Austerity in the US and Euroland

 

The USA, Greece, Portugal, Ireland and other Euro area countries have all cut their total public spending by more than the UK since the crisis struck. The USA has grown faster than the UK over the last five years, whilst much of Euroland has remained in a long recession for the same period. What can we deduce from this about austerity policies?

It is true that the spending cuts have been much larger in parts of Euroland than anywhere else. Irish total public spending is down by 15% in cash terms from the 2009 peak. Greek total spending is down by a bit more. In the USA total public spending fell marginally in cash terms in 2010 and in 2013, and was just 2.7% up in cash terms in 2013 over 2009, reflecting a real terms reduction. In comparison UK current public spending has shown real terms increases over each of those years and is up 13% in cash terms, 2013-14 compared to 2009-10. Total UK spending is up by 7.6% in cash terms, reflecting a substantial decline in capital spending resulting  from Labour’s cuts at the end of its administration.

The Irish economy has just started to grow again after five years of falling output and serious problems. The further recent reduction in public spending has not prevented a small improvement. Meanwhile, in the UK public spending control is now tighter than in the period 2010-12, but output is now expanding much more rapidly.

The poor performance of the peripheral Eurozone economies has not been helped by very large public sector cuts, reducing employment incomes and other spending in the public sector. However, the bigger impact on their output has come in the private sector. The high exchange rate for their cost base has limited their ability to export or to substitute home production for imports. The lack of independent control over money means they have not been able to stimulate demand by monetary means as the USA and UK have. As a result the sharp fall in public sector output has not been offset by rises in private sector output, but reinforced by declines in private activity. High and rising unemployment has added to the misery and subtracted from demand.

Meanwhile, the better performance of the USA with tighter controls on spending, and the better performamnce of the UK now it also has tighter controls on spending, suggests that public sector spending  controls do not prevent gr0wth. The private sectors of the USA and UK are able to expand, thanks to easy money policies. The US has also had the added advantage of early exploitation of shale gas, adding directly to output and making US industry more competitive thanks to cheap energy.

 

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56 Comments

  1. Arschloch
    Posted November 8, 2013 at 6:46 am | Permalink

    John come on now in your other role as a fiduciary of other peoples money are you then suggesting the USA is going to be a great place to invest? Lets have a look at some other statistics: 1 in 6 Americans on SNAP/Foodstamps, big cities on the verge of insolvency and smaller ones having already declared so, the FED printing $85 billion A MONTH to buy
    Obama’s IOUs and subprime stuff. Where is the demand going to come from with that? OK they have shale so their exports should have an advantage, but who is buying the Germans, the Chinese? You support a government that is influenced by Keynes and if he was around today he would be telling Mr Osborne that we are in a depression, as we are continuing to see subtend growth. Be honest and admit that 2008 was just like a mini stroke with the big one, with multiple organ failure, only being just around the corner.

    • lifelogic
      Posted November 8, 2013 at 1:04 pm | Permalink

      I do not agree with that, the USA has its problems and challenges, but its larger worldwide companies will be fine I suspect. It could do without Obama and with a smaller state sector, but it is surely a better bet than the UK under Cameron/Miliband/Unison for the next 7-20 years.

      • Bazman
        Posted November 8, 2013 at 10:21 pm | Permalink

        Pure religion.
        Ram it.

  2. Gary
    Posted November 8, 2013 at 7:31 am | Permalink

    Govt spending beyond tax receipts is credit expansion.

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”- Mises

  3. Andyvan
    Posted November 8, 2013 at 7:59 am | Permalink

    We can deduce that all the countries mentioned have suffered very badly from the expansion of government and it’s counter productive regulations and taxation. Some are so weakened by the dead weight of bureaucracy that they react very badly when cuts are made and take years to wean themselves of the public sector drug. America is a special case as it’s economic statistics now bear as much relation to reality as the Five Year Plans in the Soviet Union did. US government spending is so out of control and so completely hidden by accounting fraud that talk of cuts to it’s budget is laughable. Having said that the relatively short term boom of shale gas has helped them considerably and the imposition of a virtual police state and economic repression has assisted the government no doubt.
    The UK has managed to keep it’s head above water by a huge devaluation of sterling which has further impoverished ordinary people whilst benefiting financial and political elites very considerably. This policy will no doubt continue under the Bank of England’s chairman (words deleted ed) Mark Carney
    The biggest surprise is that any private sector economy manages to survive anywhere under the appalling dead weight of government. Since most of the economies mentioned now resemble old Soviet Bloc satellite states more than they do free markets we can expect their government’s economic statistics to resemble them too.

