Category Archives: New Economics
Marc Stears: firstname.lastname@example.org writes:
This election is about power, and about Brexit. It’s about the right to shape Britain’s relationship with the EU and the rest of the world.
But it is also about the right to try to shape our country’s future at home. Because the way Britain works right now is simply not accepted by millions of people.
People yearn to gain some purchase on the places where they live, and the forces which shape their lives. People want control over what matters to them – their work, their homes and families.
At the New Economics Foundation, we are fighting for real control. That means:
* Building power in our workplaces, where new technology is combining with the old power of capital.
* Real choice over where we get to live, in the face of a vicious housing market which continues to deny so many of us a decent, affordable home.
* Revitalised local communities, which are so often overlooked by top-down efforts at regeneration.
* Fair access to essential services like energy, rather than allowing six giant companies to dictate terms to everyone.
* A reformed financial system, so that banks can start to serve the public interest and not just their own.
3. The Next Step: the Bioregional Economy (later developed into the book opposite left) – Molly Scott Cato
In a world of climate change and declining oil supplies, what is the plan for the provisioning of resources? Green economists suggest a need to replace the globalised economy, and its extended supply chains, with a more ‘local’ economy. But what does this mean in more concrete terms? How large is a local economy, how self-reliant can it be, and what resources will still need to be imported?
The concept now developing amongst green economists is that of a bioregional economy—an economy which is embedded within its environment. Bioregionalism represents a culture of living that acknowledges ecological limits From an economic perspective, bioregions are natural social units determined by ecology rather than economics, and that can be largely self-sufficient in terms of basic resources such as water, food, products and services. The concept of ‘bioregionalism’ itself assists in interpreting economics in a broadly geographical way, in contrast to the post-globalisation economics which revolves around price (usually the price of labour) and downplays the role of geography altogether.
Climate change re-emphasises the importance of transport-related CO2 emissions and therefore an economic response to climate change requires the re-embedding of space within our understanding of the economy. This new economic paradigm requires us to live consciously and carefully within our ecological niche: ‘Bioregionalism recognizes, nurtures, sustains and celebrates our local connections with: land; plants and animals; rivers, lakes and oceans; air; families, friends and neighbours; community; native traditions; and traditional systems of production and trade’.
Bioregional economics is therefore about reconnecting with our local environment and having deeper relationships with the suppliers of our resources, as a substitute for the thin nature of such economic relations within the globalised capitalist economy:
Your bioregion is effectively your backyard. It is the part of the planet you are responsible for. Bioregionalism means living a rooted life, being aware of where your resources come from and where your wastes go. Within the bioregional approach beginning with the local is a principle that trumps principles such as price or choice.
This chapter has presented proposals from green economists to replace the globalised capitalist system with a network of self-reliant local economies. As made clear in the previous chapter, this will not mean the end of trade, but it will mean that preference is given to local production for goods that can be produced locally. This will mean a shift in the focus of our economic life: we will need many more people skilled in practical crafts and especially in agriculture.
There is no question that within such an economy we will need to become different kinds of people: that we will achieve our satisfactions in life in new ways and that we will be called upon to be more creative and ingenious than we presently are. Some aspects of the transition will cause hardship, but others will be more deeply fulfilling than our lives within a capitalist work-and-consumption system can ever be.
Such a vision offers greater community and personal satisfaction: a world where conviviality replaces consumption, where local identity replaces global trade, and where community spirit replaces brand loyalty. Lord Beaumont of Whitley, speaking in the House of Lords
For a couple of decades the proponents of globalisation have been winning the ideological battle, in spite of strong and growing opposition and proposal for more humane ways of organising international economic relationships, as outlined in the previous chapter.
During this time the few green economists calling for local food and energy security, or protection of local economies and communities, have seemed like voices in the wilderness. Yet, partly as a result of the immanence of climate change and increasing oil prices, putting all our eggs in the globalisation basket has begun to seem rather a risky strategy. Put this together with the recognition that globalisation means vastly more carbon-intensive transport of people and goods, and localisation begins to be an increasingly popular strategy.
