“There is no plan B,” declared George Osborne in October 2010, as he slashed public spending to reduce the deficit. He promised that the plan would create “a platform for economic stability”.
But as time has worn on, and the UK has plunged into a double-dip recession, more and more experts are urging the Chancellor think again. (This week’s New Statesman cover story has nine of 20 who signed a letter in support of Osborne rethinking their positions.)
Now, the Guardian has repeated an exercise done by the New Statesman in October last year and asked leading economists what their Plan B would look like. (They asked seven, including Robert Skidelsky. We asked nine, including Robert Skidelsky).
Some of the advice is fairly straightforward – end austerity and stimulate the economy. Here’s Joseph Stiglitz in the Guardian:
The good news is, you’re not part of the euro. So my first piece of advice would be, don’t join! And second, call off the mad austerity. No large economy has ever recovered from a downturn as a result of austerity. It is a certain recipe for exacerbating the recession and inflicting unnecessary pain on the economy.
And here’s Paul Krugman:
My message to you is: do the opposite of what you’ve been doing for the last two years.
As well as simply “change course”, many of the economists have offered concrete proposals. Here at the NS, Jeffrey Sachs called for a financial transaction tax:
I am strongly supporting the call for a financial transaction tax, or FTT, which I believe would add efficiency to the global financial system by reducing destabilising speculation (as argued by James Tobin 40 years ago) and by raising revenues fairly from the undertaxed, high-income financial sector. As you know, we have a race to the bottom in the world tax system as the UK, US and others jostle to attract mobile capital.
This race to the bottom in taxation and regulation was one reason that the financial system became dangerously deregulated in the lead-up to 2008. It is also why US corporate tax revenues as a share of GDP are plummeting. US multinational companies are increasingly hiding their profits in the Cayman Islands and other tax havens. All countries have a shared interest in ending these tax havens.
In both publications, Robert Skidelsky calls for a national investment bank, while both Sushil Wadhwani and Steve Keen advocate giving money directly to the public – either in vouchers or cash – to get them spending (think of it as quantitative easing, but more fun). Other suggestions include a recovery fund, a “green new deal” and cuts to VAT and National Insurance. Jonathan Portes advocated lifting the cap on immigration.
Between the two “Plan B” pieces, and the New Statesman cover story this week, the chorus of voices telling George Osborne where he’s going wrong – and how he could fix it – should be growing harder to ignore.