he said. "They have concluded definitively that the answer is no.''

Today's developments suggest that if there ever was any vindication, which was never credible of course, it has now fled.

To be fair to the IMF, the original report did warn that:

If the economy experiences a prolonged period of weak growth and high unemployment . . . then some combination of the following would need to be considered: (i) expanded asset purchases by the Bank of England and (ii) temporary tax cuts. Such tax cuts are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households or job creation to increase their multipliers.

This has now happened as growth disappoints.

Today's release of growth data for the second quarter of 2011 from Europe were scarily bad with the eurozone economy growing only 0.2 per cent and there may well be worse to follow. This is the smallest increase since the recovery began in the third quarter of 2009. This is bad for UK growth -- which was also 0.2 per cent for the second quarter of 2011 -- given our dependence on exports to the slowing euro area.

Growth has slowed sharply from the 0.8 per cent increase seen in the first quarter. Growth in France and Portugal was zero, while Germany grew by only 0.1 per cent, compared with market expectations of 0.5 per cent. The Netherlands (0.1 per cent), Italy (0.3 per cent) and Spain (0.2 per cent) also showed very little growth.

As can be seen below the UK has performed badly compared to our European counterparts for whom we have complete data. Based on data for the last three quarters, which is how the table is presented, the UK ranks next to last ahead only of Portugal and tied fourth from last with Italy using data for the last four quarters, ahead of Portugal, Romania and Spain. No vindication here George, I'm afraid.

According to a Treasury spokesman, Osborne chatted with Christine Lagarde, the new managing director of the IMF, while he was on his holidays in Hollywood. I suspect Slasher wasn't too happy about what she said, given his frequent claims that the IMF, Uncle Tom Cobley and all supported his misguided and disastrous macroeconomic policy.

Writing in today's Financial Times, Lagarde argues that deficit-reduction plans must not harm growth as the austerity programme clearly is doing in the UK. She writes:

For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time, we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow . . . What is needed is a dual focus on medium-term consolidation and short-term support for growth and jobs.

That may sound contradictory but the two are mutually reinforcing. Decisions on future consolidation, tackling the issues that will bring sustained fiscal improvement, create space in the near term for policies that support growth and jobs. By the same token, support for growth in the near term is vital to the credibility of any agreement on consolidation. After all, who will believe that commitments to cuts are going to survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?

I could have written this.

Recall that Osborne opposed Gordon Brown's candidacy and supported Lagarde's in the job, so this is highly embarrassing.

Commenting, Ed Balls, Labour's shadow chancellor, said:

The slowdown of a number of European economies is obviously a serious cause for concern. The Managing Director of the IMF, Christine Lagarde, is right to say that "slamming on the brakes too quickly will hurt the recovery and worsen job prospects". The evidence for George Osborne's claim that Britain is a safe haven has collapsed and his dangerous complacency is being exposed. That is why the Chancellor should take heed of the IMF's latest advice. The IMF were right to warn George Osborne a few months ago that he would need to change course if the UK continued to stagnate. His decision to continue to ignore wise advice is not just complacent it is deeply reckless -- a dangerous gamble with jobs, investment and living standards, too.

Osborne's claim that his policies have succeeded because of the fall in bond yields looks like a stretch, given -- as http://www.ft.com/cms/s/0/b8d489a8-c363-11e0-b163-00144feabdc0.html#axzz... " onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;">Peter Tasker noted in the FT last week -- that no OECD country that issues its own currency is suffering from rising borrowing costs. The IMF does not support the coalition's failing economic policies. Vindicated my foot. It's time to stimulate growth and jobs.

Tags: GDP George Osborne

More from David Blanchflower

View the discussion thread.

64 comments

Tue, 2011-08-16 17:56 — Boomandbuster (not verified)

Blanchflower you fathead could you give us the UK GDP numbers accounting for the impact on inflation of VAT hike this would give a like for like comparison. I'll give you a clue this reduces CPI down to 2.8% and lifts us well up your silly little meaningless chart. Other points to consider whilst you do this for you bending bit of analysis "data guy", try looking at the correlation between long term growth rates and the level of debt and taxation in an economy, you'll find these are positively correlated. I'll explain this for you and your leftie cohort the lower your national debt and the lower your taxes the faster your economy grows, i.e. Socialism impoverishes nations through time. Please however do not let annoying empirical evidence get in the way of your mission to keep pulling the fiscal levers until all Western Sovereigns have defaulted.

Tue, 2011-08-16 17:58 — Jesse Boucher (not verified)

Wouldn't take too much from Christine Lagarde's comments she is after all the finance minister responsible for taking their economy to the brink of a downgrade from the major ratings agencies who have little faith in the policies implemented by her

Tue, 2011-08-16 18:03 — Freeman2

Libby Smith writes, 'Same tired old point raised by the discredited Marxist economist who has lost the argument and has now completely lost the plot.'