In his ‘global manifesto’ for localisation Colin Hines defines globalisation as follows:
Globalization n. 1. the process by which governments sign away the rights of their citizens in favour of speculative investors and transnational corporations. 2. The erosion of wages, social welfare standards and environmental regulations for the sake of international trade. 3. the imposition world-wide of a consumer monoculture. Widely but falsely believed to be irreversible—See also financial meltdown, casino economy, Third World debt and race to the bottom (16th century: from colonialism, via development.
This is, as Hines himself concedes, a blunt and indeed a savage critique. He sees globalisation not as a positive move but rather as an economic de-localisation or dismantling of local economies on a global basis.
There is plenty of evidence to show that the beneficiaries of this massive expansion in international trade are the transnational corporations (TNCs) that control it. For example, 51 of the top 100 economies in the world are TNCs. Just 500 TNCs control 70 per cent of international trade and a mere 1 per cent of TNCs control half of the world’s foreign direct investment. And whilst the global economy typically grows at 2 to 3 per cent every year, large corporations have an 8-10 per cent growth rate.
As well as political concerns about the shifting of economic power from governments to corporations, there is the obvious concern that the increasing amount of transport of goods and—increasingly—people too, has severe environmental consequences. In addition there are anxieties about the failure of security of supply of our most basic necessities such as food and energy.
The UK’s dependence on food imports makes us particularly vulnerable to rising energy prices. We currently rely on imports to provide almost one third of the food consumed in the UK, and have one of the lowest self-sufficiency ratios in the EU.8 Although the UK has been a net importer of food for a long time, imports are currently growing at a significant rate. DEFRA figures show that imports in tonnes increased by 38% from 1988 to 2002. For some types of food, the increase has been even more dramatic. Imports of fruit have doubled, for example, while imports of vegetables have tripled. Half of all vegetables and 95% of all fruit consumed in the UK now come from overseas.
The problem for the proponents of localisation is that the rules of the economic game are stacked against them. Although globalisation has resulted in a single economy for sales, there is no global rate of wages, or internationally agreed standards of employment or of environmental protection.
Green critics of globalisation are very keen to make clear that their objection is not based on narrow xenophobia. Hines draws a distinction between globalisation and internationalism, which can be thought of as ‘the flow of ideas, technologies, information, culture, money and goods with the end goal of protecting and rebuilding local economics worldwide
Its emphasis is not on competition for the cheapest but on cooperation for the best’. The following opinion from J. M. Keynes is frequently and favourably quoted by greens:
Amongst green economists there is a consensus that, in James Robertson’s words, ‘A revival of more self-reliant local economies must be a key feature of the 21st-century world economy’. However, there is less agreement on the sorts of policies needed to revive those economies. This section looks at some policies that have been suggested. Other greens despair of political solutions and look for homegrown solutions that lie within the power of communities: their activities are documented in the next section.
Hines’s 2000 ‘manifesto’ includes policies designed to localize production and dismantle TNCs, specifically a ‘site-here-to-sell-here’ policy. This is a classic example of the protection of a locality’s industry for strategic reasons—to ensure security of supply of the essentials of life—as well as in order to protect the environment. According to Hines, ‘Market access would be dependent on compliance with this policy, ensuring that whatever a country or a geographical grouping of countries could produce themselves they did’.
Woodin and Lucas go further in their support for local economies by suggesting an end to all subsidies to agricultural exports and the introduction of a food security clause into the World Trade Organisation treaty to protect self-sufficiency in poorer countries.
The Green Group in the European parliament has called for strong measures to support local food economies including the ending of dumping of subsidized EU production and greater local self-reliance in food production and ‘Rewriting the EU Treaty and the rules of the World Trade Organisation. This is necessary to ensure that food security and maximum self sufficiency, with its inherent reduction in fossil fuel use, replaces the present emphasis on more open markets and international competitiveness. At the same time, poorer countries which currently depend on their exports to EU markets, must be supported in order to enable them to develop stronger national and regional markets closer to home.
