On Monday at 5 pm I am debating austerity and growth policies at the Sheldonian Theatre , Oxford under the chairmanship of the Warden of St Antony’s College. The other main participants are Martin Wolf of the FT, Robert Skidelsky and Meghnad Desai.
The topic is “Austerity in the UK and the Eurozone: kill or cure?” Anyone interested in hearing is welcome to attend this public debate, at no cost to them.
My Parliamentary duties allow me to do this, as Parliament is having another day’s debate on the Queen’s speech. I have already made my speech in this debate and am not allowed to speak again in the main debate. There will be no vote on Monday.
May 11, 2013
We just have damaging austerity, higher taxes, little bank lending, more regulation, expensive energy (and lack of confidence in the government direction) in the private, wealth creating, sector. Meanwhile tax borrow and waste by the cart load, continues in the state sector.
The exact reverse is needed but this seems to be beyond the grasp of Osborne, Cameron and Clegg. Meanwhile the BBC/Labour and the anti business secretary seem to think we have too much austerity – we do but not in the state sector where it is needed, that is for sure.
May 11, 2013
@Lifelogic: “Meanwhile the BBC/Labour and the anti business secretary seem to think we have too much austerity”
I suppose the IMF are BBC/Labour types too? I won’t try and explain the Labour parties press releases or policies away but I really don’t think you have quite grasped the fact that the BBC reports news, it doesn’t write other organisations policies or speeches – least of all for the IMF….!
Getting back to John and this Austerity Debate:
John, whilst Oxford is not out of the question from my locality can I have a rain-check on this please, until you perhaps get invited to a location a little bit closer. I’m sure it will be a very interesting evening with, hopefully, no quarter given, time we all had a far more serious debate on all our futures.
May 11, 2013
There is a massive amount of news, but one can always rely on the BBC to select from this the stories that fit with their standard agenda.
In case you missed what this is, without fail it is :- pro uncontrolled immigration, anti landlord, pro the undemocratic EU super state, pro ever more regulation, more state sector everywhere, more regulation, more taxes, anti business, anti real science, pro the quack green/religion agenda and pro huge pay and pensions at the BBC, pro the enforced “equality” agenda.
May 12, 2013
lifelogic: “There is a massive amount of news, but one can always rely on the BBC to select from this the stories that fit with their standard agenda.”
As do all news and media organisations, but it is interesting that you would prefer the BBC notto report something that goes against your own political opinion – where is the real biased here, at the BBC or in the head of Mr Lifelogic?…
May 13, 2013
Not so, I just want some balance on the BBC. You almost never get anything pointing out the huge negatives of the EU, anything pro business, anything pro a smaller state, less regulation and lower taxes nor anything against the absurd global warming exaggeration religion. Almost never – they have an agenda which bears not relation to reality, science or economics. It is just tax funded, lefty, big state, propaganda.
May 16, 2013
@Lifelogic: But anything you don’t like is biased it would seem… Oh and the BBC is not state funded, nor is there a law that says one has to use television broadcast equipment and last -but far from least- someone who has admitted to not living in the UK have no right to comment, you (personally) do not need to fund the BBC, anything you watch you do so for free.
May 12, 2013
Nice one, again, lifelogic.
May 12, 2013
@Lifgelogic: “There is a massive amount of news, but one can always rely on the BBC to select from this the stories that fit with their standard agenda. ”
So much the same as any media outlet or news agency then, there are issues, stories and news that one would be unlikely to see on Sky News and never on their (re-broadcast) US sister channel.
In case you missed my point, the BBC (like all other news agencies) report the stories, they do not make them – but thanks for admitting you actually want censorship of anything that doesn’t fit your political agenda…
May 12, 2013
Sorry for the repeat comments John, forgot I had already replied once. 🙁
May 12, 2013
Damaging austerity?! What heresy is this? How can cutting anything be bad in this tax and waste government. Explain which austerity measure are bad? You are for cutting half the state are you not? Lets have more by stopping government spending on all energy issues not just green ones. Building power station is no business of the state this should be financed by the power companies selling power and what business is it of the government to tell privately owned banks who the lend to? Surly they know their market and customers. Idiot.
May 12, 2013
Ironic then Baz, that this article is informing us of the opportunity to attend a debate.
Im not sure you would enjoy attending a debate as you cannot listen to anyone else’s opinions nor argue a different view without getting angry and resorting in the end to personal abuse.
As you have done so again here.
As my old teacher used to say, its only yourself you are letting down.
