Duncan’s Economic Blog

Ed Balls: Excellent News

Posted in Uncategorized by duncanseconomicblog on January 20, 2011

Back in September I argued for Balls to be made Shadow Chancellor. So, although it is  sad that Johnson has had to step down for personal reasons, I’m delighted by his appointment today.

The Bloomberg Speech last August, one that won high praise from Martin Wolf and Sam Brittan in the pages of the FT, remains the best demolition of the Government’s economic strategy we’ve heard from any politican since the election.

One occasionally wonders how the General Election might have played out a little differently if we’d made such a case rather than arguing over £6bn of in-year “efficiency savings” (which of course turned out to include such efficiencies as scrapping the Future Jobs Fund and Child Trust Fund).

The Bloomberg speech still makes for excellent reading, especially the emphasis on Keynes and the need to question conventional wisdom. But that wouldn’t come as a surpise to those who have read Steve Richards’s “Whatever It Takes

The youthful Balls had ideas about how to build the stable architechture, and yet like Brown he was also committed to tackling unemployment and poverty. In interviews later Balls described himself openly as a socialist, a rare admission in New Labour circles and not a term used by Brown. Keynes was one of Balls’s heros, long before the economist became more fashionable after the credit crunch in 2008. (pp. 59)

We’ve got a Shadow Chancellor who doesn’t need a primer in economics, things are about to get interesting.

 

16 Responses

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  1. scandalousbill said, on January 20, 2011 at 9:23 pm

    If Balls appointment means a shift toward a more positive growth oriented critique of Tory led coalition policy, it should be a favourable change. However, give AJ his dues. He did have a strong capability to highlight the impacts of Tory policies on people’s lives. If Balls can carry on this approach and focus it with his economic knowledge and Treasury experience, Labour could clearly take things up a notch. Osbourneomiocs are abysmal, they simply placate the old school elites and we could have a real opportunity to demonstrate this weakness.

  2. […] I argued for Balls to be Shadow Chancellor initially in September, Duncan now says things “are about to get interesting,” but I think you have to be a member of a small coterie, not expanding far past Duncan and […]

  3. […] post: Ed Balls: Excellent News « Duncan's Economic Blog This entry was posted in Uncategorized and tagged balls, excellent, johnson, shadow, step-down. […]

  4. Dave Holden said, on January 21, 2011 at 12:07 pm

    Personally I’m not sure appointing the chief architect of the last tenyear’s failed economic policies is such good an idea – either politically
    or economically.

    Politically? Well although good bruiser he’s pretty disliked by
    the public and much of his own party for that matter.

    Economically? Well let’s not forget this is an “Economist” who not only missed
    the biggest debt driven asset price bubble in history but spent most of
    it boasting he’d abolished the boom and bust cycle.

    Sadly it’s easy to guess what his economic approach will be: The
    solution to a debt problem is more debt. Not only do current debt levels
    make that unfeasible it doesn’t play well with the public.

    All that said, if there was a good time to be an opposition Chancellor this
    should be it.

    We have Ireland close to a default and several other Euro countries close
    behind. China has a real estate bubble and serious inflation. Australia’s
    own real estate bubble seems just about to deflate. Add to that all the
    recent Fed/BOE/ECB money printing has caused some serious input cost
    inflation which because we’re still in a deleveraging recession businesses can’t pass on to customers – result, profit compression and job losses.

    It’s going to be a tough time for incumbents all over.

    ETA.

    There was a lot of initial crowing in the press that Johnson just wasn’t
    up to it, as it turns out he really did resign for personal reasons.

  5. gastro george said, on January 21, 2011 at 1:46 pm

    Economically? Well let’s not forget this is an “Economist” who not only missed the biggest debt driven asset price bubble in history

    That would be like most “economists”, then. Don’t forget that the Tories opposed none of those policies.

    Not only do current debt levels make that unfeasible it doesn’t play well with the public.

    We’ll see when the dole queues start lengthening.

  6. Dave Holden said, on January 21, 2011 at 2:18 pm

    “That would be like most “economists”, then. Don’t forget that the Tories opposed none of those policies”

    It certainly would be most Economists – although that doesn’t excuse the error . One of the few who did see it coming (Steve Keen) has quite a good book on the failings of the teaching of Economics http://www.debunkingeconomics.com/

    Check out his recent interview with Dominic Frisby in which he talks about why debt deleveraging is key http://commoditywatch.podbean.com/

    “Don’t forget that the Tories opposed none of those policies.”