At the heart of green policy for the local economy is a focus on the small locally-based businesses which create most jobs. The Party also supports the establishment of democratically accountable community banks, which could provide capital for local businesses, as well as local and community currencies.
Last month readers from 20 countries (listed below) were attracted to the site, many reading Richard Murphy’s review of Colin Hines’ book about Progressive Protectionism but even more focussed on basic income, as John McDonnell announced that Labour has set up a ‘working group’ to investigate universal basic income, with Guy Standing (SOAS) as one of its economic advisers, a co-founder of the Basic Income Earth Network (BIEN).
For some years, America’s Nicholas D Rosen, a Patent Examiner at the Patent and Trademark Office, has advocated land taxation. In a 2012 forum entry he cites a book by economist Joseph Stiglitz, ” The Price of Inequality: How Today’s Divided Society Endangers our Future”.
Though Joseph Stiglitz expresses concern about America becoming less egalitarian and mentions reducing rent-seeking as a solution, Rosen points out that he does not mention the ultimate form of rent-seeking: collecting the ground rents of land.
He continues: “If an increasing share of gross national product is going to the top 1%, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production”.
The revered laws of the market do not apply: Rosen (2008) points out that no one is making more land to keep the price down by competition.
Rosen’s solution: tax the value of land, and cut taxes on earned income, sales and so on, making the tax system more progressive. He comments: “Unlike most schemes for doing so, it would not cause the productive to quit work, turn their efforts to finding loopholes in the tax code, or take their skills and capital elsewhere”.
Nine years later he has written a letter to the Financial Times’ editor:
Your editorial “Robot tax, odd as it sounds, has some logic” (February 21).
Regarding the possibility of taxing robots to preserve jobs, calls to mind Henry George’s Progress and Poverty. Writing in 1879, George noted that if labour-saving technology reached perfection, labourers would get nothing and capitalists would get nothing; all production would go to the owners of land, as land would still be needed despite automation.
Rather than proposing to tax robots, the great economist advocated a single tax on the value of land.
If we should ever achieve complete automation, this would enable people to be supported out of citizens’ dividends.
Short of complete automation, land value taxation still has important advantages, such as letting people keep what they earn by their own efforts, and putting the burden of taxes on those who enjoy the privilege of holding land that they did nothing to create.
He ends: “It would also help to make housing affordable and prevent the speculative bubbles in land prices that currently contribute to the boom and bust cycle”.
There was an outcry when the Chancellor Philip Hammond unveiled a National Insurance hike for self-employed workers in the Budget – now postponed. Some 4.6 million people, around 15% of the workforce, are now self-employed and data from the Office for National Statistics show that two thirds of new jobs in the UK created in recent years are down to self-employment.
Self employment, often insecure, low-paid, with no access to holidays, sick pay, maternity and paternity leave
Now sometimes known as ‘the precariat’, the self-employed, often work in service industries such as fast food, for security firms on temporary, even zero-hours contracts, or in the so-called ‘gig economy’. The precariat includes many workers who used to have skilled or semi-skilled but relatively well-paid and secure jobs, under-employed graduates, often working in insecure jobs requiring a much lower education level, migrant workers, and people from ethnic minority communities. As long as they have a contribution record established, they get the standard state retirement pension and older self-employed workers attaining pension age today have, in many cases, some pension accrued as employees for a number of years of their life which the present generation will not have. Benefits the self-employed cannot access relate to holidays, sick pay, maternity and paternity leave.
Earlier this month it was reported that Labour is to convene a summit to develop a new deal for self-employed workers and small businesses to develop Labour’s policy on self-employment. – recognising “that the world of work itself is changing”. John McDonnell, the shadow chancellor, said. “The labour movement has risen to challenges like this in the past. It was born out of the struggle for decent pay and conditions when new technologies were ripping up existing ways of working . . . We need that same spirit and vision again. So I’ll be convening a summit next month of unions, the self-employed, and small businesses to develop Labour’s policy on self-employment”.
