Posts Tagged ‘Larry Summers’

The economic questions behind and beyond the election

10/04/2015, 04:46:25 PM

by Jonathan Todd

Ed Conway characterises this as “fast becoming the election that economics forgot”. If non-economic factors are determining votes, we might note the uptick in Ed Miliband’s ratings, showing improvement against the variable that I’ve argued Labour should focus on: leadership.

It is a big Tory theme to ask, “do you want this oddity as prime minister?” If the people say, as they seem to, “actually, he’s not that bad”, then this a Tory problem. Nonetheless, Miliband’s ratings have been poor enough for long enough that they risk the electorate buying the stories that the incumbents peddle. Even when reality is inconsistent with rhetoric.

This rhetoric has claimed that Labour caused the global financial crisis (when Mervyn King, the ex Governor of the Bank of England, says otherwise), that Labour spent too much at crucial junctures (when the Tories then backed this spending), and that Labour failed to properly regulate the banks (when the Tories wanted less regulation).

As galling as it may be, though, too much time may have passed for public opinion to substantially shift on these debates. But there remain questions about where the economy is now and where it is going.

The rhetoric was of “the march of the makers” and renewal of competitiveness. The reality is that the balance of payments and productivity are both unprecedentedly awful, evidencing a troubling lack of competitiveness, which may explain two-thirds of economists recently surveyed reporting concerns about the government’s economic management.

The political vogue of economic metrics waxes and wanes. We were more agitated by the balance of payments in the 1960s. Unemployment became a bigger issue in the 1970s. Thatcherism made the money supply “the thing” in the 1980s.


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The big ideas of 2014 and what they mean for Labour: international challenges

31/12/2013, 07:30:45 PM

by Jonathan Todd

Yesterday, we had a look at the Prospect big ideas for 2014 that will impact domestic policy. Today, it’s the turn of international arena; Prospect identify 3 key challenges.

1. Secular stagnation

What if Larry Summers is right? And what if he is wrong?

The global economy has, according to Gavyn Davies’ summary in Prospect of the argument recently made by the former US Treasury Secretary, been grappling with problems of excess savings and under-confidence for well over a decade, raising profound questions about monetary, fiscal and exchange rate policy in the US and the rest of the world.

In lay terms, Summers is saying that this recovery from recession is different and will not kick in as recoveries from previous recessions have done. Gloomy days are here to stay. If he’s right, it will be harder for Osborne to say in May 2015: “Haven’t I done well?” Equally, the obstacles between an incoming Miliband government and securing its economic objectives may be insurmountable. Still, if this is hand that Miliband is dealt, he should reflect how he’d play it.

Secular stagnation is a term usually associated with the 1930s depression and was revived by Summers. His argument that this is caused by a dearth of investment opportunities reminds me of the latest Robert D. Atkinson and Stephen J. Ezell book, which provides an original and convincing analysis of the failings of western capitalism.

But Summers stretches credulity in the incredibly basic sense that the 1930s ended and the post-war boom arrived. It need not take another world war for a similar cycle to occur. The digital revolution and the rise of the rest create tremendous opportunities. While they also pose challenges, their potential and inherently cyclical nature of capitalism makes Summers seem too downbeat. Labour should focus on overcoming these challenges – which may require the slaying of some Labour sacred cows – and not presume that we are stuck in an inescapable secular stagnation.

2. The new Cold War

How does Labour see the future of the Middle East?

Beyond the Arab Spring, it seems ever less likely that we shall arrive at a Middle East of liberal democracies and ever more likely that we’ll confront a region polarised between Shia Iran and Sunni Saudi Arabia. This is the new cold war, which is as hot as hell in Syria. If Labour wants to confront the Middle East as it is, rather than as we would wish it, we need to think through the implications of the ever more encompassing and visceral rivalry between Iran and Saudi Arabia.


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