  4. alan jutson
    Posted November 8, 2013 at 8:00 am | Permalink

    I do wish people who describe that living within their means is austerity would please stop doing so.

    If living within your means is austerity, both my family and my parents have been guilty of such for nearly a century.

    Given the above, why should I be impoverished even more, by having my disposable income reduced by increased taxation, to pay for those loans taken out by successive governments in my name.

    Not only do we have our governments borrowing ever more in our name, but we have the EU doing the same, then we have the wonderful QE policy of devaluation which increases inflation.
    Then a huge amount of this so called additional money (borrowed and printed) appears to be wasted and squandered at every turn.

    • alan jutson
      Posted November 8, 2013 at 8:12 am | Permalink

      Off Topic

      I see it is reported in todays Press that our “Burka clad wanted man” has now been given the Ok by a UK Judge, to claim for legal aid, to help him to claim compensation from us, for his so called treatment in Somaliland in 2011.

      Sorry, but I just do not understand this reasoning at all.

      This is human Rights gone mad, and the sooner it is changed the better.

      Another load of money to be sucked from the taxpayer to be just chucked down the drain and into the hands of the legal proffession.

      • lifelogic
        Posted November 8, 2013 at 9:48 am | Permalink

        The last thing the UK needs is more lawyers and more legal aid. It needs more people actually doing useful things, builders, engineers, sales people, scientists, innovators …… we will not get rich by all suing each other.

        • alan jutson
          Posted November 8, 2013 at 1:36 pm | Permalink

          Lifelogic

          Agreed.

      • backofanenvelope
        Posted November 8, 2013 at 10:50 am | Permalink

        As I understand it, this guy couldn’t be brought to trial because that would reveal really secret stuff. However, he has now cut off his electronic tag and absconded in a burka. Surely he can now be brought before a court, tried, and if convicted, deported.

        Reply It may be he has not been charged because they do not think he has committed any offence.He is innocent unless and until proven guilty of a crime. He can now presumably be charged over the tag.

        • alan jutson
          Posted November 8, 2013 at 2:39 pm | Permalink

          Reply – Reply

          This Human Rights claim has nothing to do with him being charged or not, as I understand the reports (which could of course always be wrong).

          He is I understand, moaning about us knowing of his so called mistreatment in Somaliland, and doing nothing about it.

          Then he comes here to escape it, but wants us to pay compensation for that mistreatment on the basis of our so called knowledge of it.

          So he wants to sue the hand, that he thinks is a safe refuge.

          Difficult to make it up.

          • Bazman
            Posted November 8, 2013 at 10:25 pm | Permalink

            Like everyone he does what he can get away with bankers included. Real Tory stuff as I’m sure you all agree?!
            ramit..

          • alan jutson
            Posted November 9, 2013 at 10:33 am | Permalink

            Bazman

            I agree totally, its the system that is at fault.

            So we should just tell him, and others like him, to Ram it !

            In the meantime we need to change the system.

            An interesting approximation:
            The fact that he has asked for £1,000,000 in compensation, is the equivelent to the lifetimes tax take of 10 people working on £25,000 a year.

            Then of course you need to add in the legal costs.

            So this one persons claim will cost approximately the entire tax take of 20 working people who are on an average salary.

            If he fails to get anything, then its 10 people paying a lifetimes tax take for the expenses of the claim.

            Just think about that, and how bloody stupid we are in allowing this sort of claim culture to continue.

            Of course I have not included any benefits he has been getting in the meantime, or indeed the cost of following him.

        • lifelogic
          Posted November 8, 2013 at 5:57 pm | Permalink

          Burka fugitive broke terror orders 20 TIMES – it is reported -are these not offences?

          It certainly would not lead me to trust him to comply next time!

      • Arschloch
        Posted November 8, 2013 at 2:12 pm | Permalink

        Where else but in Cameron’s Britain could you see a load of women in jail for not paying their TV licence and a cheeky chappie such as this give the police the run around? Honestly Callaghan in the depths of the Winter of 1978 now looks as though in comparison that he was offering competent and effective leadership.

        http://www.independent.co.uk/news/courts-jail-845-for-not-paying-tv-licence-fines-1428836.html

      • uanime5
        Posted November 8, 2013 at 5:07 pm | Permalink

        How exactly is he going to take part in this trial while trying to avoid being captured by the police?