    I have no allegiance to the Tories or any party so I would certainly agree on this. To the Tories credit however they’ve recognised that debt is the problem unfortunately for them (and us) the only solutions to the problem of unsunstainable debt is pay it down, inflate it away or default. Non of those options are painless – in fact down any of those paths lies a lot of pain.

    “We’ll see when the dole queues start lengthening.”

    Tragically I can’t see any path where dole queues won’t rise – the Tories spin that the private sector will lead the recovery is true only in a long-term sense in the short-term I don’t see how the private sector can lead a recovery when their input costs are sky rocketing yet wage inflation is negligible – who’s going to buy the stuff they make?

    The best solution to our current problems is not to have got here in the first place.😦

  7. gastro george said, on January 21, 2011 at 5:58 pm

    Well, of course we’d soon not be here. I’d be the first in line to agree that New Labour did the wrong thing in going along with the neo-liberal economic consensus, and Balls is probably as guilty of any member of New Labour in following that.

    But the tone of your original post was too glib – and likely to be similar to the attacks that the Tories will make. Hence my response – the Tories have nothing to crow about.

    Despite Balls previous form, he seems (to me) to be heading in the right direction. The debt is not unsustainable, and cuts to “cure” the “debt problem” will only makes matters worse. Your question “who’s going to buy the stuff they make” is entirely the point. Reducing overall demand in the economy in the current situation is madness.

  8. Dave Holden said, on January 21, 2011 at 6:25 pm

    “But the tone of your original post was too glib – and likely to be similar to the attacks that the Tories will make. Hence my response – the Tories have nothing to crow about.”

    I’m sorry but there was nothing glib about my post. As to how the Tories “attack” I have no interest, I’m not aligned to any party. What matters to me is that there is a fundamental economic reality at work and trying to get both a grip and understanding of it.

    “Reducing overall demand in the economy in the current situation is madness.”

    But that is my point where is the demand going to come from – we’re in the process of a once in a life time period of debt deleveraging. As I said your options are pay down, inflate away or default on that debt. Non of those options are easy.

    In the last two years we’ve just had the biggest stimulus in our history and growth is still anaemic – it has however lead to a massive increase in our national debt and all that implies both for interest rates and the willingness of markets to lend us the money to continue down that path.

    The current Tory approach – try to cut debts and hope that zero interest rates and tax cuts (the VAT increase is counterproductive here) create enough growth to create a sustainable debt/GDP balance is equally precarious.

    Ireland of course are currently facing up to the last of those options default.

  9. Newmania said, on January 22, 2011 at 10:52 pm

    Gastro George – Talking Balls

    1-The Conservative Party steadfastly opposed the 55% increase in government spending over ten years ( adjusted) and Howard and Oliver Letwin are not the only ones whose careers were de-railed by going against the “conventional wisdom” that a boom would last forever.( You require examples ?)
    2-The fact that eventually they were obliged to adopt the entirely rhetorical position of promising to match spending is misleading . Blair made the same promise and Thatcher the same with regard to Callaghan. It means , as many of your sort reminded Blair , nothing in practice
    3-In fact in cash terms spending has been higher in every month of the coalitions tenure thus far ….. not hard to stick to it in some sense then.

    More generally Balls was never elected , he was “chosen” for a safe seat after smoothly moving from the FT ( gosh do they like him…fancy) into the New Labour court in which many unelected schmoozers , notably Campbell, out ranked civil servants and representatives of the people

    Balls was personally responsible for the useless and expensive FSA ,the reckless creation of a dangerous structural deficit and , more generally , the reverse take over of New Labour by Oldish Labour by his sugar daddy Brown and back benchers . It was he ,as much as anyone , that blocked reform of Welfare and housing towards conditionality , not to say flooding the least productive parts of the Economy with tax payers money placing parts of the country into state serfdom , notably the North East . Meanwhile slush fund Regional Quangos were supposed the impression they wanted real growth. In other words he not only sucked on the froth of an asset bubble , he used it to destroy the real Economy .His supply side damage is probably more important than the more obvious demand side Balls -up

    He aggressively sought to de fenestrate Alistair Darling the only person to emerge with any credit form the recent clown show , happily describes himself as a socialist and has already started lying about his past .” I wasn’t to spend , not cut “ he memorably said in his leadership campaign .