Some have been in the forefront, pressing for such action, including Pat Conaty, David Hookes and – for many years – Guy Standing, a leading proponent of Basic Income. Pat writes: “The work of Professor Guy Standing at UCL SOAS and formerly at the ILO for 36 years on the Precariat Charter is superb”. See the links at the foot which include Standing’s 2011 Policy Network article.
Pat Conaty, Alex Bird and Philip Ross produced the Not Alone report that Co-operatives UK and the Wales Co-operative Centre have published with Unity Trust Bank – the trade union bank. It focusses on the needs of people in self-employment who face low income and social and economic insecurity – the ‘self-employed precariat’.
The executive summary records that there are now more self-employed workers than at any time since modern records began. Some 4.6 million people, around 15% of the workforce, are now self-employed and data from the Office for National Statistics show that two thirds of new jobs in the UK created in recent years are down to self-employment.
Many of the self-employed are among the lowest-paid workers in the country; their potential income is eroded by other costs such as agency fees and additional challenges relate to difficulties in not being paid on time and not having the right to a contract.
The report calls for the ‘cousins of the labour movement’ – co-operatives, trade unions and mutual organisations – to come together and help form cohesive institutions to unite the self-employed precariat, as illustrated in the model of a ‘solidarity economy’ partnership.
As Conaty says in correspondence: “God knows something has to be done for zero hour workers, growing ranks of exploited self-employed and those working all hours of the week in the gig economy to make ends meet”.
In the latest New Economics Foundation mailing there is a useful summary of these five omissions. One question asked by MacFarlane* is “What about the housing crisis?”
The Chancellor failed to mention housing even once, despite the fact that we are in the grip of a serious and escalating housing crisis. One of the things fuelling that crisis is the fact that the government is insisting on selling off public land rather than using it to help deliver more genuinely affordable housing.
At the current rtate, the new homes target on sold-off public land will not be met until 2032, 12 years laer than promised. And the majority of homes being built on the land sold are out of reach for most people — only one in five will be classified as ‘affordable’. Even this figure is optimistic as it uses the government’s own widely criticised definition of affordability. If the government ended the public land fire sale they could use that land to partner with local authorities, small developers and communities themselves to deliver the more affordable homes people need.
According to the latest Nationwide House Price statistics, as most people cannot afford to buy now even with a mortgage, cash buyers such as second homeowners and buy to let landlords are propping up the market. Things are getting worse for people left at the mercy of this failing market. The Chancellor could have put a stop to the fire sale of public land yesterday, but instead he acted as if there were no housing crisis all.
*Laurie MacFarlane is an economist whose work focuses on reforming the financial sector and the economy to align with long term interests of society. Before joining NEF he was Head of Analysis at the Water Industry Commission for Scotland, an economic regulator which ensures that water customers receive value for money and led a small team of economists undertaking economic and financial analysis and engaging with industry stakeholders. He also spent one year in the Markets and Economics division at Ofwat, where he worked on establishing the recent water company price determinations. He has worked closely with Common Weal, a progressive Scottish think tank which aims to promote a new vision for economic, social and cultural development in Scotland and has a particular interest in analysing the links between UK housing crisis, the finance system and inequality.
Read more here: http://action.neweconomics.org/people/entry/laurie-macfarlane
In 2000 the Post-Autistic Economics movement attracted attention and its website now redirects us to the active and well-read Real World Economics Review and, following the 2008 crash, the Post-Crash Economics Society (PCES) was formed.
David Pilling reports that seven undergraduates met on the top floor of Manchester university’s student union, four years ago. Two founding members gave a brief PowerPoint presentation explaining what they thought was wrong with the economics curriculum.
The most glaring failure of mainstream economics, the students argued, is its failure to explain, much less foresee, the financial crash of 2008. Joe Earle, founder member of the PCES recalls that the crisis was not mentioned once during his entire first year at Manchester in 2011. His lecturers appeared to believe in a rational economic system that was largely self-correcting, one that would return naturally to a state of equilibrium. He arrived at Manchester, aged 20 after working in several sectors, with a broader perspective than most. The economics he encountered seemed unconcerned with real-world problems, such as inequality or financial stability.
“You are taught a narrow way of thinking about the economy as this set of rules and laws not to be questioned and not to be engaged with,” he says. He would like to “put politics and philosophy and, well, in plain language ethics” back into economics by teaching it as a “contested”, cross-disciplinary subject in which different approaches are tested against real-world scenarios.
Debunking ‘trickle -down’
The analysis of the Post-Crash Economics Society is shared by Ha-Joon Chang, a developmental economist who teaches at Cambridge. He remembers students banging on his door, saying, ‘There’s the biggest financial crisis since 1929 going on around us and our professors teach as if nothing has happened.’ Chang – a prolific author – says he is the “last of the Mohicans”, the last non-mainstream economist to make it on to the Cambridge faculty before the powers-that-be drew down the drawbridge.
Diane Coyle, professor of economics at Manchester university, defends the basic methodology of economics. She says there is confusion among critics between microeconomics, the study of the behaviour of individuals and firms, and macroeconomics, the study of whole economies. Macroeconomics, she admits, “is broken”. But microeconomics is both robust and often verifiable with real-world data
“Almost anybody teaching economics accepts that, post-crash, the curriculum needed reforming, though I understand why for students this is all impossibly slow.” Diane Coyle also reminded us in 2011, that the financial crisis is just one of the many economic challenges we face: “More pressing is the instability in our natural environment, as consumption demands by an ever-expanding world population continue to put strain on the earth’s resources”.
Post-Crash Economics has now become Rethinking Economics, a registered charity that links more than 40 student groups pressing for curriculum changes in campuses from Italy to Canada and from China to Brazil. One member, Neill Lancastle, tweets about the 19th Annual Conference of the Association for Heterodox Economics in July at Dalton Ellis Hall, University of Manchester.
Its theme: SUSTAINABLE ECONOMY AND ECONOMICS:
“The shrinking of the polar ice caps suggests a dangerous rise in sea level by 2050. Declining biodiversity and growing sea pollution indicate that change is needed in the dominant narratives about growth and profit. Heterodox economics needs to offer a compelling alternative. We welcome abstracts and stream proposals which theorise such issues, or do empirical work, or both”. More information: https://drive.google.com/file/d/0B6WcIic0m806Q0dGU1RTRi1Eb0U/view
Those who dismiss these initiatives should remember, as Pilling points out, that today’s students are tomorrow’s trained economists, some of whom will be running economies from their desks in government, banks, multilateral institutions and think tanks. He believes that what these students learn about how economies work and how governments can influence outcomes – and will have a profound impact on future policies covering everything from tax and spending to interest rates, minimum wages, greenhouse gas emissions and trade.
The writer welcomes aspirations to ‘democratise’ economics – but hopes for beneficial change falter because of the lack of reference to ethics or morality in the material read.
John McDonnell announces that Labour has set up a ‘working group’ to investigate universal basic income
The group is working with Guy Standing, one of its economic advisers. Guy is a British professor of Development Studies at the School of Oriental and African Studies (SOAS), University of London, and co-founder of the Basic Income Earth Network (BIEN).
Standing has written widely in the areas of labour economics, labour market policy, unemployment, labour market flexibility, structural adjustment policies and social protection. His recent work has concerned the emerging ‘precariat’ class and the need to move towards unconditional basic income.
During the summer of 2016 Mr McDonnell, who has been the MP for Hayes and Harlington since 1997, suggested he could “win the argument” on basic income within the Labour party. He now intends to publish a report on the idea to encourage discussion on the topic around Europe.
The Shadow Chancellor launched the first of Labour’s regional economic conferences in Liverpool on February 4th– read more here.
Transforming our Economy’ Conference in Newcastle Saturday 18th March 2017, details TBC
Annual ‘State of the Economy’ Conference in Birmingham Saturday 20th May 2017, details TBC
‘Transforming our Economy’ Conference in Bristol Saturday 8th July 2017, details TBC
‘Transforming our Economy’ Conference in Cardiff Saturday 28th October 2017, details TBC
Speaking about the idea – floated by Benoit Hamon during the socialist primaries of the French presidential elections – Mr McDonnell added:
“Interestingly, [Narendra] Modi’s government has brought forward a report in India as well about the need to develop basic income ideas and again see how they can implement it over a period of time. All of a sudden it’s become… an idea whose time may well have come . . .
“We’re exploring it. We think there are elements of it that we can bring forward as first steps towards a basic income that people can support.
“I was involved in the early campaigns many years ago on the development of child benefit – at that point in time there were all sorts of anxieties about whether you could bring forward a benefit for everybody that wasn’t based upon an assessment of need and we won the argument. I think child benefit is like one of the foundation stones of a future basic income”.
As John Nightingale who sent the link says, this ‘reads well’:
Each year the Financial Times conducts a survey of leading economists on the UK’s upcoming prospects. The New Weather Institute is part of that survey and predicts a bumpy ride. A lot of the FT material sits behind a paywall, so for interest here are the answers we gave to their questions (which are themselves interesting in terms of locating mainstream concerns) on issues ranging from economic growth, to Brexit, monetary and fiscal policy, inflation, immigration and, unavoidably, Donald Trump.
How much, if at all, do you expect UK economic growth to slow in 2017?
It is time to stop measuring the health of the economy using orthodox economic growth measured by fluctuations in GDP as the primary indicator. By mistaking quantity for quality of economic activity, worse than telling us nothing it can be actively misleading. It tells us nothing about the quality of employment, the intelligence of infrastructure, the economy’s resilience, the environment’s health, or the life satisfaction of the population. As the United Nations Development Programme pointed out (as far back as 1996), you may have growth, but it might be variously jobless, voiceless (denying rights), ruthless (associated with high inequality), rootless (culturally dislocating in the way that fed Brexit, for example) or futureless (as now, based on unsustainable resource use). All of this said, I would expect the undifferentiated volume of UK economic activity not to rise significantly over the course of 2017. If anything, the opposite is more likely due to a combination of the instability resulting from the lack of clarity over Brexit, and the unknown global impact of a rise in economic nationalism in the United States under a Trump Presidency.
Compared to what you thought 12 months ago about the UK’s long-term economic prospects outside the EU, are you now more optimistic or more pessimistic than you were?
I am more pessimistic than 12 months ago. Official optimism from the UK government over negotiating Brexit appears either disingenuous or extremely naïve to anyone with a wisp of experience of trade negotiations. If it is a case of being disingenuous to save political face, the sheer lack of public realism demonstrates a kind of poor management of expectations that is likely to feed a creeping disillusionment in the process, as deadlines are missed and compromises made. If simply naïve – and it is publicly recognised that Whitehall chronically lacks negotiating capacity – it raises the spectre of levels of incompetence that make it impossible to be optimistic about the UK’s long-term economic prospects.
Inflation has started to increase in recent months. To what extent do you expect inflation to rise in 2017?
The minor movements of inflation to a shred over 1 percent keep rates at historically very low levels. A bit more spending on shoes, clothes and furniture barely constitutes even cause for comment. You could say that the rate is rising because it doesn’t have much else to do. With broader economic uncertainties so strong, we are still in touching distance of a deflationary environment. And, with high consumer debt levels still worrying the Bank of England, the low inflation rate stands to exacerbate debt burdens. With the economy in a kind of limbo due to the opaque future ushered in by our unknown future relationship with the EU, I expect inflation to do nothing more dramatic than it has done for most of the last twenty years in an upward direction. But there is always a danger that it might weaken further, which will be a much bigger problem.
In December, the Monetary Policy Committee said the next interest rate move could as easily be up as down. Will there be a shift in this monetary policy stance by the end of 2017?
