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Ben Bernanke: Austerity went too far in the UK

The former head of the US Federal Reserve says governments "ran too quickly to budget-cutting". 

Ben Bernanke is one of the rare people to emerge from the financial crisis with their reputation enhanced. As the chairman of the US Federal Reserve from 2006 until 2014, he helped prevent a recession becoming a depression through policies such as ultra-low interest rates and quantitative easing (QE). Not everyone appreciated his efforts. “If this guy prints more money between now and the election . . . we would treat him pretty ugly down in Texas,” the Republican former governor Rick Perry warned in 2011.

“I love being a civilian again,” Bernanke, 61, tells me when we meet at the Delaunay café in Aldwych, London. The former Princeton economics professor is now a fellow at the Brookings Institution and the author of a newly released memoir of the crisis, The Courage to Act. At a time of increasing economic pessimism, does he fear another crash? “The risk of a crisis like 2007 is relatively low,” says Bernanke, spooning the froth from his cappuccino. “Banks have much more capital, oversight is much tighter.” The most troubling trend, he says, is “the reaction of the other emerging-market economies to China’s slowdown”.

Though a depression was averted in 2008, the recovery in the US and the UK has been anaemic. Bernanke partly blames the imposition of fiscal austerity (spending cuts and tax rises), which limited the effectiveness of monetary stimulus. “All the major industrial countries – US, UK, eurozone – ran too quickly to budget-cutting, given the severity of the recession and the level of unemployment.”

He criticises George Osborne’s new budget surplus law, which prohibits government borrowing when the economy is growing by more than 1 per cent. “I would be very cautious about putting in rules that would prevent a timely fiscal response to a slowing economy, particularly in a world of very low interest rates.” He adds that “a period of excess labour supply and low interest rates is not only a good time to invest, from the perspective of the recovery, it also makes sense from a long-term productivity perspective”.

Bernanke is also sceptical of Jeremy Corbyn’s “people’s QE”, under which the Bank of England would use newly created money to fund infrastructure, rather than buying financial assets. “That’s more or less equivalent to the combination of a fiscal infrastructure programme and the acquisition of bonds by the central bank. The main objection I have is a governance objection: it’s not up to the central bank to make fiscal policy decisions.”

Once a Republican, the softly spoken Bernanke now describes himself as a “moderate independent”, lamenting the “know-nothingism of the far right”. He argues that “ideological polarisation” has “diminished the willingness of either party to work across the aisle to find constructive solutions”. Has he considered entering politics? “Absolutely not, never. I’m much more comfortable in an analytical environment than a political environment.”

Bernanke is troubled by the level of income inequality in the US and the UK. “It’s not something that can be addressed overnight. It requires sustained effort, for example, to improve the skills and training of those who are not benefiting from new technologies and new industries.”

At the close of our conversation, I ask Bernanke what he regards as his greatest achievement at the Fed. “I hope that our strenuous efforts to stabilise the financial system and to help the economy recover will ultimately lead to the kind of growth and prosperity that we need,” he replies. But, he warns: “The final chapters of that story are not yet written.” 

George Eaton is political editor of the New Statesman.

This article first appeared in the 05 November 2015 issue of the New Statesman, The end of Europe

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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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