Conservatives will ‘wreck recovery’ – Blanchflower
Interesting piece in this mornings Guardian by Danny Blanchflower; in it, he rips into David Cameron and the Conservatives but also all of those who see the major economic task as being debt repayment. As I have said before this debate has an air on unrealism about it because both the media and Conservative Party have politically engineered a climate of near hysteria about the size of the national debt. Consequentially the debate has become unfairly and unwisely skwed towards making debt repayment the only issue of consequence; while ignoring the fact that governments are always in debt and while Britain’s is big the issue is more debt management as opposed to a desperate scramble to make ‘savage cuts’ (to paraphrase Nick Clegg).
The debate at such times is not about big government versus small government. It isn’t about moving this service from public to private sector because the private sector can do it better. The debate here is about maintaining levels of aggregate demand. In a deep recession the choice is: the government does it or nobody does it; it is public spending v no spending. You don’t worry about paying off debt when you are at war: you have other priorities. Win the war first.
The first point is politically apposite because it shows the protestations of the Conservatives up for what they are; ideological assertions that ‘small government’ is better. Reducing the debt is the Trojan Horse which small government Conservatives are using to smuggle in their ideology under cover of practicality. Small wonder then the Politics Home PH100 come to the conclusion that the argument for small government is an ideological one.
Blanchflower argues something that for a long time in economics has been an ideological taboo; that inflation should be encouraged;
Moderate inflation would help all the people in negative equity; rising asset prices would certainly help, and are one of the stated purposes of quantitative easing. A few years of inflation, around 5% or so, would be a really good idea. Keep interest rates low for the foreseeable future, keep the stimulus going.
So, ‘savage cuts’ and pay freezes probably not the best idea then? Maybe Nick Clegg should take note; there are other ways to repay this debt than sacrifice our social commitments and rhetoric about savage cuts just alibis the Conservatives; who are poised to lead us off the edge of an economic cliff.