Debt

Britain’s zombie economy stands exposed

philmullan Debt, Economic growth, Economic policy, Politics, Productivity, Zombie economy

Britain is in the grip of financial turmoil. Over the past week, the pound has crashed and rallied, as has the bond market. Pension funds, at one point, looked to be on the brink of collapse, prompting an emergency intervention from the Bank of England. All this has followed last week’s now globally infamous mini-budget, unveiled by prime minister Liz Truss and chancellor Kwasi Kwarteng. While there is no doubt that this incoherent budget acted as a trigger, it is not the underlying cause of Britain’s woes. It simply brought the UK economy’s underlying fragilities to the fore. There’s more to this market meltdown than Truss and Kwarteng’s hapless ‘mini-budget’.

Read the full article here.

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

philmullan Debt, Inflation, Politics, Productivity, The longest depression

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?

philmullan capitalism, Covid-19, Debt, Green agenda, Politics

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

philmullan capitalism, Debt, Economic policy, State intervention

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

philmullan Covid-19, Creative destruction, Debt, Economic policy, Zombie economy

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.