When you say 'Marxist' do you mean he believes that 'The history of all hitherto existing society is the history of class struggles'? I must say I've never noticed that. But, if you believe he does, which side would you say he is on in these phase of the class struggle?

Mon, 2011-08-22 16:58 — Awake!

@ OWH-
'Well, more fear means more people flood to gov't debt. Gov't bonds are safe, as long as the gov't issues it's own currency.' really? History is littered with sovereigns that defaulted and had their own currency- and that iss precisley the point here, some sovereign debt is trading down cos people don't think it's serviceable, the UK's not included in this. People only buy debt because they believe they will get a MEANINGFUL return, not because the bloke selling u the bonds has a printing press. In NORMAL conditions and a perception that a slowdown is imminent, agreed, debt gets bought because people want to park cash quickly whilst they assess new datapoints. Currently, normality has broken down- the economics we are seeing is being made up as we go along, and fear of this and the debt imbalence has driven the yields. AND, a lot of the guys in the industry don't know what they're talking about, adding to the confusion- remeber, these types brought us AAA and 7.5% simultaneously... er, how did u manage that i asked? slice'n'dice, commoditisation, and we keep the mezanine... clever huh?... erm,that worked out. Some of the asian wealth funds COMPLETELY sidestepped the subprime debacle. How did they do that? As the Singaporean fince minister said" US and British sharp suited bankers kept trying to sell it to us- our guys could not understand, so we didn't buy" so it seems they're are many 'opinions' , some cleverer than others, and blanchflowers is poor poor poor. Where was he when this was going on- oh that's right, feverishly opening the taps so the merry go round carried on... sick
Interesting what u said about eurozone
a defacto gold standard- u referring to the Bundesbank unwillingness to print?- it's a sign of the times when a refusal to print money means it has become a gold standard, don't you think? It's incredible really...
1.) my point about low rates was that there has been a while during which money could have chased the longer maturities, it only did this recently when fear really began to take hold- this fear triggered by recent events in europe and US.
2)I meant the volatility in fx fluctuations- and in equities- these are at historical highs i.e. there is a detachment on some of the fundamentals, this providing no resistance to strong moves in price- classic fear
3)well, if u like weaker gdp globally is always going to make a equities trade down, and agreed in NORMAL economic conditions that forces longer yields lower, but it's not so much fear, it's just efficient resource allocation in the light of new facts. My point was that these companies are in very stong positions- some of them don't know what to do with their reserves and are increasing divIDENDSs, yet they got slammed as well- which is COMPLETELY IRRATIONAL, BASED ON FEAR. To be fair to you, the mkts took a dive when the US numbers showing slowing growth hit, but out of context this was insignificant move, it was normal. What was scary was it came after so much other bad news and realisation about the imbalence being politically manipulated.
4)didn't understand what u meant, u seemingly have argued against yourself, saying gold is NOT money but then saying it IS the very definition of money- a medium of exchange and store of value- And even more interestingly, you state itis a commodity- quite right, and exactly the point I WAS MAKING- when fear grips mkts, people want to hold things withy intrinsic value.
I agree the problem started earlier, i said the CRACKS came in 2005. Maybe like u say it was in the sixties- personally though I find the cultural aspect of what happened more interesting to understand, and I link the decline beginning as the moment we decided to start running persistent deficits i.e. it became structural. I find it repugnant that as a society we became so enamoured with the physical that we were happy to 'bond' ourselves into long term servitude to enjoy these material wealths. Pathetic

Tue, 2011-08-16 18:12 — Clare (not verified)

For allowing Blanchflower near UK monetary policy I think the UK should be permanently downgraded. How ever did this politically motivated crank get on the MPC, his academic background is mediocre to say the least.

Tue, 2011-08-16 18:32 — Shinsei67

This is, yet another, ad hominem attack on Osborne by Blanchflower full of hyperbolic nonsense that the economy is "failing" and deliberate misinterpretation (as does Ed Balls)of the IMF's assessment of the UK's economic policies.

By what possible definition of "slamming on the brakes" is cutting government spending of £850bn per year by £16bn.

Is it worth the risk of bond yields rising and the currency collapsing just to reduce the cuts by a couple of billion per year.

Even Larry Elliot (the Guardian's economics editor and no fan of Osborne) thinks Balls plans to cut VAT are totally wrong.

Blanchflower would be better tasked in suggesting some growth measures the Chancellor can introduce now that will boost growth and not involve just buying growth through more borrowing.

Instead we just get another personal attack on "Slasher".

