Economics

Wednesday

James Forsyth

GDP figures show the economy needs fundamental reform

Today’s GDP figures are far worse than expected. They mean that the economy has now shrunk for three consecutive quarters. The figures have destroyed the optimism created by the fact that employment and tax revenues are rising. Politically, these figures are undoubtedly a blow to the coalition. Labour is out trying to pin the blame for the continuing recession on the government’s economic policy. The Treasury is countering that the figures confirm that ‘the country has deep rooted economic problems’. In a sign, though, of how serious the GDP fall is, the government is conspicuously avoiding suggesting any external reasons for it — such as the Eurozone crisis, the weather

Jonathan Jones

GDP down 0.7% in Q2

The ONS’s first estimate of GDP in Q2 of 2012 shows a 0.7 per cent fall on Q1. It’s worth remembering that this is just a preliminary estimate and subject to revision later, but that’s a very big drop — the largest since the beginning of 2009 — driven largely by a big 5.2 per cent contraction in the construction sector. The ONS does point out that the extra Jubilee bank holiday will have hurt the economy, as will the record rainfall in April and June — but don’t expect Osborne to highlight this, for fear of a repeat of the ridicule he experienced for pointing to snow and the royal wedding

Monday

Fleur Macdonald

Across the literary pages | 16 July 2012

Any idea what an Ouroboros is? It’s not the name of the cloud hanging over London at the moment but, according to Will Wilkinson, in his review of Joseph Stiglitz’s The Price of Inequality on the Economist blog, a perfect symbol for the ‘progressive master narrative’ championed by a new technocratic coterie (which also counts Paul Krugman among its members). An ancient image of a snake consuming its own extremity, the Ouroboros is a fitting symbol for ‘progressives dizzy from chasing their tails’. Nobel prize winner, former head of economics at the World Bank and adviser to Clinton, Stiglitz is apparently in the perfect position to comment on the price

Saturday

Fraser Nelson

Friedman’s genius

Milton Friedman would have been 100 later this month, and there is likely to be much commemoration – much of it nostalgia for an era where the right had a clear idea about how to get out of the mess the left had left. I always believed that Friedman’s ability to articulate – his gift for aphorisms and jokes – was his greatest single talent. The arguments for the basics of human liberty are made all the time, but no one has quite made them with as much force and effectiveness as Friedman. His 1970s series Free to Choose remains, in my view, the most powerful TV documentary ever filmed

Thursday

The Spectator

Shelf Life special: The Skidelskys

Robert and Edward Skidelsky have written a new book for our times, How Much Is Enough? The Love of Money, and the Case for the Good Life, which is published today. In their own words: ‘it is the story of… how we came to be ensnared by the dream of progress with purpose, riches without end.’ But what have this father son combination been reading while penning this and their other books? The answer is: rather more than just John Maynard Keynes. Robert Skidelsky 1) What are you reading at the moment? Laurent Binet, HHhH 2) As a child, what did you read under the covers? J.B.Priestley, The Good Companions

Friday

Ryan Bourne

There are economic reasons to cut the state, irrespective of the deficit

Treasury Select Committee Chairman Andrew Tyrie recently explained he would support cutting back the size of the state even if our public finances were in balance. I doubt whether the leadership of the Conservative party agrees. Cameron and Osborne seemed settled on the Brownite consensus until the financial crisis threw them a curved ball. This, in many ways, makes the so-called ‘austerity’ programme more difficult for them to implement. Without the argument that they genuinely believe in smaller government for economic or moral reasons, the party has had to adopt the ‘we wish we weren’t doing this but we have to’ line. It’s meant they’ve been unable to spell out

Thursday

Clarissa Tan

Eurozone v Facebook — which is the economic model of our time?