  5. margaret brandreth-j
    Posted November 8, 2013 at 8:01 am | Permalink

    It is probably a little early to forecast private success whilst simultaneously cutting public spending.
    The shipyard closures are a sad spectre of grand reshuffling and I do hope it is reshuffling rather than much more dole money.
    Percentages on the whole do not reflect the ins and outs of sufferings and numbers in relation to that per 100.
    Myself as Joe public brought Euros 145.00 home from Greece in Euros (as the hotel I booked was closed and had to rebuy all inclusive) and for my money at home I was offered from £108-£116. This is what is real.

    • Peter van Leeuwen
      Posted November 8, 2013 at 10:42 pm | Permalink

      @margaret brandreth-j: the pound sterling going from strength to strength? 🙂
      Or profit for the money changers?
      I never change my euros on return from Greece and you could also keep them, e.g. for a next visit to the continent.

    • alan jutson
      Posted November 10, 2013 at 9:37 am | Permalink

      Margaret

      The huge difference you are faced with between the buying and selling costs from sterling – Euro’s and back again makes it sensible to hang on to any euro’s you return with for next time.

      If you never intend returning, then find someone who is going and work your own exchange rates with them to best advantage for both.

  6. lifelogic
    Posted November 8, 2013 at 8:06 am | Permalink

    Money for business is still not that easy nor even that cheap for many businesses, most money seems to be being pushed toward mortgages. The new banking rules are putting artificial and daft restrictions on lending and for 4 years the banks have just been pulling cash back from many businesses often for no good commercial reason. RBS has been a one bank recession machine.

    Banks are still often trying to charge margins of 6%+ (for perfectly secure business lending with good security) thus due to the severe lack of competition in certain lending areas. Anything remotely non standard – just forget it seems to be the message.

    Cameron seems determined to make sure British industry is at a competitive disadvantage in all directions.

    High property costs, high taxation, over complex taxation, over regulation of virtually everything, no retirement, daft employment laws, abysmal public services, poor infrastructure, religious and very expensive energy, tax borrow and waste, rip off banking in many areas ……….

    Only daft economist think taxing the productive and then just wasting it, hand over fist, on things like green energy subsidies and HS2 will help the economy. How can it ? It just divert cash from sensible investments to daft ones inefficient and pointless ones.

  7. Narrow shoulders
    Posted November 8, 2013 at 8:08 am | Permalink

    I am afraid this analysis is seriously flawed without mentioning the ability of USA and UK to print money for the last five years whereas EU has only begun to print in the last 12 months. The expanding monetary base in US and UK mitigated lower than expected public sector spend and lack of private sector investment.

    Speaking as an individual I would prefer government to be more concerned with my disposable income and less worried about growth and pandering to business. Business adapts, that’s what it does. Individuals do not always have that luxury.

    • Anthem
      Posted November 8, 2013 at 11:25 pm | Permalink

      Agreed. Indeed, if government focused less on what it can spend our money on and allowed us to keep more of it, business would be catered for anyway because we’d all be buying more of their products and services.

      It’s not rocket science really, is it?

  8. Hope
    Posted November 8, 2013 at 8:23 am | Permalink

    JR you are correct in your assertion. Your problem is swimming against the tide. Cameron swallowed all the Lib Dems stupid green agenda and had it introduced in the coalition agreement. He has such poor judgment I am surprised no one has made a serious challenge to get rid of him.y our previous blog showed the lack of public spending cuts that he ranted on about so much and delivered nothing. He has failed on all fronts and lost a vast amount of Tory supporters along the way. He is a lost cause as there is not enough time to bring about change and he is not trust worthy on what he says. I am only surprised it has taken so long for many people to reach the same conclusion. The Tory party will not be a serious contender for office for the foreseeable future, in effect they will take the position of the LibDems as a minor opposition party.

    • lifelogic
      Posted November 8, 2013 at 9:45 am | Permalink

      Indeed Cameron is a good presenter but with a compass like the BBC’s that is 180 degree out on nearly every issue. That is why he gave away the last sitting duck election against Gordon Brown. Miliband and Labour/Unison are clearly truly dreadful but he will clearly lose to them as his only selling point is that he is not quite so dreadful.