Tue, 2011-08-16 18:40 — Shinsei67

I realise that Blanchflower will regard it as "dog ate my homework" excuses, but the independent OBR did say that excluding the very unusual combination of events in Q2 (effectively 4 bank holidays and massive disruption following Japanese tsunami) growth would have been 0.5%.

0.5% underlying growth is actually rather good, even more so when compared to France and Germany's lacklustre economies Q2.

But why let the actuality of the economic situation interfere with knocking-copy on Osborne.

Sun, 2011-08-21 03:10 — PhilDuval

Yes, I must admit having lived in countries perviously wrecked by IMF 'advice' I'm not sure why anyone really argues too much over their 'advice'. Use their data but take their opinions with a pinch of salt.

Let's have a look at what 'structual adjustment' did for Russia, Thailand, Africa and South America - Argentina especially.

Why do Conservatives even bother trumpeting their economic advice as being 'good for the country/ economy'? It is what is good for their own narrow class interest.

Even if the UK economy grew by 10% this year how could we be sure it had impacted positively on people's lives? The UK grew and grew under New Labour but how did it increase wages? What did it do for working hours? The affordability of houses? I.e reall human concerns.

Tim Congdon was on Newsnight last week saying that the banking sector had been too heavily regulated in the last 2 years and hadn't been able to grow!! Incredible. The shadow banking system loaded the world with debt - swiftly transferred to the public when the shit hit the fan - and the City's answer is allow more rampant lending. Which really means throw the people a few credit cards for a couple more years and sit back and watch the whole thing implode again.

That a crisis of the private financial world has been allowed to be presented as a crisis of public fiscal policy is one of the greatest crimes in our recent history. Numerous works have come out on this written by people who didn't listen to the mainstream media noise but who read the forums where the traders meet and discuss what they are going to do with their funds the next day.

'Whoops! Why everyone owes everyone else and no-one can pay' and 'The Debt Generation' are excellent places to start in all this.

Sat, 2011-09-17 08:24 — Benedict

Is it possible for you to say exactly what you would do? Would you increase government spending or cut taxes? If you spent more where would this money come from, by borrowing, or printing or taxing? And where would it go exactly?
http://www.diyhomerenovations.org

Tue, 2011-08-16 19:33 — Chris (not verified)

@nick

To correct you it was actually the ONS that calculated the growth figure and estimated that up 0.5% of growth was taken off the Q2 figure by "special factors". BUT they attached the following caveat

"These estimates are broad brush and illustrative. There can be no certainty as to the impact of the special events and there may be other factors at play."

Not exactly a massive vote of confidence in their own "estimate".

"But why let the actuality of the economic situation interfere with knocking-copy on Osborne"

LOL!!! Interesting take on the "actuality of the economic situation". The reality of the situation is that the UK grew 0.2% in 2011Q2.

Tue, 2011-08-16 19:37 — rob andersen (not verified)

CLOWN!!
the reason you DON'T borrow till lenders stop lending (or start charging higher interest) is PRECISELY because when the proverbial hits the fan you are then ABLE to borrow because you're seen as credible.
Honestly, listening to you and Brown, it's insane- have you guys EVER spent time running a business, something smaller than a country where sensitivities are higher and results more immediate, rather than the cataclysm we maybe be about to be engulfed in. (interestingingly you used that word on bloomberg today...)
re Lagarde, as usual your analysis is completely skewed.
Firstly, she is making the general point that austerity without growth is not desirable and that IN FACT SHE BELIEVES the following, her words;
"Shaping a Goldilocks fiscal consolidation is all about timing. What is needed is a dual focus on medium-term consolidation and short-term support for growth and jobs. That may sound contradictory, but the two are mutually reinforcing"- now that is a tall order, impossible for you to even understand because ultimately your economics are one dimensional, or perhaps you'tre political- I don't care anymore, you're boring- HOWEVER, there is too much at risk to let this go. The task at hand, as Mrs lagarde confirms is very diificult. Interestingly, her point about markets disliking growth more than Fiscal contraction was surprising, bearing in mind that it's actally in the Eurozone that the market forces are being supressed i.e. they have a ban on short selling equities- for the uninitiated, this means that the market is not being allowed to determine share prices, a paractice that historically is a herald for some sort of end- it's put in place by politicians trying to calm markets, but does the very reverse- it freaks people out. this ban is not currently in place on the UK, US or anywhere else in the world. More bullshit economics folks, the stock market must be centrally controlled... simply drives investment away. Even more interestingly, Blancheflower makes no mention of this ban- it is shoddy, but he can't, it's too close too Lagarde perhaps? What would he say if Osborne had imposed it? I wonder...
So is lagarde aiming at the US or the UK?
She's talking to everyone... that is the truth. In layman's terms she is saying: the debt needs to be tackled in such a way that demand isn't completely choked off... and this will be difficult. So for the idiots who note that Osborne borrowing is actually up, it's because u can't smash into the problem like Thatcher did, because right now the whole world is caught in this web )the effect of globalisation)
This is a faier analysis. The problem is the partisan bollocks we have to listen to- this situation is so critical, the system is so unstable AND worse, a lot of economists now have no understanding of dynamical systems- their noses being routed in MU curves at 16, never having done a paper round... This global crisis can be fixed, but it's more complex than the rioters because it involves sooooooooo many more people. We cannot allow the nonsesnse to prevail.
The FACT is that right now mortgages will get cheaper BECAUSE we're seen as safe in the world. The crap we're hearing from the usual crowd is INCORRECT and SELF DEFEATING- they are saying the reason UK and US yields are so low ids because we have our own currencies. The reason they think this? because they don't understand ANY maths- they have spotted a correlation, and the inference is stupidly shocking or politically motivated. What would they have, we kkeep borrowing such that we get a currency crisis as well.. is that what you wish.
Thus is all so moronic- it's almost as if there is a 'goal seek' by these guys to blow absolutely everything up. the level of analysis, at such a critical time, is beyond credulity. it is almost as though they relish watching the world on the edge of the Abyss. And I'm not trying to scare people, this abyss is Miltonian- it makes satan's fall look like humpty dumpty falling off a wall.
Blanchflower, you title the piece;
"Christine Lagarde's attack on Osbornomics is damning"- did you pull that out of you're arse or did you think about it?

