Co-authored with Marcus Miller Almost 100 years ago, a young official in the UK Treasury sought to advise European policy makers on how daunting external debts might best be managed. There was, he argued, a limit to the national capacity to service debts. Those expecting further payments were bound to be disappointed. More than that, … Continue reading How Keynes would solve the eurozone crisis

Co-authored with Felix Martin The Office for Budget Responsibility forecast in March that the UK economy would grow by 1.7 per cent in 2011, and that the government could meet its target of eliminating the structural deficit by 2014-15. But the economy has underperformed these forecasts by so much that it now seems growth will … Continue reading Urgently needed: a plan C to save Britain’s economy

Co-authored with Felix Martin As he prepares for Wednesday’s Budget, George Osborne, chancellor, faces a dilemma. On the one hand the recovery has stalled even before his cuts have started. On the other the simple solution of relaxing austerity plans to stave off a double-dip recession is financially and politically unrealistic. Fortunately, there is a … Continue reading A Way out of Britain’s Growth Dilemma

Three cheers for Robert Zoellick. Writing in the FT this week, the World Bank president set out an ambitious agenda for the Group of 20 leading economies to “rebalance demand” and “spur growth”. He recognises that the reduction of current account imbalances is a necessary condition for a non-protectionist trading system. Global imbalances lie at … Continue reading A golden opportunity for monetary reform

Next week the parliamentary battle over cuts will start up again. The chancellor, George Osborne, will say the government’s programme of fiscal retrenchment is necessary to “restore confidence”. Alan Johnson, his shadow, will say it threatens the “fragile recovery”. The government plans to cut public spending by 10 per cent over four years as part … Continue reading Britain’s Austerity Apostles Duck the Debate

Co-authored with Michael Kennedy In 1937 Keynes wrote: “The boom, not the slump, is the right time for austerity at the Treasury.” Jean-Claude Trichet, president of the European Central Bank, disagrees. Stripped of its jargon, his argument last Friday in the Financial Times is that fiscal retrenchment is needed to “consolidate recovery”. This has become … Continue reading Future generations will curse us for cutting in a slump

In 1974, Edward Heath asked: “Who governs – government or trade unions?” Five years later British voters delivered a final verdict by electing Margaret Thatcher. The equivalent today would be: “Who governs – government or financial markets?” No clear answer has yet been given, but the question may well define the political battleground for the … Continue reading Once Again We Must Ask: ‘Who Governs?’

Co-authored with Prof Marcus Miller The fragility of the British economy in face of the Great Recession demands a rethinking not just of macroeconomic policy, but of the balance between consumption and investment, between finance and industry. In response to this challenge, George Osborne, the shadow chancellor, set out a “new economic model” in the … Continue reading Do not rush to switch off the life support

Sir, In their letter to The Sunday Times of February 14, Professor Tim Besley and 19 co-signatories called for an accelerated programme of fiscal consolidation. We believe they are wrong. There is no disagreement that fiscal consolidation will be necessary to put UK public finances back on a sustainable basis. But the timing of the … Continue reading Letter to the Financial Times: First priority must be to restore robust growth

It was to be expected that our present economic traumas would call into question the state of economics. “Why did no one see the crisis coming?”, Queen Elizabeth reportedly asked one practitioner. A seminar at the British Academy tried to answer and the FT has taken up the discussion. The Queen’s question is understandable, given … Continue reading How to rebuild a shamed subject