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

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Mark Sampson's exit leaves the FA still trying to convince itself of its own infallibility

Football's governing body won't be able to repair the damage to its reputation in silence.

By the end, it appeared as if Mark Sampson was weathering the storm.

Despite personal reflections that the uproar and scandal that has surrounded his recent tenure as England women's football manger was taking a toll, he seemed, as of Tuesday night, firmly ensconced in the post he had held since 2013.

Player Eniola Aluko’s claims of bullying and racism against the coach – given little backing from teammates and, on balance, disregarded by consecutive enquiries – remained a persistent story, yet talk of a fresh investigation were trumped in importance by Sampson’s continued presence at training and in the dugout.

The BBC’s occasionally rabid attachment to proceedings gave the saga prolonged oxygen, but when Sampson seemed to retain the FA’s support – taking charge of the Lionesses’ 6-0 win over Russia on Tuesday night – the worst appeared to be over.

With hindsight, the vultures were simply sharpening their talons.

Sampson’s sacking – less than 24 hours after that Russia game – came after a report was unearthed detailing a historic complaint against him from his time coaching Bristol Academy – a job he left to take up the England post.

In what has long become customary, the FA received these claims nearly four years ago yet failed to act definitively – initially concluding that their new coach was “not a safeguarding risk”. However as the recent crisis depended, the full details of these initial accusations were allegedly not revealed to senior leadership.

Confirming Sampson's departure on Wednesday, FA chief executive Martin Glenn carried a pained expression reminiscent of former incumbent Mark Palios, who, in another entry in the annals of great FA crises, resigned in 2004 as a result of an affair with FA secretary Faria Alam.

Glenn will hope that his own head is not sought in the weeks ahead as his conduct throughout the Sampson saga is probed.

It also marks yet another turbulent 12 months for the beleaguered governing body, who almost exactly a year ago to the day, parted company with England men’s coach Sam Allardyce after just a single game in charge – the former Bolton and Sunderland coach getting the bullet as a result of transfer advice offered to undercover journalists.

The Allardyce departure was handled with uncharacteristic efficiency – a symptom, perhaps, of the initial scepticism behind his appointment rather than any particular reflection on his crimes.

With clear-eyed judgement, it is difficult not to have a portion of sympathy for Sampson – who, cleared by those investigations, maintained the very visible backing of his squad – right up until Wednesday’s bitter denouement.

That he’s been paid in full for the three-year contract signed last summer speaks for how soft a line the FA took on the events that forced the sacking – hoping, perhaps, for as quiet an ending as possible for both parties.

Regrettably, for the FA at least, considerable damage to their reputation will not be something they can repair in silence – not in an era where women’s football enjoys such a high profile in the national consciousness and the body continues to mark itself an easy target for criticism. 

The exact contents of those 2014 allegations and that report are sure to be known down the line – non-disclosure agreements willing – but are as of now only conjecture and innuendo.

Without details, it’s difficult to know how hard to judge Sampson. The facts of his performance on the pitch mark him out as having been an accomplished coach. That is no longer the exclusive measure of success.

Detractors will murmur darkly about there being no smoke without fire, while his supporters will point to the unique nature of the job and the often confrontational elements of its duties.

Sampson, at 34, is still a relatively young man and may be able to coach again once the rancour has subsided – although with a reputation severely bloodied, will look on the two-year salary windfall with some gratitude.

Despite Glenn’s insistence that his former manager is “clear to work” in the sport, it’s hard to envisage his career ever resuming in the women’s game.

The FA itself is again left rudderless as it tries to convince itself of its own infallibility. Flabby management structures and the perception of being an antiquated country club – valid or not – will be revisited with relish.

Perhaps positively, it could herald a more honest conversation behind what success looks like for the national game as a whole. Inclusiveness and development of a robust culture are often the first words to disappear from the vocabulary once on field results start to falter.  

For once, the identity of the next coach is not the urgent dilemma facing the FA.

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