Trade wars cause real wars? It’s not that simple

President Trump’s imposition of steel and aluminium tariffs is counterproductive for the US economy in several ways. It will increase import costs and hit US businesses and consumers. It will cause tariff retaliation from other countries, thus restricting America’s export sales. But, more importantly, it will inhibit economic advancement. Tariffs are anti-growth and hold back economic renewal at home. They shield domestic companies from engaging in the long-term investments needed to grow productivity. And in today’s depressed conditions, they act to reinforce stagnation.

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Philip Hammond’s ‘Tiggerish’ delusions

A few months of better productivity figures and a whole 0.1 per cent upgrade in the Office for Budget Responsibility’s growth forecast for this year is not much to be positive about. Yet under instructions from the prime minister, chancellor Philip Hammond presented a more upbeat, ‘Tiggerish’ side of himself at his first Spring Statement, and announced that there was ‘light at the end of the tunnel’ in Britain’s elusive recovery from the financial crisis of 10 years ago.

It didn’t take long for critics to accuse the chancellor of complacency.

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After Carillion: we need to end zombie capitalism

The liquidation of Carillion, Britain’s second largest construction company, is extremely worrying for its 43,000 workers and their families worldwide, of whom 20,000 live in Britain. This big government contractor going bust means damaging disruption not just to its own employees, but also to its many suppliers and their employees. And it is bad news, too, for the many more thousands relying on Carillion for their pensions. Unfortunately, though, much of the initial political and media reaction has been too narrow to learn the lessons from this calamity. The state has been propping up business and making life more precarious for workers.

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Free market vs nationalisation? It’s a delusional divide

This autumn’s UK party conferences triggered reminiscences about the old political debates from the 1970s and 1980s. Jeremy Corbyn wowed his new Labour Party supporters with a call for full-scale nationalisation, including of the rail, mail, water and energy companies. In response, senior Tories used their conference speeches to assert the merits of the ‘free market’, under the inspiring mantra of ‘no return to the 1970s’. Theresa May used her infamous leader’s speech to declare that ‘the free-market economy, for so long the basis of our prosperity’, is under threat, and needs defending.

As a great 19th-century thinker remarked, history repeats itself: the first time as tragedy, and second as farce.

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A successful industrial strategy requires letting zombie firms die

As the government considers its industrial strategy white paper, due later this year, it must first break free from blinkered thinking.

While doubtless well intentioned, the familiar policies under discussion so far – additional public infrastructure investment, more state-funded research, and skills enhancement, with a particular focus on management training – are not sufficient to bring about a new industrial revolution.

The flaw in this approach is that none are new practices – and even as they have been operating, Britain’s productivity trap has been getting worse. Repeating what hasn’t been working is not a good route.

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Ten Wasted Years: The Crash One Decade On

This summer has seen the start of the discussion about the 10th anniversary of the financial crisis. It’s a discussion that will continue through to autumn next year. To recap, it was on 9 August 2007 that the French bank BNP Paribas announced that the ‘complete evaporation of liquidity in certain market segments of the US securitisation market’ had ‘made it impossible to value certain assets fairly’. This blunt admission by BNP Paribas that it could no longer price, and therefore redeem, investments in three of its funds triggered a breakdown in trust between financial institutions.

As a result, the wide diversification of repackaged debt around the financial system, which had previously been heralded as sound ‘risk management’, backfired. No one seemed to know which bundles of paper were worthless, so none could be relied upon. Credit markets began to freeze up.

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