Even as our attention is gripped by a crumbling eurozone, another huge economic entity is emerging in the marketplace — Facebook, which has just upsized its number of IPO shares by a quarter before its $100 billion flotation tomorrow. Providing the crisis in Europe does not blow out into a huge political standoff (and just stays the gigantic economic mess it currently is), which entity would future historians regard as the defining business model of our age? Both the eurozone and Facebook, in a way, try to deal with the problems of geography — how to connect people from different places and cultures. But they do it in radically different

Wednesday

Jonathan Jones

A plan that could change the face of future Budgets

‘I’ve never seen a government document with a Laffer curve in it before’, declared Ed Balls last week. Well it looks like he might be seeing a lot more of them, if George Osborne gets his way. Yesterday, as James noted, the Chancellor told the Treasury select committee that: ‘I think the Treasury can now, and I’ve asked this to happen, start undertaking some real research into dynamic scoring, and what the broader economy effects are of changes to taxation’. Now, it’s hard to get all that excited about something with a name like ‘dynamic scoring’. It was never going to make the front pages, especially when there’s a ‘pasty

Friday

Fraser Nelson

The time for Osborne to shed Brown’s 50p rate is now

Will George Osborne have a better chance to abolish the 50p tax than this month’s Budget? It would be unpopular, so it’s the kind of move he’d be unlikely to make before an election. The Lib Dems have something they want to trade: permission to raise the tax threshold towards £10,000. And two recent reports, by the CEBR (pdf) and IFS (pdf), have reinforced that this tax is losing money. At the heart of the 50p tax is a deeper question: is Osborne a transformative Chancellor who will change the terms of debate? Or is he doomed to operate within parameters set by Gordon Brown? I look at this in

Monday

Peter Hoskin

Greece is still the word ahead of today’s eurosummit

How about this for a claim by Nicolas Sarkozy, made in a TV appearance yesterday? ‘Europe is no longer at the edge of the cliff.’ It’s quite some statement, so let’s hear it again: ‘Europe is no longer at the edge of the cliff.’ Of course, Sarkozy has reasons for saying it beyond mere pre-electoral braggadocio: the rates paid on Italian and Spanish 10-year bonds have generally been falling since the the beginning of the year; the euro has been making some tentative progress against other currencies; and so on. But it still constrasts heavily with much else that is being said around the eurozone. Only last week, Angela Merkel

Friday

David Davis-Mp

The paradox of incentives

Banker bashing has become something of a national pastime, and politicians have been quick to join in. But rather than devoting their energy to avenging past sins, our political leaders might be better off learning the lessons of Dan Ariely’s book, The Upside of Irrationality. In this valuable work, Ariely shows that the incentive of big bonuses can actually damage performance, not improve it. He cites a century-old experiment in which rats were placed in a cage with two pathways. One led to a reward, the other to a device which gave the rats an electric shock. The aim of the experiment was to see how quickly the rats learned

Wednesday

James Forsyth

Lord Glasman’s target is the other Ed

Maurice Glasman’s New Statesman piece on Ed Miliband is causing a bit of a stir. Lord Glasman, an academic who Miliband proposed for a peerage, writes that the Labour leader ‘has not broken through. He has flickered rather than shone, nudged not led.’ But if you read between the lines of Glasman’s article it is clear that he thinks someone is holding Miliband back and he drops very heavy hints as to who that is. For instance, the second sentence reads as follows: ‘Old faces from the Brown era still dominate the shadow cabinet and they seem stuck in defending Labour’s record in all the wrong ways – we didn’t

Tuesday

Alex Massie

Ed Balls & his Fellow-Travellers at the New York Times

Ed Balls is a bonny fighter and even his opponents often appear to enjoy being wound-up by the Shadow Chancellor’s pleasingly-shameless* approach to opposition. There was a typical piece of Ballsian chicanery during this afternoon’s debate on the economy when Balls accused George Osborne of stubbornly sticking to a failed “Plan A” and, to buttress his argument, pointed out that the New York Times agrees that the coalition has failed to get Britain working again. Well, if the New York Times says something it must be true! Or, you know, not. Though the Old Gray Lady is a mighty paper it is not the last word on anything, let alone