      Furthermore his ratting on the EU, IHT and other issues mean he cannot be trusted one inch or centimetre as he would doubtless have it, to do anything that he say he will do. Indeed one can be rather sure that he will not keep his promises.

      He is even so incompetent that he has not even been able to arrange a level electoral playing field for the next general election. He is further risking a dreadful & damaging spilt in the union. This despite the fact that he gave the Libdums their silly, pointless and very risky AV referendum.

      • Hope
        Posted November 8, 2013 at 6:48 pm | Permalink

        I thought Soubry did a good job to help UKIP last night. She said nothing of substance about the issues the country cares about and just want to insult Farage. Keep going Soubry, like Cameron, you are shooting your party and its supporters in the foot. Well done. BTW, name calling is a Lib Dem trait. Perhaps she has kept the wrong company for too long or is in the wrong party. And the BBC, once again, shows outrageous bias. No facts and still misconstrues stories to suit their agenda. When will it be privatised?

        • lifelogic
          Posted November 9, 2013 at 6:03 pm | Permalink

          Indeed

  9. Nick
    Posted November 8, 2013 at 8:29 am | Permalink

    The state will screw you over. That’s the conclusion.

    So come on, what’s happening on the debt front?

    6,500 bn or is it 7,000 bn on the pensions debts?

    How’s that election promise to publish the debts going?

    Of course, you don’t want to publish the debts. It was just to get elected, and promises made like that, well, they aren’t really promises are they. Fingers crossed.

    And because you didn’t at the start, when you could have blamed labour, you can’t now, because people would blame you.

    (This could result in direct action etc ed)
    That’s what they will do to those that stole 8,000,000,000 pounds.

    Reply As you well know I did publish the debts in full and the government published the debts less the state pension scheme (also producing a figure for that for those who think that is also a state debt rather than a pay as you go public service).

    • M.A.N.
      Posted November 8, 2013 at 3:45 pm | Permalink

      The ‘real ‘ national debt is no secret, burning our money used to regularly give a running total. Possibly between £9-£11 trillion, but its not all repayable at once, the elephant in the room would have to be pensions, in particular final salary ones.

  10. Bert Young
    Posted November 8, 2013 at 9:22 am | Permalink

    The relationship between public sector debt and growth in the economy is linked , but , only to a small extent . Far more important is the link between growth in our economy and the extent to which the USA continues its QE programme . Our production and manufacturing sectors are directly linked to the confidence in world markets and the extent to which international consumer spending is propped up by the credit system ; the USA has a dominant influence in under-pinning the supply of credit ; if it falters , the world reacts . Germany would suffer enormously if it were to withdraw or scupper the Euro ; equally if China revalued, the price of energy would increase and make our manufactured goods a little less attractive . Overall these features are more important to us than the link to public spending .

  11. Brian Tomkinson
    Posted November 8, 2013 at 9:23 am | Permalink

    Once more we see your government planning to wreak yet more damage on contributory company pensions. We read in today’s Daily Mail:
    “The death knell for widows’ pensions: Over 1m in private sector could lose historic right to spouse’s benefits”
    http://www.dailymail.co.uk/news/article-2491732/Widows-pensions

    The changes won’t affect public sector workers – including MPs. Are you so determined to lose the next election?

    Reply I know nothing of this idea, which has not been proposed to MPs.

    • Arschloch
      Posted November 8, 2013 at 4:15 pm | Permalink

      Out of all fairness the death of final salary pension schemes began with Norman Fowler and his tinkering to give early leavers a fair deal with their transfer values or that their preserved pensions were revalued in line with inflation etc. The real killer punches to keeping these arrangements affordable has been QE increasing the cost of the final annuity and volatile capital markets mucking around with the underlying value of the schemes assets.

  12. Neil craig
    Posted November 8, 2013 at 9:56 am | Permalink

    China has not had “austerity” (they were competently run in the first place), they have had 10% annual growth and are 160% as well off now as 5 years ago. The difference is that they have had Economic Freedom + Cheap Energy.

    We could have the same any time our ruling class allow it.