Tue, 2011-08-16 19:45 — rob andersen (not verified)

And from balls we have;
"The IMF were right to warn George Osborne a few months ago that he would need to change course if the UK continued to stagnate"
No shit sherlock.. just one thing, though, cretin man... if i get in my car to drive to a shop, and rather than drive it through my neighbours garden i use the steering wheel and go round bends, have I changed course?
the Only reason these people get air time is because of their title, plain to se...

Sat, 2011-08-27 12:06 — Luddite (not verified)

Jonathan Gregor:
Empty rhetoric - the government has sovereignty over all within its borders. The ruling elites want the public to believe that the government is powerless to help its citizens.
Can our government close the door on immigration?
Can our government deport foreign criminals?
Can our government built new coal-fired power station?
Ask Tony Benn how much sovereignty the British parliament has these days...

Tue, 2011-08-16 20:49 — Pam Morgan (not verified)

Blanchflower, Balls and Brown deserve each other....they are all morons.

Pam

Wed, 2011-08-17 23:02 — Luddite (not verified)

How's dolly matthew?

Thu, 2011-08-18 18:39 — Luddite (not verified)

I see writeon: believes in the economics of the mad house, 'forget about the future debt' It's forgetting about debt that's put us all in the BROWN-STUFF. The state can't create sustainable employment, only the favourable conditions for employment, and if this massive 'state intervention to create jobs and demand, 'fails' what then? Do you have a plan B...

Tue, 2011-08-16 21:13 — Mike S (not verified)

Well done David - you really rattled the Tea Party cages. But, sadly, as we all know they are not capable of responding to reason as they are fanatical idealogues.

Sadly, with the boy George in command of our economy they'll take us all with them.

And our kids.

Tue, 2011-09-27 01:23 — Paul C (not verified)

60 years ago J M Keynes - a man whos has proven himself more dangerous than Hitler and Stalin - gave politicians an excuse to spend money they did not have. They jumped at the opportunity. Today, with EU stooge Lagarde's insane plan to escape from insurmountable debt by creating 3 trillion more debt, we reach the end of that road. Game over. China 1, rest of world 0.

Tue, 2011-08-16 21:34 — matthew fox (not verified)

The London Evening Standard where bragging on Friday that Construction would help the UK avoid recession, which was ironic, since Manufacturing is now heading south.

The conservative movement are still scratching for good economic news.

Sun, 2011-08-21 12:08 — Mr. Divine (not verified)

Actually Phil, you're wrong about the IMF. The reason why countries need the IMF is they get into too much debt. The IMF doesn't need to lend them anything. Do you really think the IMF is going to lend a country money if the country is going to continue spending more money that its got? Really, think about it. The reason why the country has got itself into financial strife is because it is spending too much.. the only way they are going to sort themselves out is if they stop doing what they are doing. What do you expect the IMF to say, "Carry on as you're going, here's some more money!' Then you say the IMF policy is not effective look at so and so .. Jesus wept Phil. If you look at Thailand then the country did what it was told and consequently it has boomed in 2000s, so too has Argentina, and Russia and South Africa. Have a look at their growth rates and their debt ratios!

The problem with a History degree is that the person doesn't understand basic economics, and then thinks he is able to understand the mechanisms of macro-economics. Go back and study economics before you start trying to analyse things like this.

