Ex-MPC member: Britain has an investment crisis, not a debt crisis

Adam Posen hits out at governmental "misinterpretation" of the economy.

Former Bank of England Monetary Policy Committee member Adam Posen has a post up at Jonathan Portes' Not the Treasury View… where he lays out what, precisely, is screwed up about the UK economy. The whole piece is at Portes' blog, but here's the bullet point version, in Posen's words:

  • The British economy is lacking productive investment, but not for want of investment opportunities. Banks and large corporations are sitting on cash, households are holding back on large purchases (including of housing), and the public sector is slashing its investment flow.
  • The current British coalition government’s economic policy program, however, is intended to address a lack of savings, not of investment.
  • This false assumption feeds back into further arguments for fiscal and household consolidation. The UK public and private sectors are paying down debt less quickly than expected to, and that means by assumption that their future ability to pay down debt is declining, so they must cut back spending and borrowing even more today to remain solvent.
  • The facts of recent experience, including of the recession, do not fit with [the misinterpretation that debt is the problem], but do fit with the view that investment failings are at work in the British economy.
  • So should the British government just go on a spending binge instead? No, clearly not. Even though there is legitimately little fear about UK government finances at present, with the large deficits largely driven by slow growth pushing down tax revenues and up benefits spending, there is nothing to be gained by making those fears more realistic.

Posen's full piece has a long list of examples backing up his reading of the economic situation versus the Chancellor's, which is worth reading if you have the time.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland