That a UN report feels the need to teach such basic economic lessons speaks volumes for the parlous state we are in
There is a warning to politicians in the latest UN report on trade and development that austerity costs growth (take note, George Osborne). There is also a warning to super-tough central bankers that taking a tough line on inflation costs growth, especially when the inflation in question is temporary and dealing with it by raising interest rates encourages businesses to sit on their hands and invest less, sack staff and freeze wages. Jean-Claude Trichet at the European Central Bank tops the list of offenders in this category.
And there is a further warning to the International Monetary Fund and the rich nations' thinktank, the OECD, that they risk adding to the world's economic woes by failing to bring nations together for a co-ordinated response to the current trade imbalances and lack of growth. If anything, they have encouraged austerity budgets, tough-talking central bankers and countries such as the UK that thumb their nose at co-ordinated responses to declining global growth.
These warnings suggest a high degree of frustration at the UN Conference on Trade and Development (Unctad) at the simplistic stance of global and national institutions at a time when the richer developed nations stand on the precipice of another recession, with every likelihood that should they fall, they will drag the less developed nations down with them.
In a telling section of the report, Post-Crisis Policy Challenges in the World Economy, Unctad admonishes these organisations for falling into the trap of equating national economies with household budgets. It was a theme of Thatcher's government to liken a housewife's weekly budget to national accounts. Today, the read-across from one to another remains popular, especially to those on the right.
Cut spending and save to reduce outgoings and borrowing is the mantra, leaving the budget refreshed and ready for action. Except a government that hacks away at spending also reduces its income through lower tax revenues. It can reduce borrowing with any savings, but not enough to make up for the losses. According to the view from the right, private enterprise steps into the space left by government, but in reality, businesses rather like riding on the back of government spending and dislike taking risks without a strong state-induced feelgood factor.
That a report of this magnitude – the annual review of Unctad is more than 220 pages long – feels the need to teach such basic economic lessons speaks volumes for the parlous state we are in.
The UK government has closed its ears to warnings from Unctad and others. The effects on the rest of the world of UK austerity are of little concern to ministers. Maybe it will take another recession for a change of heart and the realisation that it will take a co-ordinated response, where we sit down with other countries to halt a slide into stagnation and a long depression.
Source http://www.guardian.co.uk/
And there is a further warning to the International Monetary Fund and the rich nations' thinktank, the OECD, that they risk adding to the world's economic woes by failing to bring nations together for a co-ordinated response to the current trade imbalances and lack of growth. If anything, they have encouraged austerity budgets, tough-talking central bankers and countries such as the UK that thumb their nose at co-ordinated responses to declining global growth.
These warnings suggest a high degree of frustration at the UN Conference on Trade and Development (Unctad) at the simplistic stance of global and national institutions at a time when the richer developed nations stand on the precipice of another recession, with every likelihood that should they fall, they will drag the less developed nations down with them.
In a telling section of the report, Post-Crisis Policy Challenges in the World Economy, Unctad admonishes these organisations for falling into the trap of equating national economies with household budgets. It was a theme of Thatcher's government to liken a housewife's weekly budget to national accounts. Today, the read-across from one to another remains popular, especially to those on the right.
Cut spending and save to reduce outgoings and borrowing is the mantra, leaving the budget refreshed and ready for action. Except a government that hacks away at spending also reduces its income through lower tax revenues. It can reduce borrowing with any savings, but not enough to make up for the losses. According to the view from the right, private enterprise steps into the space left by government, but in reality, businesses rather like riding on the back of government spending and dislike taking risks without a strong state-induced feelgood factor.
That a report of this magnitude – the annual review of Unctad is more than 220 pages long – feels the need to teach such basic economic lessons speaks volumes for the parlous state we are in.
The UK government has closed its ears to warnings from Unctad and others. The effects on the rest of the world of UK austerity are of little concern to ministers. Maybe it will take another recession for a change of heart and the realisation that it will take a co-ordinated response, where we sit down with other countries to halt a slide into stagnation and a long depression.
Source http://www.guardian.co.uk/
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