May 13, 2013
Edward2 I noticed that you weren’t able to rebuke any of Bazman’s claims, so you decided to patronise him instead. Hardly an example of good debating.
May 14, 2013
I don’t believe that calling someone an idiot or telling people to ram it makes it worthy of a reply.
May 17, 2013
La-di-da!
May 18, 2013
Well done Baz, nice to see you managing a witty reply without resorting to your usual abuse and rudeness.
May 13, 2013
Theres no one in the Treasury especially George Osbourne and every Cabinet member who is capable of grasping that the only people who were able to spend was the Grey Brigade through countless years of prudence and saving
They have been squashed like bugs and ripped off and penalised by low interest rates to fund feckless debtors
That’s a face Osbourne needs to face fast before they all have to apply for Pension Credit and swell the Welfare Bill further
More and more credit/debt is not the way to solve the debt problem and the ballot box will kick your party down the road
May 11, 2013
Very frustrated that I can’t attend this one because of a family matter. A good subject, and a great diversity of views represented on the panel. Lord Desai who is a bit of a medium paced Marxist with interesting views on globalisation, Baron Sidelsky who has had an interesting political odyssey…..I remember that he wrote a book on the Great Depression and a biography on Keynes I think……He also went from Labour to SDP to Conservatives, and then fell foul of Hague because he opposed the NATO bombing of Yugoslavia, and left the Tories. Martin Wolf has had a bit of political change too, working for the World Bank, and then being influenced by Hayek and becoming a free marketeer. He has then gone back to being a bit of a Neo Keynesian since 2007. Interesting spread of views……John, it would be interesting to see how the debate goes and what comes out of it. Who knows you might convince some of them to change their minds…… 🙂
zorro
May 11, 2013
Skidelsey’s biography of Keynes is excellent – really brings him to life and gives a good picture of his times. Highly recommended for anyone interested in the period even if they arn’t interested in economics. I don’t know if he is that much of an economist but he is certainly a fine biographer / historian.
I always agreed with Martin Wolf’s writings up until the the post-crash period and his strangely statist neo-keynesianism. I wonder how he can have faith in the likes of Brown / Balls / Milliband to spend productively all this money he wants us to borrow and our children to repay. Perhaps John Redwood will ask him for us.
May 13, 2013
It’s basically a myth that “our children” repay the debts we incur. Reason is that the children of relatively wealthy families inherit an ASSET – i.e. government debt – while others incur a LIABILITY, namely the obligation to repay the debt to aforementioned asset owners. And those assets and liabilities cancel out.
That actually reflects an unavoidable PHYSICAL reality, namely that it is not physically possible to make a sacrifice in 2025 and produce something that is consumed in 2013. That, to repeat, is physics, not economics.
The only exception to the above point comes where debt is held by foreigners. In that the children in the debtor country WILL MAKE a sacrifice when those creditors are repaid (as pointed out by R.A.Musgrave in the American Economic Review in 1939).
May 13, 2013
‘Our Children’ is shorthand for taxpayers of the future. It may be that some of these taxpayers will hold bonds issued by the govt as an asset, which may or may not exceed their imputed additional tax liability. That is irrelevant. What is clear is that interest on the debt and repayment of principal must be met, either by taxation or by the issue of new debt. It is because debt financed govt spending implies higher future taxes (or perhaps inflation as govts attempt effective default) that its claimed long-term growth boosting attributes are so doubtful.
May 13, 2013
What I was objecting to is the popular idea that one generation can borrow and pass on some sort of burden to the next generation. That seems to be what you mean when you say “all this money he wants us to borrow and our children to repay”.
It’s true that when debt matures one of the options for government is to collect taxes and repay debt holders, but that is not “net taxation”: it simply consists of government collecting money from one lot of people, and handing the money to another lot. The tax, so to speak, is cancelled out by “negative tax”.
May 11, 2013
I saw your speech in Parliament John, and I was so impressed that you articulated so forcefully what so many of us think. Sometimes I think that you are among the very few there that are in touch with the ordinary people. Thank you for being our voice.
May 12, 2013
The voice of Prestbury?
May 13, 2013
No, Northwich. But should it matter!
May 11, 2013
It would be great if someone would video the event and post the link – is that possible?
