The Danes' counter-example

Additional stimulus hasn't caused bond yields to rise in Denmark. They're in the EU and have their o

Denmark's new three-party coalition government has announced that the primary aim of its economic policy is to secure a balance between revenues and spending and create growth by bringing forward public investment. The new Danish prime minister, Helle Thorning-Schmidt, who is Neil Kinnock's daughter-in-law, unveiled her coalition cabinet on Monday and indicated that her government would take a radically different approach from the austerity measures being adopted by other European countries. The new Danish government apparently intends to spend ten billion Danish kroner to upgrade roads, railways and bicycle paths. The stimulus agenda also includes plans to provide temporary tax credits for companies that invest in R&D and machineries along with new technologies. It said it also aimed to carry out a tax reform that would significantly reduce taxes on wage incomes.

This is a very interesting counter-example to George Osborne's and David Cameron's claims that austerity is crucial to keep bond yields low. This is what Cameron said in the rapidly revised part of his party conference speech yesterday, that in a draft version that was circulated told people to save -- when he really meant he wanted them to spend.

When you're in a debt crisis, some of the normal things that government can do, to deal with a normal recession, like borrowing to cut taxes or increase spending -- these things won't work because they lead to more debt, which would make the crisis worse. Why? Because it risks higher interest rates, less confidence and the threat of even higher taxes in future. The only way out of a debt crisis is to deal with your debts. That's why households are paying down their credit card and store card bills. It means banks getting their books in order. And it means governments -- all over the world -- cutting spending and living within their means.

Cameron's speech -- even the corrected final version -- gets it precisely the wrong way round. The only way out of a debt crisis -- if by debt crisis we mean, as he says, a situation where households are desperately trying to pay down debt because on an individual level this is rational -- is for the government to step in and spend more, at least temporarily. For the government to join in and try to save more too, which he argues is logical, is disastrous. A first-year undergraduate course in macro-economics should have taught him that!

What has happened in Denmark -- which, just like the UK, is not in the euro but is a member of the European Union? It is a nice test case, because if Dave is right -- which he isn't -- then bond yields should have soared in Denmark, even on talk of injecting stimulus. They haven't. Here is a selection of yields on ten-year government bonds for Denmark and the UK over the past couple of months or so.

 
  Denmark UK
05/10/2011 2.005 2.354
30/09/2011 2.069 2.427
23/09/2011 1.932 2.363
09/09/2011 1.975 2.456
02/09/2011 2.204 2.641
19/08/2011 2.362 2.606
12/08/2011 2.573 2.753

 

One argument the coalition has made is that the US has lower yields because the dollar is a reserve currency, so their data isn't relevant: currently their yield is 1.888 per cent. But that does present the government with a further problem, because bond yields in Sweden, which is also in the EU but not in the euro, are 1.695 per cent. They are 2.135 per cent in Canada, which is also not a reserve currency, and a paltry 0.879 in Switzerland, which really does look like a place of safety.

Based on the evidence from Denmark, putting additional stimulus into the economy has not caused bond yields to rise and they remain below those in the UK. The Danes are a much better comparison country than the Greeks, the Portuguese, the Italians or the Spanish that don't have their own central bank and currency as the Danes do; just as we do.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

Photo: Getty
Show Hide image

Who will take responsibility for the rise in far-right terrorism?

Muslims are asked to condemn Islamist terrorism – should the mainstream right do the same when the attackers are white?

Following the attack on a Finsbury Park mosque, both Theresa May and Amber Rudd have issued statements and delivered speeches adopting hard lines against Islamophobia and right-wing extremism. May has gone so far as stating that Islamophobia itself is a form of extremism.

These pronouncements have drawn positive responses from prominent members of the Muslim community such as Miqdaad Versi of the Muslim Council of Britain. But it is important to question whether or not this change in rhetoric signifies a genuine change in government policy.

On the face of it, there are reasons for tentative optimism. The seriousness with which politicians took the Finsbury Park attack is a significant change. On this, the government is ahead of the media. While other terrorism attacks have been condemned as unjustifiable violence, some newspapers framed the Finsbury Park attack as a "revenge".