  13. oldtimer
    Posted November 8, 2013 at 10:09 am | Permalink

    I quibble with your use of the words “austerity policies”. When governments are spending such huge proportions of GDP, that is more a case of misallocation of spending power than austerity. Add to that the fact that much of it is in the form of fools gold, funded by QE, then reductions in government spending in real terms and/or as a proportion of total GDP should be regarded as a return to more realistic policies of living within their means.

    No doubt there has to be a transition over time to a better balanced, self sustaining economy. The USA has a far better chance of achieving this than the euro economies. In the EZ the differences between countries appear to be as big as ever, with no sign of a resolution. The UK, it seems, is still hooked on debt and, like the res of the EU, on dear energy. So long as that mill stone remains, the outlook is bleak.

  14. James Matthews
    Posted November 8, 2013 at 10:15 am | Permalink

    Sorry to go off topic, but can we please can we have a post about the cuts to Portsmouth Dockyard? MPs sitting for English constituencies ought to be spitting tacks about this. It won’t even have the intended effect of shoreing up Scottish support for the Union because it just makes the SNP assertion that RUK will continue to place orders with Scottish dockyards after independence (because it will have no place else to go) hugely more believable. Really an utterly shameful decision.

    Reply The decision on new warship orders falls to be made after the Scottish referendum decision. I doubt the MOD would want to place these orders with an independent Scotland, as the relationship would clearly then be very different on defence matters. All of this is of course subject to specifications, tenders and procurement rules as well.

    • James Matthews
      Posted November 8, 2013 at 1:22 pm | Permalink

      Reply to Reply. I am grateful for that response Mr Redwood and glad you are optimistic, but if the skills and facilities to build warships are lost at Portsmouth the only remaining yard in England, Wales or Northern Ireland which might (I stress might) be capable of doing the work is Barrow, That does not leave much in the way of options.

      Reply Barrow has submarine work for the future.

      • E Justice
        Posted November 8, 2013 at 4:23 pm | Permalink

        James Matthews on cuts to Portsmouth Dockyard “MPs sitting for English Constituencies should be spitting tacks”
        Say’s it all , the silence is quite deafening could it be because they are thinking of another way to bribe the Scots to stay in the Union?
        “not political” well if this is “not political” I don’t know what is.

    • Denis Cooper
      Posted November 8, 2013 at 6:58 pm | Permalink

      Then why are auxiliary naval vessels being built in Korea, if that is true?

  15. Kenneth R Moore
    Posted November 8, 2013 at 11:02 am | Permalink

    Captain Redwood,

    As I’m sure you know , MPs will vote today on James Wharton’s EU Referendum Bill. It is a well-crafted piece of legislation, laying down an eminently fair question (“Do you think that the United Kingdom should be a member of the European Union?”). Will you be supporting this motion and further discussing it in on these pages ?

    Reply Of course I will support it. I have written about it before, but may do so again if there is something worthwhile to say.

  16. Tad Davison
    Posted November 8, 2013 at 11:32 am | Permalink

    ‘ The lack of independent control over money means they have not been able to stimulate demand by monetary means as the USA and UK have. As a result the sharp fall in public sector output has not been offset by rises in private sector output, but reinforced by declines in private activity. High and rising unemployment has added to the misery and subtracted from demand.’

    Oh boy am I looking forward to the pro-EU lobby trying to explain that one!

    Tad Davison

    Cambridge

  17. lifelogic
    Posted November 8, 2013 at 11:58 am | Permalink

    A good and for once optimistic program on BBC 2 last night on “This World The truth about population.” True is was presented in the usually juvenile BBC manner and they got the CO2 “non problem” bit in at the end but they actually pointed out for once that:

    Life expectancy worldwide at birth is now up to 70 years.
    Population growth in children 1-14 population is now fairly level at 2Bn,
    Population is thus expected to peak at about 9Bn then decline,
    only 1% of energy world wide comes from “renewables” (and that need back up)
    80% adult literacy,
    woman having on 2.5 babies on average,
    and the number in poverty halved.

    What is not to like?

    What however was amazing was how people especially in the UK and especially the “UK educated” knew none of this. Mainly I suspect due to the profits of doom and the BBC’s lefty doom predicting propaganda units and those of charities and the other predictors of doom that are everywhere.

    The world and its people will be just fine despite the efforts of the green loons.