Tue, 2011-08-16 21:52 — Anon (not verified)

What a funny looking lady. And why so many vitriolic from these guys above me, does anyone read them, or care?

Tue, 2011-08-16 21:55 — Shinsei67

@Chris
"LOL!!! Interesting take on the "actuality of the economic situation". The reality of the situation is that the UK grew 0.2% in 2011Q2."

Why the LOL ?

It is well known that GDP figures are prone to plenty of revisions so it is usual to wait about a year or more to get the precise and actual figures.

However anyone basing their economic policies on what is actually happening in the UK economy will look at the data and adjust it for special factors.

Hence the fact there is a seasonal adjustment in the figures.

Underlying growth in the UK economy is clearly stronger than the 0.2% figure. Whether it is as strong as 0.5% is moot.

Blanchflower writes as if economic growth is negative and the UK is losing jobs, rather than creating jobs surprisingly quickly.

I admit, however, that I wrote OBR when it was obviously the ONS.

Thu, 2011-08-18 18:13 — Mary Nash (not verified)

Thank you Prof Blanchflower for patiently pointing out Osborne's failing economic policies to us. Hopefully Osborne will wake up following the warning from the IMF boss, Christine Lagarde that growth and job creation must not be sacrificed at the altar of his Austeriy Policy. The hysteria and anger coming from Tim Montgomerie's disciples who misinterpreted the low UK bond yields as vindication for Osborne's economic policies is embarrassing. Like you, the Nobel laureate, Paul Krugman described this incompetence as Osborne's delusions ..."the wolf is at the door, Osborne thinks it is the confidence fairy".

Tue, 2011-08-16 23:06 — ABev (not verified)

Mr Blanchflower please refrain you are starting to become an embarassment to the left. I'm a labour voter but even I can see what you are saying is bordering on the absurd. Let's get back to the centre of the argument which is a debate about the scope and rate of the cuts. You and Ed Balls are leading the left into an economic cul de sac.

Tue, 2011-08-16 23:18 — Eddy S (not verified)

i don't think we should look too much into christine lagarde's comments, she presided over a french economy facing imminent downgrade, the only thing to save french face is the eurobond.

interestingly estonia is top of the table an economy with very low flat rate taxes.

Fri, 2011-09-09 10:19 — Awake!

oh dear mr blanchflower- Mrs lagarde just been saying UK is doing the right thing- who's embarassed now?

Tue, 2011-08-16 23:46 — rob andersen (not verified)

the analysis is so poor and skewed, the attacks so damning, it begs the question- what secret deal have you done mr blanchflower, and who with?
And is ed aware of Balls' plan to oust him, and intate you as chancellor??

Tue, 2011-08-16 23:47 — David Blanchflower1

Golly I really did rattle a few of those right-wingers' cages. The bad data on top of more bad must be a real concern to those who pinned their faith in austerity.

"Absurd"
"discredited Marxist economist"
"fathead"
"politically motivated crank"
"clown"
"insane"
"moronic"
"embarrassment to the left"

Interesting.

Danny Blanchflower

Wed, 2011-08-17 00:20 — Mr. Divine (not verified)

Danny can't you see it's about how you are presenting your argument? Largarde didn't say anything about Osbourne but your headline made out it did. You are coming across as a used car salesman... that's what is pissing people off.

Wed, 2011-08-17 00:27 — Mr. Divine (not verified)

Your table is also a misrepresentation. If you include Spain, Iceland and Greece the UK wouldn't be second from bottom. It's like you're twisting the facts to win an argument but it's obvious to some people. The negative reaction is coming from people because it feels like you are lying to prove a point.

Incidentally the wikipedia table has UK pa growth at 1.25% above Italy.. where is your table from?

You're losing respect because you come across as a used car salesman and I partly support your ideas.

Why don't you write what the government should spend its money on?

Wed, 2011-08-17 00:43 — Mrs.Josephine Hyde-Hartley (not verified)

I don't think the IMF has attacked our Chancellor really. As an ordinary member of the public I too can see and tell that what's needed generally is a dual focus on medium-term consolidation and short-term support for growth and jobs.

But I suppose it's hard for people working hard at their normal jobs too understand how to look at things the way Ms Lagarde does because of a genuine fear that it's none of their business and anyway, hopefully someone else will know what she's on about and sort it all out.

Personally I reckon the way to achieve the kind of balance required is to seriously review the position of the weakest but yet most strategically important players in our economy. For example, people who openly and rightfully apply for retirement pension when unable do their normal job because of ill-health are the kind who may save money and help the wider economy all round - given decent consideration instead of the current arrangements ( whatever they are).

That may sound contradictory, but the two are mutually reinforcing.