In fact, radicalisation is not a one-off event, but takes place in a web of institutional, social and ideological conditions. Furthermore this ignores a much longer story about the drip, drip, drip of Islamophobic or anti-Muslim discourse which permeates British society. 

The government has played a part in legitimising this anti-Muslim sentiment. Let’s not forget that Prevent has, since its inception, disproportionately targeted Muslims. The impression of an "us and them" mentality is only underlined by its secrecy. Moreover, the Prevent agenda has conflated a variety of other social policy concerns relating to gender equality, sexual violence, and unemployment as "extremism" issues. For example, Amber Rudd herself suggested that Islamophobia would decline if grooming stopped, which can not only be seen as victim-blaming, but further contributes to stereotyping Muslims as the enemy within.

So are promises to get serious about Islamophobia more empty words from the Prime Minister?

Think about timing. Far-right extremism has been deadly. Mohammad Saleem was brutally murdered in 2013 in Birmingham by a far right extremist. Mushin Ahmed was killed in 2015 (and was notably called a "groomer" by his attacker as his head was stamped on).

Jo Cox was murdered by a far-right extremist this time last year. This is not even mentioning individuals such as Ryan McGee, who made a nail bomb and was intent on murdering immigrants.

Just twelve days ago, the Prime Minister claimed that Britain was too tolerant of extremism, and she was right. Just not in the way she meant it.

Britain has indeed been too tolerant of extremism of the far right kind. This is a rising problem, not just in the UK, but also in Europe.

According to the defence and security think-tank RUSI, far right extremists make up 33 per cent of the threat, with Islamic extremism slightly more at 38 per cent. Furthermore, one in four referrals to Channel, the UK deradicalisation programme, are from the far right.

We cannot forget the government itself peddles the tropes of far right hate. Think of David Cameron referring to migrants as "swarms", May’s hostile environment policy, complete with "go home vans" driving around in multicultural areas, and the uncritical embrace of Donald Trump’s presidency by the Prime Minister. 

The Muslim community has been told many times to fight terrorism from within, but will there be a similar response to far right extremism? The ongoing rhetorical attacks on multiculturalism, and the longstanding association of Islamist radicalisation with a lack of integration, rather than religiously inspired political violence, make it difficult to see how real change will happen.

This would require deep soul-searching, followed by serious changes in public debates about policies relating to both immigration and extremism. Until that happens, May’s words on Islamophobia will be nothing more than political PR.

But this PR also has a more sinister element. Although no specific new counter-terrorism legislation was announced in the Queen’s Speech, there was a promise that the government would review existing counter-terrorism laws, with a spokesman stressing that new legislation would be brought forward if needed.

May continues to lobby for increased executive powers to fight terrorism, which she has done since her time as home secretary. The policy on right-wing extremism is likely to follow that of Islamic extremism: it will focus only on ideology and it will ignore the wider context of structural racism and white privilege.

Ask yourselves, will white men ever be stopped and searched to the same extent as brown men? Will white women be seen as easy targets for violent attacks as Muslim women disproportionately are? Will far right extremists fear for their citizenship status?

And does the solution to extremism, in any form, truly lie in further oppressive legislation and more government power? We also need to be aware that powers extended to address extremism are likely to continue to have a disproportionate effect on minorities.

As long as there is no change in government policy, the status quo will continue to reinforce the same divisive narrative which is the bread and butter of every extremist group. After the Queen’s Speech, we continue to see no evidence of any serious attempt to reform policy and seriously address far right extremism. May’s empty words after the Finsbury Park attack represent nothing more than an opportunistic political move from a weakened Prime Minister who is desperate for approval – and for power.

Dr Maria Norris is a political scientist researching terrorism and national security. She is a Fellow at the  London School of Economics and Political Science. She tweets as @MariaWNorris.

Dr Naaz Rashid is a Research Fellow at the School of Law, Politics and Sociology at the University of Sussex and is author of Veiled Threats: Representing the Muslim Woman in Public Policy Discourse (Policy Press 2016) about the UK government's engagement with Muslim women as part of its Prevent agenda. She can be followed on Twitter @naazrashid.

0800 7318496