The deficit doves strike back

Blanchflower, Skidelsky and Stiglitz to the rescue.

I've long argued that it's a mistake for the left, and the government in particular, to sign up to the "cuts agenda" pushed by the Tories, the right-wing press and the free-market think tanks since the financial crash in late 2008. Instead, Brown, Darling et al should have questioned the underlying (and economically illiterate) premise of the Tory argument: how does cutting spending in the middle of a recession help economic growth or prevent widespread unemployment?

As I pointed out in a speech at Ken Livingstone's Progressive London conference last month, going into an election campaign advocating only "nicer" and "smaller" cuts is both unwise (in terms of economic policy) and pointless (in terms of political strategy). The fact is, on spending v cuts, the much-reviled Ed Balls has been right all along.

It is therefore a delight to see some of the country's -- indeed, the world's -- top economists come out in favour of deficit spending, and against immediate and "swingeing" cuts, in two letters to the Financial Times today.

My colleague George, on the Staggers blog, has already posted on the two letters and pointed out that they make a mockery of George Osborne's claim that there is a "consensus of expert economic opinion" behind his plans to make cuts to public spending as soon as he walks through the door of No 11.

Letters signed by economists have a long pedigree in British politics -- the celebrated 1981 letter by 364 academic economists, protesting Geoffrey Howe's monetarist budget, is often cited. The 60-plus economists in the FT today were responding to the silly, incoherent letter signed by 20 other economists in the Sunday Times last weekend. From the Murdoch-owned paper:

Signatories of a letter, published today in the Sunday Times, include the former chief economist of the International Monetary Fund, a former deputy governor of the Bank of England and head of the Financial Services Authority, and a former permanent secretary to the Treasury and cabinet secretary.

. . . It was organised by Tim Besley, a professor of economics at the LSE, who left the MPC last year. The names include Lord Turnbull, Sir Howard Davies, Lord Desai, Ken Rogoff, Thomas Sargent and Sir John Vickers.

As I said, George has already highlighted how foolish today's letters make Osborne look, but I'd point out that they make Tim Besley look like an even bigger fool. Here's his quote in the Sunday Times:

"I don't want this to be seen as us siding with anyone," he said. "But it does suggest that the Conservatives are where majority opinion lies."

How foolish he must have felt this morning, confronted by two letters of rebuttal signed by, among others, Nobel Laureates such as Joseph Stiglitz and Robert Solow, Ivy League heavyweights such as Richard Freeman of Harvard, and former members of the Monetary Policy Committee such as our own David Blanchflower, Sir Andrew Large, Rachel Lomax, Chris Allsop and Sushil Wadhwani. Not to mention grandees such as Lords Layard, Skidelsky and Peston. Sorry to seem so petty and immature, but the Sunday Times list looks rather pathetic, insubstantial, underqualified and second-rate in comparison.

Of course, for some people, this will all seem like gobbledegook and another example of dull, internecine warfare within the (much-discredited) economics profession. One is reminded, as our prescient leader in the magazine this week points out, of Churchill's line: "If you put two economists in a room, you get two opinions." Or even Harry Truman's declaration, in response to equivocations from his economic advisers ("on the one hand . . . but on the other . . ."): "Give me a one-armed economist!"

Nonetheless, the future of the economy, and the lives and prospects of millions of unemployed Britons, depend on fiscal policies enacted by the next government. The two FT letters expose Osborne and his Sunday Times supporters as being in the minority, rather than the majority, of "expert economic opinion". It is therefore difficult to disagree with a spokesman for the Chancellor, Alistair Darling, who said this morning that the latest letters showed that Osborne had "jumped on the wrong bandwagon".

Yet this debate will rumble on. The modern-day Hooverites will not give up so easily. Their agenda is to shrink the state, not grow the economy.

So who are YOU going to trust? Economists such as Stiglitz, who warned of the dangers of financial deregulation in the 1990s, and Blanchflower, who saw the recession coming and voted for rate cuts in 2007 and 2008, or Ken Rogoff, a lifelong proselytiser for the deregulatory reforms and financial liberalisation that helped cause the crash, and Tim Besley, who failed to spot the recession coming and voted for a hike (!) in interest rates as late as July 2008?

I know which side I'm on.

 

 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

Photo: Getty
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Donald Trump tweets he is “saddened” – but not about the earthquake in Mexico

Barack Obama and Jeremy Corbyn sent messages of sympathy to Mexico. 

A devastating earthquake in Mexico has killed at least 217 people, with rescue efforts still going on. School children are among the dead.

Around the world, politicians have been quick to offer their sympathy, not least Labour leader Jeremy Corbyn, whose wife hails from Mexico. He tweeted: "My thoughts are with all those affected by today's earthquake in Mexico. Pensando en todos los afectados por el terremoto en México hoy" in the early hours of the morning, UK time.

Barack Obama may no longer be an elected politician, but he too offered a heartfelt message to those suffering, and like Corbyn, he wrote some of it in Spanish. "Thinking about our neighbors in Mexico and all our Mexican-American friends tonight. Cuidense mucho y un fuerte abrazo para todos," he tweeted. 

But what about the man now installed in the White House, Donald Trump? The Wall Builder-in-Chief was not idle on Tuesday night - in fact, he shared a message to the world via Twitter an hour after Obama. He too was "saddened" by what he had heard on Tuesday evening, news that he dubbed "the worst ever".

Yes, that's right. The Emmys viewing figures.

"I was saddened to see how bad the ratings were on the Emmys last night - the worst ever," he tweeted. "Smartest people of them all are the "DEPLORABLES."

No doubt Mexican president Enrique Peña Nieto will get round to offering the United States his commiserations soon. 

I'm a mole, innit.