Wed, 2011-08-17 01:05 — p j wall (not verified)

Even Gideons allies are questioning his austerity measures!, Ms Lagarde was Gideons choice to be chief of the IMF, This organisation has no morals when it comes to Austerity and the misery it causes to millions of the poorest people on the planet, So for it to question Gideons approach on our economy, after always dancing to his tune, is saying something!!, even to an Idiot like Gideon!!, No doubt Gideon will blame the riots for the rest of this years economic gloom, along with the rain, snow, heat, royal wedding, etc, etc,. There`s obviously some very sensitive Right Whingers on here not happy that their hero Gideon Osborne has been found out to be 'INCOMPETENT'!!, never mind, diddums, diddums.

Wed, 2011-08-17 01:28 — Chris (not verified)

@Nick

"Why the LOL ?"

Because you're talking about the "actuality" of the situation but basing this actuality on some extremely dubious numbers, the ONS statement renders the estimate of 0.5% almost meaningless, imho.

"It is well known that GDP figures are prone to plenty of revisions so it is usual to wait about a year or more to get the precise and actual figures."

yeh, yeh, yeh of course the numbers are subject to revision but if they're so unimportant and wrong why would anybody take any notice of them. The majority of people interested in these numbers aren't going to care much if they're revised by a couple of percentage points either way.

"However anyone basing their economic policies on what is actually happening in the UK economy will look at the data and adjust it for special factors."

I refer you to the ONS caveat, nobody really has a clue what affect the "special factors" had on Q2. The actuality of the economic situation is the UK has grown 0.2% in the last 9 months. You can argue about special factors but a economy that was healthy wouldn't be knocked off course by snow or a few days of hot weather in April. The trend has been down since the tory-libs started scaring everyone with their attack lines (Britain's bankrupt, etc).

"Underlying growth in the UK economy is clearly stronger than the 0.2% figure. Whether it is as strong as 0.5% is moot."

Where are the figures to support this? The trend has been down since the 2010Q3.

"Blanchflower writes as if economic growth is negative and the UK is losing jobs, rather than creating jobs surprisingly quickly"

Economic growth has been basically zero for 9 months, that isn't the sign of a healthy economy. If you take a deeper look at the employment figures you'll see that the vast majority of the jobs created in the past year were before Oct 2010. And that recent drops in unemployment has been down to young people entering education. The ILO headline figures have looked better than the reality.

The whole idea of special factors affecting growth is, imho, b*llocks. One off events don't cause 0.2% growth over 9 months.

Wed, 2011-08-17 01:47 — David Blanchflower1

Mr Divine
No misrepresentation. I used the latest data published today by eurostat, the EU statistical agency. I had to leave out seven countries as in this data release we have no data for them yet.

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-16082011-AP/EN/2-160...

Danny Blanchflower

Wed, 2011-08-17 01:54 — Dickie1

There are so many people on this site who are abusive. Perhaps they are part of the 'sickness' (that their beloved Cameron speaks of)in society, since they cannot make an argument plainly.

Osborne is wrong for one reason: as we know all financial people do not want to upset the apple cart by speaking their minds, so any statement that looks close to doing so is likely to be a watered-down version of what they really think.

Previously there was talk that 'if such and such...then so fourth' which means 'you are on the wrong track' in normal speak. You will come to understand this idea, in time.

Wed, 2011-08-17 05:14 — Mr. Divine (not verified)

@Danny: But your table is a misrepresentation. You've got the UK second from the bottom on the table with a growth rate of 0.8% from the last 4 quarters. However, Spain and Rumania have lower growth rates at 0.7 and 0.2% respectively. Do you see what I mean about people like me looking closer at what you are doing? And coming to the conclusion that you are telling the story in a biased way.

Wed, 2011-08-17 05:31 — Mr. Divine (not verified)

The other thing about those figures is that the Q4 of 2010 was minus 0.5% and this was due to the snowy weather which shut down British production for days... government policy wouldn't have made any difference. If you take this out of the equation then you have the UK half way up the table. Secondly, you have countries like Estonia and Latvia up at the top in terms of growth but we all know that these countries have low GDP per head and so the percentage increases can easily be higher than the rich countries because they are starting from a low base. Thirdly there are other problems when comparing one year to another year such as the previous year might have had a very sharp fall in growth, so this year the increase is very large in comparison.

And I look at the Euro stats page, Greece and Iceland didn't have fourth quarter figures but they would have been lower than the UK.

Like I said before I am not opposed to fiscal expansion but I get put off by you trying to 'prove' that Osbourne is wrong by highlighting certain figures, and I think quite a few people feel the same way.

Please stop boring us with this 'he's wrong, I'm right and these figures prove it' Write something different.

