Heseltine argues for growth

[Tangled up in Blue]

http://www.bbc.co.uk/news/business-20142837

At last someone's arguing for growth.And he's a Tory too.:winking:

 

[Neil_F]

I'm not sure which aspect of your view is more simplistic: that simply talking about growth will make it happen or that you think the current government don't want any growth.

 

[Tangled up in Blue]

I'm not sure which aspect of your view is more simplistic: that simply talking about growth will make it happen or that you think the current government don't want any growth.

Neither.
It is in effect a recognition that Plan B will happen(since this report was commissioned by Osborne in the first place).Presumably (as I've predicted elsewhere)there will be an announcement early next year detailing infrastructure spending plans which will feed into the real economy by 2014.Just in time for the 2015 election.Co-incidence or what?

 

[Neil_F]

How is that a Plan B? Osborne isn't going to deviate from the original spending plans, he's just going to move some revenue spending to capital spending without adjusting the total. This is not a fiscal stimulus though and it won't involve any extra cash. It will probably be paid for with more current spending cuts and some private sector/off balance sheet financing.

There probably will be some infastructure projects announced. The nuclear power plant deal with Hitachi being an example, but it also demonstrated one of the reasons why growth is depressed. Hitachi will build new nuclear power plants but it will take 4 years for their reactor design to be approved. Four years????? These are reactors that have already been approved in the US, Japan and elsewhere in Europe. There have been no safety issues and construction has been to budget. Why exactly does it take 4 years?

I haven't read the Heseltine report, but my understanding is much of it is about structures and processes (devolving to regions etc).

 

[Yorkshire Blue]

I thought Barna was getting down the kids and talking about his ill manor.

It's also unfair for you to ask for more details until the Grauniad has opined for him.

 

[londonblue]

I'm not sure which aspect of your view is more simplistic: that simply talking about growth will make it happen or that you think the current government don't want any growth.

I take it you don't agree with Nobel Prize winning economist Paul Krugman then?

Click Here

To quote him, Osborne's policy is:

Madness

(Although that quote isn't in this article.)

 

[Napster]

I take it you don't agree with Nobel Prize winning economist Paul Krugman then?

Click Here

To quote him, Osborne's policy is:



(Although that quote isn't in this article.)

That will be the Krugman who admires Gordon Brown and is an unabashed Keynesian.

 

[Yorkshire Blue]

Krugman's an economist.

He just guesses. They all do. None of them really know what's going to happen next.

 

[londonblue]

That will be the Krugman who admires Gordon Brown and is an unabashed Keynesian.

And works for the NY Times.

The point is there is more than one side to any argument. To just dismiss it is wrong.

 

[Neil_F]

I take it you don't agree with Nobel Prize winning economist Paul Krugman then?

I do. Krugman believes that demand can be managed through Keynesian fiscal stimulus. I do not.

I don't subscribe to the theory of expansionary fiscal contraction (that cutting the deficit increases growth). If you cut spending and raise taxes then it depresses short-term demand, which reduces growth. The fiscal multiplier resulting from raising taxes is typoically much worse than that for cutting spending (i.e. there is a bigger impact on growth from raising taxes than cutting spending).

However, agreeing with this point doesn't mean that deficits should not be cut and doesn't mean that the opposite is true. If spending is increased or taxes cut I do not think there would be a corresponding increase in demand.

I'm of the opinion that trend growth in the UK is probably about 1% p.a at the moment. That means that fiscal stimulus won't have effect. I put this down to the huge levels of household debt. If you gave every household in the country £1,000 what would they do with it? Some would spend it but not reduce their debt stock, so providing a one off articial demand spike that is essentially deferring delevaraging. Others would repay debt with it, which would have no impact on short term demand but would be beneficial in the medium-term. This is about the limits of central planning. I simply don't believe that demand can be "managed".

I do agree with the OBR though, who found that consumer demand had been depressed by higher levels of inflation. Reducing inflation will have a much bigger effect on growth than fiscal policy.

Here though we are just arguing about short-term growth. The debate over fiscal stimulus is a proxy for what kind of government we would like to see in the future. Those of us who favour small governments that enforce competition would prefer to see deficit cutting with monetary stimulus. Those who prefer big, intervenionist government would like to see further fiscal stimulus. What a surprise. I personally don't think that either will achieve much of a difference.

 

[Rusty Shackleford]

And works for the NY Times.

The point is there is more than one side to any argument. To just dismiss it is wrong.

The NY Times is hardly the newspaper of record that it used to be. It's an unabashed Obamaholic teenybopper mag with about as much journalistic integrity as the Sunday Sport. Krugman's an arse.

 

[A Century United]

Q: Why did God create economists?




A: In order to make weather forecasters look good.