One odd argument I have heard Mr Skidelsky make in the past is it doesn’t matter how much the govt borrows, it doesn’t impose a burden on future generations as the debt can always be refinanced. This argument is false as it may be prohibitively costly or even impossible to raise debt in the markets at that future time. Keynesians don’t have a good answer as to how to avoid bad investments by govt with all the extra debt they want us to incur. In the absence of market pricing mechanisms for projects the cost of capital is treated as effectively zero, and so we get nonsense projects like HS2.
May 12, 2013
Indeed borrowing to waste on HS2, wind farms, pv bling, pointless bureaucrats, soft loans to pigis, counter productive wars, trams, scotish parliament building and all the rest of the expensive nonsense is clear madness.
May 12, 2013
Trams? How do you explain their use in Germany and France? Very useful and cheap there, but not here? Explain? Oh! I see the government has to subsidise them and more cars would be beneficial to us getting around better? It’s called infrastructure lifedtyic and even countries as backward as Russia have them as well as buses and cars that run next to them. Maybe we should stop the state subsidising them and tax the businesses that take advantage of them? Sorry voluntary payments by business would not work. Oh! The workforce could pay for them? They could pay via their wages directly and the surplus could be sold to subsidise the cost? If it failed they could walk or buy a car. We guessed that. Can’t afford a car due to poor wages? The state could subsidise taxi for the workforce via the Taxi Tax system as they are creating wealth and helping Taxi firms who should get tax breaks for getting the workforce to work thus lowering taxi costs? Car companies, mainly foreign owned, should also get tax breaks for helping taxi companies. Have you heard the story about an old woman who swallowed a fly by any chance? We trams and buses need to get to our business to make some money and services and not sit in cars to fulfil your dogma ideology. Try some base logic it really does work! Ram it.
May 13, 2013
Richard 1,
If interest rates DO RISE, that’s no problem. All we need do (assuming stimulus is needed) is to print money instead of borrow it (as pointed out by Keynes, Milton Friedman and numerous others).
And the knee jerk reaction to that is of course entirely predictable: “inflation”. And the answer that was given by David Hume over 200 years ago, namely that adding to the money supply is not inflationary unless it gives rise to excess demand.
Unfortunately it seems the (misguided -ed) who teach economics at Harvard (Rogoff, Reinhart, etc) get it wrong according to this correspondent-ed)
May 13, 2013
Oh well no problem then. Lets abolish all taxes and just debt finance govt expenditure 100%. Then we just print the money to pay off the debts and pay interest irrespective of interest rates.
May 13, 2013
None of the above authorities (Keynes, Friedman, Hume, etc) advocated printing money willy nilly. They advocated printing enough to maximise employment, GDP, growth, etc in as far as that is consistent with keeping inflation under reasonable control.
May 11, 2013
Isn’t David Starkey invited? If not, not interested !
May 12, 2013
I can see your point Vanessa. I am a bit of a fan of his, and he always has something quite pertinent to say, despite ruffling the feathers of the PC brigade. And he makes mincemeat of lefties!
Tad
May 12, 2013
One of the few voices of sanity ever allowed on to BBC political programs, usually out numbered by 4 (plus the BBC think person) to 1. Still better than nothing. Andrew Neil is not too bad either but not many other voices of reason on the BBC.
May 11, 2013
No doubt you will want to raise the issue of the CP Police Commissioner from the Thames Valley who has allegedly (made generous travel claims and now has a chauffeur-ed)
This doesn’t chime well with austerity measures across the land …
May 12, 2013
The “austerity” is for the private, wealth creating, tax paying sector not the largely parasitic state sector one.
May 12, 2013
I haven’t a snowball’s hope in hell of getting there myself, but I’d love a transcript of the debate if that’s possible.
I am presently of the view, that some austerity is necessary for ourselves in the UK, but that alone will not achieve growth. We need to sell to markets that have the money to pay, which unfortunately for the Europhiles, excludes a sizable chunk of the EU. Moreover, we need to be free to make trade deals with whomever, without the interference of the EU.
As for the other parts of the EU, they made their beds, they can lie in them, just as long as we don’t have to pay any more to keep them afloat. Their people were enticed to vote for pro-EU parties by this ‘jam for everybody tomorrow, just as long as you sign away your sovereignty today’ mentality, without proper scrutiny of the policies their governments promoted. It stands to reason, that the debts they subseuently incurred have to be repaid at some point, but that seems to have escaped the voters of the indebted nations.