Wed, 2011-08-17 07:14 — Luddite (not verified)

Christine Lagarde's opinion isn't worth Jack-shit!! After all she's not actually covered in glory. Mr Divine, is quite right. Stop boring us and give us some solutions on how to deal with Gordon Brown's disastrous financial legacy.
I do recall that Osborne opposed Gordon Brown's candidacy and supported Lagarde's in the job. So why is that 'highly embarrassing' Given the choice between to evils you also choose the lesser evil..

Thu, 2011-08-18 22:15 — writeon1

'Economics of the madhouse' isn't that what we've got now? Surely no one would argue that the collosal financial, speculative, bubble that finally exploded a couple of years ago, was 'sane economics'? Turning capitalism into a gigantic game of roulette, maybe even Russian roulette, playing and gambling with the lives of hundreds of millions of people and their future prosperity?

What exactly is the 'market' anyway? Why do we allow a mere handful of people to have such overwhelming power over society's affairs? Do we ever really need the financial markets? Who elected the lords of the marketplace? Are they under democratic control? Or, are they, effectively, an unelected and uncontrolled and unaccountable, aristocracy?

And... yes, there is no plan B. It's either some form of Keynes, saving capitalism once more from destroying itself, collapsing in on itself, proving Marx right; or nothing. Keynes, or some variant of Keynes, is the only effective and rational 'cure' for capitalism when it's sick.

Unfortunately the present government have less understanding of the necessity of Keynes than they do about the true nature of capitalism, which as there is no alternative to Keynes' approach, is a recipe for a permanent recession and continued economic and social disaster.

Thu, 2011-08-18 02:21 — rob andersen (not verified)

Danny danny danny...
right wing nutters for wondering how comments from lagarde with no mention of Osborne become
"Christine Lagarde's attack on Osbornomics is damning" the title of your piece. That is right wing??????????????????????????????????
She says "growth and cuts are achievable", and rather than wonder how we might get there, Danny, you claim that the new leader of The IMF has attacked Osborne! Then you say it's right wing to point it out.
and balls and brown look up to you LOLOLOL
You are like the guy in dad's army who kept saying "don't panic, don't panic", in that you are as useful as him. The world obn the brink, and you're the boy in the village shouting 'wolf'- you want it to implode so bad it;s unreal.
Right now, the adults have to deal with the ness your economic policies hve created. Please, you said in your piece that people are working fewrwr hours- could you do the same?

Thu, 2011-08-18 02:24 — Gracie

"Henry the Happy Elephant
16 August 2011 at 15:05
How can this be bad news, when, in the last quarter, we've grown at twice the rate of Germany and an infinite number of times faster than France? If this continues forever, we'll have an economy bigger than them both combined"__________________

Oh dear, oh dear, oh dear.I don't know whether to laugh or cry at these nonsensical comments.

Thu, 2011-08-18 02:24 — rob andersen (not verified)

i declare that my pc is not posting under my usual poster name...

Thu, 2011-08-18 02:26 — Gracie

Careful rob anderson you are really appearing shrill. "Tory orf" old chap!

Thu, 2011-08-18 02:36 — rob andersen (not verified)

the guys are right blanchflower- what are you're actual ideas? It does say at the top "on matters social, political, but mostly economic"

Wed, 2011-08-17 10:49 — Mike Thomas (not verified)

So now we need tax cuts?

Great, I agree so where is the money going to come from?

Bearing in mind Labour now oppose every single government cutback - I take it that this will be done by borrowing yet more money?

The very fact that the UK is reducing its deficit is the reason why bond yields are much lower than our competitors. So the interest borne on them which is paid for by taxes is lower than it would be.

So assuming the government cuts taxes through borrowing more money.

The tax cuts MIGHT stimulate the economy but at the risk of increasing government borrowing costs which would threaten bond yield rate and INCREASE the cost of borrowing RAISING the deficit.

Which puts us smack square in the same boat as Germany, France, Italy, Spain, Greece and Portugal - and the US.

By all means we can have tax cuts at the expense of cutting government spending.

Which Labour oppose.

So, Labour and yourself have no answer other than knee-jerk fantasy economics.

Fri, 2011-08-19 01:08 — rob andersen (not verified)