Friday

Jonathan Jones

From the archives: Fall of the Rock

Yesterday, George Osborne announced the sale of Northern Rock to Virgin Money. Here, to mark the occasion, is the piece Allister Heath wrote on the bailout of the bank in 2007: Northern Rock: morally hazardous, Allister Heath, 29 September 2007 First we heard about ‘sub-prime mortgages’; then it was ‘collateralised debt obligations’; now it’s the turn of ‘moral hazard’ to appear on the Ten O’Clock News. Jolted out of prosperous complacency by market turmoil, the public has started to care about economics: strange jargon and obscure concepts previously familiar only to investment bankers are going mainstream.    The best way to understand moral hazard is to reflect on how taking

Wednesday

Daniel Korski

How do you leave the euro?

A few weeks ago, Lord Wolfson announced a £250,000 prize for the person who could figure out how a country could leave the eurozone. Given what is happening to the euro, it seemed an awful lot of money to spend on a sub-section of the real question: namely, how Europe can maintain monetary stability and promote growth. The euro, as Gideon Rachman pointed out in the FT last week, is a means to an end, not an end in itself.  It seems Lord Wolfson agrees that he asked too narrow a question and has reformulated the task. The winner will now have to answer what will be the best way

Tuesday

Daniel Korski

A counterweight to France-German power

It was only a matter of time before the Franco-German drive to reshape Europe’s “economic governance” met with a counter-proposal. In international politics, a powerful state or group of states tends to lead others to band together in or order to provide some form of balance. This is now happening in Europe. David Owen and David Marsh are proposing the creation of a “Non-Eurogroup” (NEG), corralling the 10 EU countries outside the Eurozone into a group. Writing for the Financial Times, they argue that such an NEG would bring many benefits. They say: “Setting up the NEG would establish rights and responsibilities for non-eurozone members, ending the long-held European position

Monday

Jonathan Portes

Another voice: Against austerity

Here’s the latest in our Another Voice series of posts, which give prominence to viewpoints outside the normal Coffee House fold: You can’t help but notice that the UK economy isn’t doing too well. Part of this is down to international developments, sure. But part – as Mervyn King said in “http://www.bankofengland.co.uk/monetarypolicy/pdf/govletter111006.pdf”>his letterto George Osborne last week – is the result of “fiscal consolidation”, aka spending cuts. The IMF’s assessment, published a few days ago, shows both why debt has risen (lower tax revenues) and what is happening now (sharp contraction): And there’s much more contraction to come: So why keep on contracting if it is affecting economic growth? Clearly, the Prime Minister

Thursday

Clarissa Tan

Another round of Easing

So the Bank of England has pulled the lever on a second round of Quantitative Easing. Apparently sluggish economic growth, plus more ominous signs from the eurozone, have persuaded the central bank it can’t wait any longer to print more money. But given the evidence from QE1 – only a small boost to GDP accompanied by extra inflation – it’s a big gamble. Mervyn King & the rest of the Monetary Policy Committee clearly believe that more money in the system is what’s needed to kick-start growth. But even they admit that QE1 didn’t live up to expectations, so why should QE2? In the meantime, quantitative easing as an instrument

Tuesday

Alex Massie

An Irish Recovery?

I think it’s tiresome the way countries in desperate economic trouble are treated as lab rats by pundits far away whose sole interest in their travails lies in their providing an argument to buttress favoured policies back home. It’s a pretty grim game, really. So when Paul Krugman spends a summer writing about Ireland’s enforced austerity he’s not really writing about Ireland at all. He’s arguing about the United States and never mind what the hell happens to the poor, miserable Irish. The worse things go for them, the better they go for the Krugman school. Tyler Cowen documents all this rather neatly. This doesn’t mean that a return to

Monday

Alex Massie

Thought for the Day | 26 September 2011

Via Samizdata, here’s Jeff Randall on the eurozone crisis: The fallacy at the heart of this crisis is that every financial problem has a political solution. True. And one can make another, related point: the fallacy at the heart of this and every other matter is that every political problem has a financial solution.   Or, often, a solution at all.