    • Bazman
      Posted November 8, 2013 at 6:27 pm | Permalink

      Does your view on green issues extend further than CO2 emissions being ‘plant food’. Anti pollution measures such as the stopping of dumping of waste electronics and chemicals on third world countries and the sea by recycling and correct disposal? Energy efficiency measures by conservation and more efficient technology? is this ‘green lunacy’?
      A large percentage of the world have never used a telephone and access to clean water and cooking fuels for a massive majority of the worlds population still exists. Most in the world lives better than in the fifteenth century? Horray!

    • Denis Cooper
      Posted November 8, 2013 at 7:00 pm | Permalink

      But “woman having on 2.5 babies on average” does not yet apply everywhere, and it is especially untrue in many of the poorest countries.

      • lifelogic
        Posted November 9, 2013 at 6:05 pm | Permalink

        No but that is the current worldwide average. Mainly in Africa the figures are still higher but they will it seems certainly level off as people get better health care, better survival rates and access to contraception.

        • Denis Cooper
          Posted November 10, 2013 at 9:44 am | Permalink

          In Niger it’s still about 7, in Somalia it’s still over 6, in Mali and Chad it’s nearly 6; there is a kind of pattern here, that the countries which are poorest and regularly require external aid tend to be those which still have such high birth rates that they are sure to remain poor.

          • Bazman
            Posted November 12, 2013 at 7:20 pm | Permalink

            Why do they have high birth rates Denis? No TV as they are poor?

  18. uanime5
    Posted November 8, 2013 at 5:16 pm | Permalink

    The USA has grown faster than the UK over the last five years, whilst much of Euroland has remained in a long recession for the same period. What can we deduce from this about austerity policies?

    In 2009 the US introduced a huge stimulus, which they started reducing once growth returned. This stimulus means that the deficit is still above 2008 levels. From this we can determine that austerity doesn’t produce growth but a huge stimulus does.

    In the USA total public spending fell marginally in cash terms in 2010 and in 2013, and was just 2.7% up in cash terms in 2013 over 2009, reflecting a real terms reduction.

    2009 was when the huge stimulus was introduced. Until it’s a small percentage greater than the 2008 level there won’t have been a real reduction in Government spending.

    In comparison UK current public spending has shown real terms increases over each of those years and is up 13% in cash terms, 2013-14 compared to 2009-10.

    The UK introduced their stimulus later than the US, that’s why our government spending increased during this period while the US’s spending did not. If you compared government spending from 2008 to 2013 the US would have a much higher increase in Government spending.

    The poor performance of the peripheral Eurozone economies has not been helped by very large public sector cuts, reducing employment incomes and other spending in the public sector.

    Ironically despite these problems most Europeans countries’ GDP levels are far closer to their 2008 GDP levels than the UK.

    As a result the sharp fall in public sector output has not been offset by rises in private sector output, but reinforced by declines in private activity. High and rising unemployment has added to the misery and subtracted from demand.

    To a degree this has also happened in the UK. Cutting hundreds of thousands of public sector positions did not result in the millions of private sector jobs predicted by the chancellor. High levels of unemployment also are causing problems in the UK (unemployment has been about 2.5 million of several years).

    Meanwhile, the better performance of the USA with tighter controls on spending, and the better performamnce of the UK now it also has tighter controls on spending, suggests that public sector spending controls do not prevent gr0wth.

    I wouldn’t describe the US’s huge stimulus in 2009 as tighter controls on spending. Though their attempts to reduce this stimulus are a form of spending control so far all it’s doing is reducing growth, not producing more growth.

    Slightly off topic but regarding the EU referendum there’s another problem: Gibraltar. Under UK law they’re allowed to vote in this referendum but it may be problematic if the UK votes to leave but Gibraltar votes to stay.
    http://www.telegraph.co.uk/news/worldnews/europe/gibraltar/10435761/Gibraltar-could-be-forced-to-leave-EU-because-of-referendum-MP-warns.html

    • Richard1
      Posted November 9, 2013 at 8:15 am | Permalink

      85% of the US stimulus comprised measures which happen automatically in the UK – transfers to states to fund themselves and increased welfare. The $90bn or so discretionary stimulus in the US was largely wasted with measures such as subsidies for green projects, often (conincidently) with links to the Democrats. But the US Has a lot going for it. state/GDP and tax/GDP c. 10% below what we have, 1/3 of public spending allocated by the states not the federal govt and a balance in Washington. So even a left-leaning Keynesian administration can’t do anything like the damage a big spending leftist govt such as Brown’s can do in the UK.