@ writeon
you think i'm right wing- i'm not- cosumption led growth is over for all western indebted nations, it's simply a fact. blanchflower can't adjust, [artly because he and his gang brought us here. You write;
"A country that can 'afford' to waste hundreds of millions attacking Libya, isn't broke" . Smell th coffee. war is about business interests, and the Uk has many of them in Libya. This now starts to get to the point, which I so tiresomely have to repeat because of the blind fools who talk anout caves but have not even heard f plato's analogy of the cave. i's so boring, but here we go again/
the war is paid for by taxpayers- it benefits oil companies. So we subsidise these companies- geddit???? To b fair and take the whole context, these oil companies are major weights in the index and therefore pension plans. So the Uk has a vested interst in Lybia. And before you go crying about the dirty side of this capitalism, do yourself a favour and check out who was doing deals with the Libyans in the last 10 years? cant be bothered? Brown and blair friends.. that's not political, they were acting in our interest. And is yiu still don't like it, then get a bike and stop using fossil fuelled vehicles, it's too hypocritical/
This utter fantasy land that the clowns and their supporters inhabit. Can't read, can't be bothered to read... Come on guys
@ writeon-
what we are witnessing is not the product of capitalism- In capitalism, you risk you're shirt, and if the venture fails you lose it-That fear of losing your investment keeps people on their toes.This is not going on now- bank bailouts spring to mind.
also, you talk about the maket in a paranoid way. The market is a mechanism- it's been abused that's all. There are no economics ofmadhouse, just political interfrence and removal of common sense for a sustained period of time has brought us here, and people should ask themselves whose policies, whose ideas have brought us to this brink.
The answers won't be in Keynes or hayek, or any textbook. There is a paradox, a Wittgenstinian ladder that needs to be climbed before long term solutions, WHICH DO EXIST AND ARE PLAIN FOR THIS DUMB ARSED LEFT party to see, are arrived at- the problem here is that people don't want to change- they have not understood where we've been led by the clowns, they certainly won't tell you, so look for it yourself- stop reading busted old theories, think for yourselves... question how we got here. Analysis- a greek word, it means to unravel. It is the PROCESS of unravelling that will bring forth solutions, not some static referance point that's out of date. Universal principles will apply by definition, but we've been sleepwalking to long, or are we saying that the Left is a party that has banned thinking for oneself.. maybe that is it, that is what it wants. I mean, theres a guy above who replied to a point I made, and he didn;t even read what I said, thus shot himself in the foot because his counter 'argument' REINFORCED my point- and these people can vote?? They are even allowed to become elected and make rules that govern us all... WTF. And why is it seemingly guys on the left who score these own goals? Passionate? Hardie and scargill had something to be passionate about- you chaps, you don't ven know where you live...

Thu, 2011-08-18 08:43 — writeon1

The viciousness and vitriol heaped opon DB's mild-mannered criticisms of an incompetent, lightweight, and ideologically challenged Chancellor like Osborne, is so tiresome.

Put simply, Osborne's economic policies will not work, not in the short term, and not in the longterm.

We can come back here in six months or a year, and things will be worse, not better. Unemployment will be higher, growth will virtually zero, and demand stagnant.

We need to prioritize resources where they can do the most good, and quickly, before the situation deteriorates and becomes a semi-permanent depression, which would have dire consequences.

What's needed here and now, is a 'rush for growth' at almost any cost, forget about the future debt, that can be addressed once the economy is moving in the right directin and growing again and unemployment is falling.

Sure this strategy is problematic and not without risk, but, on balance, it's better than trying to bleed the patient back to health, and hope that he doesn't die in the process. This is the most primitive type of medicine imaginable.

But 'primitive' is what characterizes this government. They simply do not understand how capitalism really works and what keeps it healthy. They are obsessed with the superficial, ideological, gloss; and not the actual, underlying mechanisms, the crucial role of the state as the protector and benefactor, without which modern capitalism begins to falter and fail.

The priority is regaining the growth momentum by massive state intervention to create jobs and demand, and therefore revenue for both the state and the private sector. And don't say there's no money. This is nonsense. A country that can 'afford' to waste hundreds of millions attacking Libya, isn't broke... just crazy.

Wed, 2011-08-17 12:47 — Ng (not verified)

I do agree with your basic premise that Osbornes policy's are too severe and that given some of the data coming out to-day and over recent weeks are definitely supporting that view. Also your stance with the MPC seems to have been vindicated with all the members now voting to keep rates on hold. However, you have in past articles pointed to the Ameriacan economic policies being a better approach than ours but I don't see any meaningfull progress being made over there.I would agree in part with Mr Divine, in that it would be nice to see more articles on what you believe should happen. Whilst I don't agree with the Goverments approach at present, I don't think Labour have all the answers either.

Sat, 2011-08-20 05:33 — Jonathan Gregor (not verified)

@Luddite: "It's forgetting about debt that's put us all in the BROWN-STUFF."
Do you genuinely do not understand that the British Government runs a floating fiat currency system? There is no public debt crisis, Britain is not broke etc. The problem is that the country is in a debt-deflation trap following the bursting of a private debt bubble.

"The state can't create sustainable employment ..."
Empty rhetoric - the government has sovereignty over all within its borders. The ruling elites want the public to believe that the government is powerless to help its citizens.

Mon, 2011-08-22 01:23 — Indu Pendent (not verified)

Danny

In all cases above it apart from Romania it looks like growth is slowing. Do you think BRIC is taking growth away from Europe or is it European fiscal policy is all wrong?