    He made himself high priest of the deficit denial cult with his Bloomberg speech a speech whose only authority lay in reference to other priestly idiot Economists who , as we all agree were notably stupider about the over heated boom than everyone else in the country to whom it was screamingly obvious

    The incipient threat of inflation is all we need to see to know that throwing more money at Public Sector Pensions etc. and calling it a stimulus or investment or some such lie was a ridiculous idea what we actually have is stagflation , strikes and the Unions paying for the leader of the Labour Party`s campaign so as to gainsay the actual PLP. Balls would have done well in the 70s as a foaming demagogic red.

    I am delighted to see his progress .New Balls please !!

  10. gastro george said, on January 23, 2011 at 7:23 pm

    @Newmania

    Life is too short to reply to your lucid portrayal of life on Planet Zog. Please resume your medication.

  11. Newmania said, on January 23, 2011 at 11:01 pm

    Cluck cluck cluck …. 🙂

  12. gastro george said, on January 24, 2011 at 1:00 pm

    Just to address your point (1), then.

    The Tories may have opposed spending increases (I’d be surprised if they didn’t). But spending increases didn’t get us to where we are today. The deficit is a symptom of the financial crisis. The crisis has nothing to do with government spending. It was a systemic failure in the financial system that caused it. The failure was in regulation (or the lack of regulation).

    True, at the time Balls was part of a government that went along with the consensus that said that light regulation was what was required and a bust could never happen. But you’re not telling me that in the 00s anybody in the Tory party was demanding the imposition of more regulation on the City are you? If you are, then you do live on Zog.

    You can call Balls a “deficit denier” – a bigger problem are the “crisis deniers”. At least he, at present, is moving towards policies that can confront the real problem.

  13. Newmania said, on January 24, 2011 at 3:55 pm

    Conservatives opposed increasing Public sector net debt from £323 billion in 2001 to £534 billion in 2007 . (2008-2010, public debt increased to to £850 billion plus ) . They opposed a 55% increase in adjusted goverment spending or , for example doubling the budget of an entirely unreformed NHS …just an example ( mostly salaries ..sigh)
    £20 billion on RBS ,Lloyds, Northern Rock,Special liquidity scheme .
    There are also £330 billion of contingent liabilities, based on guarantees over assets .The golden rule was 40% over a cycle not 40% at the top of a rampaging asset bubble plus extra choccy topping hidden bits
    Crisis denier my arse, it was the combination of an unrestrained boom and a spendaholic government who never won the argument for socialism and so never taxed to pay for it sustainably even if that were possible (and it is not from the rich at least)

    Would you call that “Prudent ” ?

  14. gastro george said, on January 24, 2011 at 5:23 pm

    As I thought, not worth engaging with.

    Do you seriously think that Lehmanns, Bear Stearns, RBS, HBOS and the rest went, or were about to, go under because of excessive government spending …?

    Sleep well on Planet Zog.

  15. Newmania said, on January 24, 2011 at 8:40 pm

    No,no-one forsesaw that but no-one was suprised either.What was forseeable was that a regime that only worked as long as the bubble got bigger and bigger was not a well designed fiscal policy capiche?
    As designing said fiscal Policy was the only bit dumb and dumber had to get right the particular set of events that revealed their miscalculation whilst of great importance in judging Banks ,is a side issue when it comes to judging Ballsed-it-up.
    Never mind GG when we reach the end of history then it will be time to let the Keystone Cops have another go and as for engaging with me . Don’t worry you haven`t ,or indeed , with the majority who agree with me .

    I think I would nominate planent Onan for you,(on many levels )

  16. liminalhack said, on January 24, 2011 at 11:30 pm

    Now Richard Lambert, lately of the CBI accuses the government of having no vision for growth. Of course he is 100% correct.

    Things are certainly about to get interesting.

    Not that Ed Balls has a credible vision for growth either. That’s even more interesting.

    What would be interesting, really interesting (and what we actually need), is a vision for not persuing economic growth.

    Gasp.

    What we need, is a vision for growing per capita income. Not the same thing at all.


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