  19. Bazman
    Posted November 8, 2013 at 5:26 pm | Permalink

    I suppose you all will be happy that 1700 shipyard workers have been set free to do more useful work in Portsmouth and maybe another 1500 now that BAE systems has less money spent on it by the government? At its peak 15000 worked for BAE systems in Barrow-in-Furness in the late 80’s and has now dropped to less then five thousand. Getting a taxi is now very easy. Very expensive due to the council setting fares though, but thats socialism for you. All defence spending could be spent abroad providing better value for money RAF tanker planes are so why not the rest allowing cost savings and more workers released to do more constructive and useful work such a taxi driving and starting there own shops and businesses such as market stalls. Or working for truly private companies not state subsidised ones such as BAE primary defence contractors and the like.
    Ram it.

    Reply No I am not happy, and am glad the MP and others are working with the business there to see what other orders can be found. There could be civilian ships to build, or export orders for warships.

    • Edward2
      Posted November 8, 2013 at 8:47 pm | Permalink

      I’ve read you on here decrying the UK defence and arms industries Baz, so you should be happy.

    • alan jutson
      Posted November 9, 2013 at 10:47 am | Permalink

      Reply – Reply

      Thought BAE was a private company.

      Given the above, it is BAE who should be looking for work all over the World to fill its order book and keep its staff employed, not the Government.

      The fact that BAE is now closing Portsmouth and scaling back operations suggests that it was totally reliant on Government orders to operate at all, that being the case, why did not the government get a better deal on cost for its warships.
      Why do we continue to pay millions over and above the original guesstimate on all projects ?.

      Once again it looks like private industry has made a fortune out of the taxpayer, then blames the tax payaer when the work runs out.

      I fail to see why an announcement was made in Parliament at all !

      Yes we will lose our ability to build our own ships, but if that is what we want, then we should manage things in a different manner.

      Sad to say, but once skills are lost you will not get them back easily if at all, because we should have learned that lesson by now !!

      • lifelogic
        Posted November 9, 2013 at 6:07 pm | Permalink

        Well private but with not many customers and mainly governments.

        • Bazman
          Posted November 10, 2013 at 10:25 am | Permalink

          Nuclear weapons and aircraft carriers are a bit pricey and only tend to be bought by governments. That would explain that one.
          The employees in between working for these defence contracts and competing with Chinese and Russian government companies to bid for British defence contracts such submarine based nuclear weapons systems could run whelk stands and drive taxis in order to maintain competitiveness with them in these bids?
          This idea falls down at a number of levels, but like energy part owned by the Chinese and French government and other services, could be worked around. Setting the employees free to do more useful and profitable work such as working for foreign companies on these projects. Just buy all defence equipment from America would be one way.

      • alan jutson
        Posted November 9, 2013 at 8:47 pm | Permalink

        OOps

        Should have posted “if that is NOT what we want, we should manage things in a different manner”.

  20. Antisthenes
    Posted November 8, 2013 at 6:40 pm | Permalink

    For the euro countries who suffered the worst austerity leaving the euro would have improved there chances of recovery considerably and ensured a better future. Despite this being obvious the majority of the citizens of those countries wish to retain the euro. That I believe is because of the dependency culture that dominates western thinking and short termism they prefer EU handouts today than long term prosperity tomorrow.

  21. Simonro
    Posted November 8, 2013 at 9:36 pm | Permalink

    “better performamnce of the UK now it also has tighter controls on spending, suggests that public sector spending controls do not prevent gr0wth”

    That is simply nonsense.

    Spending controls _delayed_ growth – you could reduce government expenditure to zero and growth would return eventually.

    What your government has just given us is the UK’s longest period of near zero growth in living memory, and this when the economy was growing at the last general election. We still have a GDP almost 3% below peak, and 5 or 6% below where it would have been without the private sector induced financial crisis (all that poorly hedged risk in the US plus too much leverage in the UK & EU & US wasn’t Gordons fault).

  22. Lindsay McDougall
    Posted November 10, 2013 at 7:43 pm | Permalink

    “The private sectors of the USA and UK are able to expand, thanks to easy money policies.”

    We have had easy money since 2008. What has been the average rate of GDP growth within the last 5 years? Has is it been less than the long term average or greater? If it has been less, what is the justification for the phrase “thanks to easy money policies”?

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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