What a marvellous thing the EU is! Nations give away their right to self-determination, then the EU allows them to get into hock, to the point where their economy all-but collapses, then the EU parachutes in unelected people to manage their affairs. All the time, the people who have been so badly led, are suffering through unemployment, the slashing of benefits, and a reduction in public services. And then the Europhiles, as on the BBC, say Britain would be mad to leave it, as the benefits it brings are enormous.
Who the hell do they think they are kidding, when the evidence of collapse and failure is all around and so glaringly obvious?
Tad Davison
Cambridge
May 12, 2013
We need to sell to markets that have the money to pay, which unfortunately for the Europhiles, excludes a sizable chunk of the EU.
Given how high their GDP per capita is they’re still a better market than most other countries.
Nations give away their right to self-determination, then the EU allows them to get into hock, to the point where their economy all-but collapses
All the economic collapses have been due to these countries either deregulating their banks too much or running their economy badly.
hen the EU parachutes in unelected people to manage their affairs
Except for Portugal, Ireland, Spain, and Cyprus.
All the time, the people who have been so badly led, are suffering through unemployment, the slashing of benefits, and a reduction in public services.
Also happening in countries outside of the eurozone, such as the UK.
May 12, 2013
Unfortunately cannot make it for 17.00 hours on Monday, but do please keep us informed of any other debates to be held in the future.
May 12, 2013
Don’t forget to read “The Seven Deadly Innocent Frauds of Economics”, Martin Wolf has been studying the “sectoral balance identity” of sovereign fiat currency economies.
May 13, 2013
Nice to see smart people like Martin Wolf catching up with the REALLY SMART people: advocates of Modern Monetary Theory. Supporters of MMT include the author of “Seven Deadly Innocent Frauds…”, plus me, plus Bill Mitchell (Australian economics Prof.) plus about a hundred others worldwide.
May 13, 2013
Ralph, and me. I have spent the last three years teaching myself macroeconomics. MMT does make sense and playing it backwards from the current neo-liberal austerity position, it does actually prove itself beyond reasonable doubt, as they say.
May 12, 2013
The govt bond-central bank-banks Ponzi in an ever more desperate bid to stoke general price inflation through QE, is instead going to suck all the cash out of the economy into the bond market until jobs collapse in a hyperdeflation(austerity) of the general economy and we actually return to barter. Simultaneously the bond market hyperinflates until that trade, like the resonating bridge in Tacoma USA that was destroyed by harmonics, becomes unhinged and explodes into smithereens and the dollar/pound is gone…… worthless. At that point the man with gold in his hands is King. (before we get to Tacoma Bridge, who knows? Probably rough sledding for all).
This presumes that the Bond Ponzi cannot(or won’t) be exited until collapse. They are trading at the resonating frequency of the bond market, and absent the gold damper, the positive feedback loop gets amplified at each turn. If that trade is stopped, then I expect we have a bond collapse, a property market collapse, hyperinflation of general prices and hyperinflation of the currency. ie Weimar and gold to the moon(priceless in dollars/pounds). If they do a Volcker and jack up rates then the entire world collapses and so does gold. Probably the dollar survives. No good options left.
The only question is “when” , not “if”, in any case. The old disclaimer, they can stay irrational longer than you can stay solvent applies.
May 12, 2013
Given the levels of state annual deficits and state debt that exist in much of Europe, there is no alternative to austerity. I define this very broadly; austerity is any set of measures, whether tax increases or public sector expenditure cuts or asset sales, that significantly reduce the annual deficit year by year until total state debt maxes out.
We are way outside the economic parameters within which John Maynard Keynes recommended demand management to reduce the magnitude of boom mand bust. Keynesianism, whether new or old, is irrelevant to the current situation, which is simply too dire. The Labour deficit of 2010 was in real terms double that created by Messrs Major and Patten (with Norman Lamont reluctantly in tow) in 1992.
The Coalition Government started on the right track by reducing the deficit by £20 billion in each of its first two years. That was 1.33% of GDP of fiscal consolidation per annum; if you want a rule of thumb for what is just about bearable, that is it. It went wrong in the 2012 budget. No fewer than 5 measures to increase taxes were rejected as unworkable or rejected by the LibDems. The Chancellor could have slapped a penny on the standard rate of income tax or put a freeze on the TOTAL amount per annum spent on welfare or removed red lines from the public expenditure cuts. This was the time at which the Coalition’s fundamental disagreements stated to show.
We should get back to deficit reduction of £20 billion per annum until a sensible level is reached. A deficit of about £30 billion is non-inflationary and an annual deficit of about £60 billion is compatible with 2% inflation. However, by the time we get to this desired level, the total public sector debt will have risen to about 100%, which is far too high. It looks like we will have to carry on with £20 billion deficit reduction per annum for many years yet.
