The cost-of-living crisis has been decades in the making

The soaring cost of living, aggravated now by the fallout from the war in Ukraine, is bringing dreadful difficulties and hardship for huge numbers of people. This is the latest in a long series of economic crises which successive governments have been unable to manage effectively. How can Britain stop stumbling from one crisis to the next? By escaping from the sustained underinvestment and rising borrowing that have left Britain trapped in the Long Depression and that have robbed governments of the slack they should have to help people get through such challenges.

Read the full article here.

Shutdown: the end of an economic era?

Particular crises rarely change everything by themselves, but they can amplify what was already underway. This is how economic historian Adam Tooze approaches the Covid crisis in Shutdown: How Covid Shook the World’s Economy. He presents it as an event that brought pre-existing trends to the surface.

Shutdown is one of the first extended economic histories of the pandemic. It covers a single year, from Chinese president Xi Jinping’s public acknowledgment of the outbreak of a novel coronavirus in January 2020 to US president Joe Biden’s inauguration exactly 12 months later. The bulk of Shutdown is a comprehensive month-by-month commentary on the progression of the pandemic, the varied government responses to it and the economic, financial and political fallout.

Read the full review here of Adam Tooze’s new book Shutdown: How Covid Shook the World’s Economy.

Please, Rishi, stop evading the problem

There is an animated debate going on about post-pandemic economic policies. Centred in the US, the discussion has implications for the forthcoming Budget in Britain and for decision-making across other advanced economies. As he prepares for the 3 March Budget, chancellor Rishi Sunak needs to get real about Britain’s economic torpor.

Read the full article here.

The coronavirus cash crunch

The UK Treasury’s number one priority, with support from the Bank of England, must be to get unlimited money swiftly to businesses and individuals who are losing income because of the government’s coronavirus containment measures. This applies both to providing firms with cash to avoid bankruptcy as well as to ensuring that all their staff – employed, self-employed and gig workers – continue to be paid when they go into unpaid quarantine or are laid off either temporarily or permanently.

But however successful the government is in this vital support task, the British economy is already in recession. And the more extensive the lockdowns are, the deeper the immediate falls in economic activity will be. Long before the Covid-19 outbreak many economists had been correctly anticipating another downturn. Britain, like most other advanced industrial countries, has been in a state of precarious sclerosis ever since the stabilisation which followed the financial crisis. Western economies have been producing too little new wealth for decades. They were only functioning as well as they have been by borrowing from the future. Now this precarious, debt-dependent economic life has suffered a sharp and unexpected disruption. The collapse is largely due to a cash crunch.

Read the full article here.

If another crash comes, don’t blame coronavirus

Institutions are starting to draw attention to the potential economic effects of the coronavirus outbreak. However Covid-19 is not the cause of our economic malaise. Forecasters should be careful in presenting new economic releases on coronavirus and now allow this health matter to become an occasion for economic scaremongering.

Playing up the economic costs of Covid-19 could exacerbate fearful responses, as well as distract from the much longer-lasting sources of economic sickliness. Global growth and, especially, advanced-economy growth are already dismal, and have been for many years. Forecasts for this year were already pretty downbeat before most people were aware of the word coronavirus. The danger is that this acute health disease gets blamed for our economic troubles, while the chronic economic disease remains undiagnosed and untreated.

Read the full article here.