Economics journalists are ga ga ?

Green shoots ? UK economy on the upturn ? Have the journalists gone stark raving bonkers ? The serious press is reporting a multitude of stories about the recession bottoming out. Take off the blindfolds dear scribblers.

No, I am not going to deny the possibility of finding little upbeat stories – some of them are factual and some are planted. It is the sheer stupidity of the editorialising around these stories. Of course it is possible for any government to create economic growth, by borrowing and printing money and pouring it into the economy via government spending and by messing around with banking capital ratios.  This is ‘easy peasy’ – but it also why governments have annual and aggregate borrowing or printing limits. It is anti-democratic to allow any government to seek an election victory by borrowing and printing huge amounts and splashing out – either artificially to avoid economic decline or artificially to create economic growth.

By 2013 the UK government’s borrowing will exceed 100% of GDP. Yes, that’s more than 50,000 quid for every person in work. In case there is any doubt about this, imagine the effect on the economy of every employed person in the UK getting a 50,000 tax rebate. If we are comparing this with the borrowing increases since 1997 that would mean a tax rebate of more than 30,000 quid per person – hard cash for people to spend in the shops or doing up their houses. Most of the money washes through the economy. Is it not surprising that there is growth. Sure some of the money has been used to prop up the banks, but they still have not come clean about the quantity of bad loans on their books (ie they have not ‘faced the music’ fully yet). The money is ‘out there’.

Have the financial press forgotten why Keynesian economic stimulae were all but abandoned ? It is not that it doesn’t work. It was the negative effects that derive from the politics. Politically-directed stimulus money gets ‘captured’ by the politically strong (doctors ?). The productivity of the spending declines as the strategy degenerates into paying people to do little. Lending declines as interest rates rise and credit ceilings come into play. Above all, the assumption that governments will ‘save’ money by spending less than they receive in taxes, in the good times, is almost always a wrong one.

Maybe the financial press has forgotten about the concept of the ‘quality of economic growth’. For economic growth to be ‘of good quality’, it must be sustainable environmentally, widely felt across the economy rather than amongst a small elite or economic group, and above all fiscally sustainable (ie not a temporary artificial creation of wild spending and borrowing by government).  After the unprecedented mega-spending by the UK government, the hangover will come. By splashing out as if there is no tomorrow there will be growth – that is almost certain. Indeed even Sterling will rise temporarily as the government uses its vast borrowing to buy back its own Sterling-denominated IoUs (gilts).

Then what ? Panic, probably. Well, that may not matter if you are a Labour politician. It will be after a general election when almost certainly, Labour will be in opposition. But….as they bequeath the job of emergency spending cuts to the next governmemnt, while they shout ‘Cuts ! I told you so !’ from the sidelines, they will slither away from the job of sorting out the UK finances and recovering from the mass unemployment now just starting.

Judging by Vince’s  ‘Storm’ book he is painfully aware of this too, and says so in slightly coded language – often too subtle for the UK financial scribblers. Advisers to Cameron and Osborne no doubt say the same thing, and indeed they can read the detailed but polite text (ie not the spin) of IMF and IFS reports as well as anyone with a will to read between the many, many lines. But dear David and George are of course paralyzed by the ‘traction’ that the Tory cuts jibe seems to have with the popular press (and maybe the public – that is not clear yet).

What a sorry mess. So much for a more open and honest style of government, my dear Gordon !

Paul

Brown’s promise of open government

You have to admire Gordon Brown’s brazen ability to ‘utter untruths’ between his teeth ! One day he promises open and transparent government, then not a week later declares that the delayed Iraq enquiry will be in private. A day before he reduces significantly the permisable scope of Freedom of Information requests, outlawing ‘public interest’ criteria as a justification for some types of FoI request. It leaves you breathless. If a piece of information cannot be released even if it is the public interest to do so, then exactly in whose interest is substituted ? Here we have statist old socialism at its best – the state having its own ‘interests’ separate from the interests of the public. I think I prefer the Mr Bean Gordon Brown to the Stalin Gordon Brown. Ultimetely the latter always seems to trump the former.

The spin machine has been in overdrive over the Iraq enquiry. The justification for a secret enquiry is that army officers and intelligence officers can speak freely. Hilarious. What is the point in speaking freely if no-one is allowed to hear what you say ! The other justification is timing. This is also hilarious. The demand by the families of those British soldiers who have lost their lives for an enquiry in public (ie not secret), is then twisted by Gordon Brown into a demand for a full judicial Public Enquiry over many years. So we have a choice do we – either a secret enquiry or a multi-million pound judicial Public Enquiry over several years. The government is doing its spinning best but this type of chicanery won’t wash this time. All deference to the government has evaporated. Pressure for an open enquiry may well win out. I for one want to express my views about the lessons in public (I appointed the first post-war regional government in Iraq in 2003, in Basra).

The government press release says that the enquiry will allow people to be candid. If one looks in the dictionary candid means ‘frank, open, ingenuous’, not ‘secret, concealed, disingenuous’. !

The other Brownian justification is national security ?  But it was the abuse of national security cover that got us into the war in the first place. The infamous ’15 minute’ claim, the ‘Niger yellow cake uranium’ fabrications, involving White House smears on intelligence officers, the WMD accusations, the decision to go to war when the Americans had already ‘turned’ several senior military officers prepared to form a new government withoutb a war – all these things passed through the hands of those supposedly responsible for UK national security.

The misuse of secrecy and ‘national security’ imperatives is part of the set of lessons to be learnt. A secret enquiry will hand control to those who were to blame for all this – since they will adjudicate over what is secret and what is not ! By making it secret, the unreformed out-of-control UK security establishment will escape criticism.

It is quite likely that US officials, fearing embarrassment and precedent rather than national security breaches, have leaned on a weak and flailing Downing Street and obtained a cast iron agreement to control the release of info at the enquiry.  Somewhere there is a memo from DC to Downing Street. Now that has a familiar ring about it………