Duncan’s Economic Blog

The Economic Consequences of Mr Osborne

Posted in Uncategorized by duncanseconomicblog on February 21, 2011

I spoke at Progressive London on Saturday afternoon on the UK economy and the government’s economic strategy.

One of the other speakers at the meeting I was involved with was Victoria Chick, co-author of an excellent 30 page book with Ann Pettifor entitled ‘The Economic Consequences of Mr Osborne’, I read this last year (whilst the blog was on an employment related break)  and would highly recommend it. It’s very remiss of me not to have plugged on here already.

So, here it is.

Go and download it.


18 Responses

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  1. Dave Holden said, on February 21, 2011 at 10:49 pm

    I’m not so sure that “The Economic consequences of economic reality” wouldn’t be a better title. In the light of analysis like these http://www.scribd.com/doc/30040130/BIS-The-future-of-public-debt-prospects-and-implications-update I guess I keep asking myself – where is the money going to come from? We either have increase borrowing or increase printing both options have consequences.

  2. Tim Worstall said, on February 22, 2011 at 9:34 am

    I’m unconvinced that anything by Anne Pettifor should be taken seriously.

    For example, they’re using the post WWI cuts in military expenditure as an example. And very weird numbers at that. 1918, government expenditure was only 35% of GDP? Really?

    Umm, other sources put defence spending alone at £2.4 billion out of a £5.something GDP.

    • duncanseconomicblog said, on February 22, 2011 at 9:43 am

      Quite detailed notes on sources and what they are counting in public spending at the end of the paper.

  3. […] by Duncan there’s a new paper by […]

  4. Luis Enrique said, on February 22, 2011 at 10:56 am

    God they get up my nose. “The Prime network is made up of a group of economists aware that conventional or ‘mainstream’ economic theory has proved of almost no relevance to the ongoing and chronic failure of the global economy”


    where to start? there’s mountains of insightful relevant work in the mainstream.

    Pettifor seems to wrote a book worrying about “too much debt”, predicting I think a sovereign debt crisis – anyway, not predicting the collapse of the banking system caused by over-leverage banks holding assets tied to housing – and from what I can gather is now saying that we can spend our way out of debt. Loon. I cannot fathom your attachment to them, Duncan.

    • Agog said, on February 22, 2011 at 12:13 pm

      Tut tut, LE.

      Quote from Pettifor in 2003:

      “There is now a growing consensus that the vast build-up of household, corporate, state and foreign debts of the US is not sustainable.”


      You’re talking nonsense.

      Maybe you should consider heeding your own advice and read a bit more widely?

      • Agog said, on February 22, 2011 at 12:49 pm

        PS in the spirit of amity, may I suggest reading some Kenneth Boulding?

        A taster:

        “Every action has two facets;
        Public debt is private assets,
        My receipt is your expense,
        Your aggression, my defense

        It’s just as true as it is funny,
        That Deficits increase our money;
        In understanding this there lies
        The power of States to Stabilize”

        Check him out. It’s not all doggerel.

      • Luis Enrique said, on February 22, 2011 at 12:56 pm


        what a strange comment.

        Pettifor worrying about household, corporate and government debt in 2003 is precisely what I thought she did. Her having written books with titles like “The coming first world debt crisis” gave me some clues here.

        I assume you’re not under the mistaken impression that predicting a “debt crisis” amounts to predicting the near-collapse of the global banking system. It comes closer to predicting what happened next with Euro government debts. A debt crisis about which she has some, in my humble opinion, some rather misguided ideas about solving.

        • Agog said, on February 22, 2011 at 6:29 pm

          You wrote she had predicted a sovereign debt crisis. She wrote in 2003 that a catastrophic debt-deflationary crisis was likely (because of overall debt levels) unless dramatic steps were taken (they made some suggestions which might not have worked; in the end it took pretty extraordinary and unconventional fiscal and monetary measures to do the trick, at the very last minute, right?).

          Let me just say that calling someone with a reasonably good record at big-picture forecasts a ‘loon’ seems wide of the mark (not to mention the unpoliteness).