In the Euro zone it is, for some Member States, far worse. This is because the rate of fiscal consolidation demanded by the EU, the IMF and Germany has been far higher than 1.33% of GDP per annum. Perhaps the EU should modify its policy so that fiscal consolidation is set at 1.33% of GDP per annum for Member States in deep dodo. However, that would result in some debt write offs or sovereign defaults or a weak Euro, none of them easy choices.
May 12, 2013
It would be interesting to hear if those promoting austerity have any examples of countries where it has worked, can explain how austerity is meant to produce jobs and economic growth, and can provide reasons why increasing the taxes the wealthy pay is somehow bad for austerity.
May 12, 2013
It depends Uni, if you feel a Government which is now spending 50% of our total GDP and is borrowing £150 billion each year, adding to a long term debt of a trillion, is a sustainable economic position and if you really believe reducing just the rate of increase of this spend level, is really “austerity”.
Turn it round and ask yourself if high or even higher levels of state spending is the answer, why do we not already have massive growth?
I unsure who is “promoting austerity” as most political parties need to be popular and they do this by bribing us with our own money (although lately a lot of it has to be borrowed)
“Increasing taxes the wealthy pay” you say, well this needs some careful setting of the rates to maximise revenues.
Hopefully the recent lower rates will bring in more revenues which I presume you will be in favour of
You ask about growth and austerity. One example I can give is the period of growth created by a modest reduction in Government spending added to some tax cuts which Mrs Thatcher’s Government created in the 80’s
But I appreciate this example will get your hackles raised.
May 13, 2013
High levels of growth requires state spending on things that produce jobs, not vanity projects. So it’s possible to have low growth and high spending if the extra money isn’t used to create jobs.
Regarding promoting austerity I was asking if there was any evidence that austerity works. If there isn’t any evidence then there’s no point promoting it.
Regarding tax cuts for the wealthy I was wondering why austerity seems to involve benefit cuts for the poor and tax cuts for the wealthy, despite no evidence that either is good for the economy.
Regarding Mrs Thatcher economic growth have there been any studies that showed that these reductions in government spending were the cause of this economic growth; rather than changes to the law, inflation being lower, or it being easier to get credit?
May 14, 2013
Uni,
I would agree with your first paragraph. One of the failures of the last Labour administration’s much higher levels of spending was that it was largely wasted and didn’t create enough useful productive assets nor enough “proper” jobs.
By austerity I suppose what we really mean is reduced Government spending. The reduction in Govt spending has been at a very low level and was required due to the last Govt’s overspending .
Does it create growth? Well I suppose that is today’s biggest economic question. In the EU it is causing problems for Spain Italy Greece etc but in the USA and perhaps even in the UK we are seeing some growth happening once more.
Perhaps here again it is about the effectiveness and quality of Government spending rather than just the quantity.
Re Benefit cuts and tax cuts for the wealthy, I don’t think these two items are correct to connect in the way you do, because the benefit cuts are a result of the required reduction in Govt spending whereas the reduction in the 50% rate to 45% is designed to encourage increased revenues in the medium term and still does not reduce top rates back to the 40% level where Brown and Blair were happy to have them until just a few weeks before the last election.
They had 13 years to increase the highest tax rate from 40% but never did until the very end as a political obstacle for the incoming Govt.
I would agree with you that growth and rising prosperity in the 80’s had more than one factor but a modest reduction Govt spending allied to the successful attack on inflation were the two in my opinion that created good levels of growth.
May 12, 2013
@uanime5
“explain how austerity is meant to produce jobs and economic growth”
If the government were a little more thrifty, they could reduce my tax bill, so I would have more money to invest in my business and create more jobs.
May 13, 2013
Given that someone working full time for minimum wage costs about £12,000 per year many small businesses would need major tax reductions before they could afford to hire more people.
May 14, 2013
I suppose Uni, the point is that if every citizen paid a few pound less tax per week and then spent that resulting extra income in the shops then that would increase demand for goods and services in the UK for SME companies who would then take on more staff et al
May 13, 2013
Exactly and you would invest or spend the money so much more efficiently than Osborne – not very hard to grasp really is it.
May 15, 2013
Austerity doesn’t have to produce economic growth; it just has to reduce the annual public sector deficit. “If you’re spending too much, spend less.” Seemple.