There is a strange and tenacious myth in economic commentary that a single, meaningful interest rate prevails across the economy. In practice, of course, this is nobody’s. What matters to the economy is that cheap, patient money is available for things that matter, such as building a resilient and efficient low-carbon infrastructure. Equally, the cost of money for risky and potentially damaging activities should be high. Unfortunately because of broader policy, pricing and market failures the opposite is often the case. Hence, tax breaks, subsidies and the way investment portfolios get managed means that money flows cheaply in fossil fuel infrastructure and operations. At the same time, necessary and successful emergent sectors like solar and other renewables can still struggle for affordable, patient capital. The privatisation and weakening of the mission of the Green Investment Bank is deeply concerning in this regard. Once again, prevalent economic uncertainties seem to be having the effect of putting everyone, the MPC included, on ‘watch’, and unlikely to do anything radically different in the ‘phony war’ period of approaching Brexit negotiations.
Immigration is likely to be central to the Brexit negotiations in 2017. How much do you think immigration will change and what effect do you think this will have on the UK economy?
It is tempting to ask how will we know how much immigration will change? Statistics are notoriously unreliable and, as the Financial Times has pointed out, become ‘less reliable the more detail you look for.’ A significant proportion of immigration is unrelated immediately to Brexit negotiations, though not to broader government policy. But on this, the government appears deeply divide, such as differences in approach to the control of foreign students between Philip Hammond, Theresa May and Amber Rudd. If anything, far from being downgraded by the Brexit debate, the economic importance of immigration to key UK sectors has been made more acutely obvious, ranging from higher education, to food, retail and a range of other service industries. Importantly, many of the drivers of population movement from inequality to conflict and environmental degradation show no sign of lessening and, if anything, growing worse. The tone and promise of government policy seems mostly to affect the degree of xenophobia experienced by immigrants rather than significantly changing their numbers. With all these things in mind, I doubt trends in immigration will change much in 2017 and that this will buoy-up a UK economy facing a wide range of threats.
Fiscal policy: Philip Hammond is expecting government borrowing to fall in 2017. His new fiscal rules provide headroom for more borrowing than currently forecast. To what extent will he need to use it and why?
The UK is weighed-down with an aging, creaking, high-carbon infrastructure. The case for public investment as necessary to rebuild the foundations for a modern, clean and efficient economy to underpin our quality of life is overwhelming. The cost of money for conventional borrowing is cheap. And the decision by the Bank of England to expand its quantitative easing (QE) programme from £375 billion to £445 billion in the wake of Brexit, demonstrates that public money creation is also possible when the situation demands it. Up to date, QE has benefited the banks, and the holders of certain assets, with broader economic benefits being questionable. But, as Mark Carney has previously indicated, there is no reason in principle why it cannot be used in a more intelligent and focused way to aid the productive, low carbon economy. I and others have consistently argued that far more good could be done if the same basic mechanism was used, for example, to capitalise a much larger and more ambitious green investment bank via bond purchases. The work subsequently undertaken such as large scale energy efficiency retrofitting of the UK housing stock and the roll out of renewable energy would generate good quality local employment and better prepare Britain for the future. There is no sign yet that the government intend to seize this opportunity and rather too many signs that any borrowing that is undertaken will not be put to as good use.
How do you think Donald Trump’s presidency will affect the UK economy in 2017?
The effect of Donald Trump’s presidency on the UK economy in 2017 will be as unpredictable as the bounce of an American football. Nobody seriously can know what it will be, other than increasing general levels of uncertainty, because nobody seriously believes that Trump himself knows what he will do in office. We can speculate that his brand of economic nationalism will be tempered by the full realisation of China’s leverage over America, just as we can question its initial sincerity. Especially as even as he was tub thumping against China, branded Trump products were available which carried globalisation’s legendary Made in China mark.
However, combined with the sentiments unleashed by Brexit, and the UK government’s active new embrace of industrial strategy, it is possible that the economic pendulum may swing back some degrees from globalisation toward localisation. Done in a purely autarchic way this might be negative. Done with respect to international cooperation and obligations, and to help build a more environmentally sustainable economy, it could snatch success from the jaws of chaotic self-destruction.
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