          • Agog said, on February 22, 2011 at 6:30 pm

            (or better – impoliteness 😉

          • Luis Enrique said, on February 22, 2011 at 7:47 pm

            clearly debt had a lot to do with what went on – how well what went on corresponds to this


            is another matter. Lots of mainstream economists before the crash predicted a crisis originating in US sovereign debt. They don’t get the claim they predicted the crisis.

            Anyway, if she did foresee that debt would lead to doom, good for her. I call somebody who is terribly worried about debt but who advocates trying to spend our way out of it, a loon.

            • Luis Enrique said, on February 22, 2011 at 7:48 pm

              sorry – don’t get “to” claim

              • Agog said, on February 23, 2011 at 9:22 am

                Sorry LE but it seems to me you really aren’t up up to speed on all this. The response from the authorities in late 2008 was very much about keeping us out of that sort of deflationary cycle (as I intimated above – they were heeding the kind of warning Pettifor was making, but exceedingly late).

                And please see Krugman on why someone needs to keep spending (hint: google ‘paradox of thrift’). Oh – sorry – Krugman is a loon *and* a communist, right. And he had a column this week defending *the unions* – gasp!

                • Luis Enrique said, on February 23, 2011 at 9:41 am


                  just below here, I wrote “I would advocate spending on public works during recessions for all manner of reasons, but not because i think it pays for itself. ” – I am quite on side with Krugman et al. I do not think Krugman believes that you can close a deficit of around 10% of GDP by increasing government spending. He – like me – believes that that keeping up spending is a good idea to sustain employment and that the impact upon the deficit will be attenuated by multipliers, but he doesn’t think there’s a magic spending fairy in the same way Pettifor appears to.

                  I didn’t make myself clear – I’m quite up to speed on debt deflation ideas the the response of the authorities to prop up asset prices etc. what I meant was it’s a matter of debate the extent to which (I wrote – “how well that corresponds to”) a complete description of what happened. I was not asserting the extent to which is corresponds was “not at all”. It misses out quite a few aspects of what happened.

                  But yes, I think if you were predicting a crisis originating from a credit boom and bust you undeniably win points for prescience, but plenty of doomsayers (as in those who predicted a US government debt crisis) predicted the wrong crisis. I don’t exactly know how much Pettifor got right / wrong; my beef with her concerns her policy prescriptions now, and I think that paper linked to above is pretty shoddy.

  5. Luis Enrique said, on February 22, 2011 at 2:24 pm

    Duncan, I don’t know why you highly recommend that publication.

    Why are they talking about the idea that macroeconomic debt is different to household debt as if this is some peculiar insight of our brave heterodox voices in the wilderness?

    How can they say it has been “demonstrated” that public works are self-financing without any discussion of the magnitude the multiplier would have to be for that to be true, and the evidence on that question?

    I would advocate spending on public works during recessions for all manner of reasons, but not because i think it pays for itself.

    the are so many problems with directions of causation, omitted variables etc. that I don’t know where to start.

    Do I understand correctly that their preferred measure of fiscal policy is “money” expenditure? In which case, we’re alright aren’t we? Or were those reports I have read that government spending will hardly fall in money terms (or grow a little even) incorrect?

    • duncanseconomicblog said, on February 22, 2011 at 2:29 pm

      I think it’s an important contribution and I think it stacks up better than Policy Exchanges long austerity argument from November 2009.

      The focus on investment is useful.

      I donlt go as far as them – I do support cuts once the economy is growing strongly and think a structural deficit 2003-2007 was a mistake (as I’ve made clear).

      Remember (on your last point) they are excluding transfer payments and debt payments.

  6. Luis Enrique said, on February 22, 2011 at 2:34 pm

    sorry, I notice they write: “The actual outcome for the public sector finances depends
    on the value of the multiplier and rates of taxation and benefit expenditure”

  7. Luis Enrique said, on March 1, 2011 at 9:32 am

    I know DSGE models aren’t going to win any arguments, but here’s a related paper:

    Is there a fiscal free lunch in a liquidity trap?


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