mainly macro: Balanced-budget fundamentalism – Simon Wren-Lewis

A yellow flag.

A yellow flag. (Photo credit: Wikipedia)

This is an excellent article by respected Oxford scholar, Simon Wren-Lewis. Check it out!

mainly macro: Balanced-budget fundamentalism.

Personally, I tend to identify with the argument here. For me, we have seen a clear rise in economic fundamentalism in both London and Berlin.

Economic fundamentalism seems to protect the wealthy and the privileged but is universally hard on the middle and working classes.

What’s the significance of the yellow-flag. Let me offer a definition:

a ship’s yellow flag, denoting the letter Q for ‘quarantine.’ When flown with another flag, it indicates disease on board; when flown alone, it indicates the absence of disease and signifies a request for customs clearance.

Economic fundamentalism is preached by economic policy-makers, like George Osborne, in the UK, who tend to have no formal training in economics. For me, the economic fundamentalists need to be identified, quarantined and neutralized.

Let me turn this to an open question:

How should we overcome economic fundamentalism in London and Berlin in favor of economic policy that recognizes the social costs of extreme policy?



3 responses

  1. The British establishment has always resolved problems, or these days known as challenges; the way resolution has in the past and present is to use military or and police force, and economic pressure; the last path ever to be trod is reason; but the cost of military violence may be at the cross-roads, whereby the cost is greater than the returns?

    Terrorist activity has been fairly mundane in terms of targets; there is another mode of terrorism that would bring about greater chaos and become difficult for repressive authoritarian regimes to deal with; thanks to the lack of imagination of terrorists, this path has yet to be worked out by those who seek radical change.

    It is unfortunate that violence is not only preferential to Establishment to secure their interests; unfortunately this creates the radical opposition of what Government’s do not want, as such the example of the speech before the beheading on utube, the journalist states in his farewell utterance, that it is not the terrorist that is responsible for beheading but the American, Government? And those that are in power, do any of those who are our the academic interpreters, armchair commentators and presenters, understand the meaning?

    • Don,

      I am not entirely sure of your point here.

      I agree that military adventures overseas are often seen as a distraction from domestic politics by some political leaders.

      With a keen interest in history, I have observed time and time again, that both the US and the UK are reluctant to deploy foot soldiers. This often means that military adventures do not have a clear strategy with an exit. So far, I fear that Western governments have struggled in dealing effectively with terrorism.

      Would you care to clarify your point?

  2. Cutting your way to prosperity will never work on its own and if it is to be applied at all it needs to be a short sharp shock of 2 years duration run in parallel with strong efforts to export our way out of trouble.

    This is what the Canadians and the Irish Republic did and we now see the results.

    What Dr Alf has correctly identified is that the EU and George Osborne policy is austerity on its own and no really effective measures to stimulate growth and exports.

    It is a policy which will increase the inequality which already exists in the UK and over much of Europe except for Germany, Sweden and Holland where the gap between rich and poor is much narrower.
    Dr Alf wants to quarantine those who prescribe austerity and yet more austerity and go for Keynesian stimulii.

    I think this is unlikely to happen with someone lske Angela Merkel in charge of Europe or with George Osborne thinking he is going to succeed David Cameron.

    We can earn our way out of trouble if we get the stimulus from massive inward investment via China’s Sovereign Wealth Fund and from the Emir of Dubai,Temasek and South Korea.

    What gets in the way is David Cameron and his rather stupid Home Office Minister, who has now saddled the taxpayer with a £500,000,000 gbp bill for the failed E-Borders program, having lost an important court case to Raytheon for breach of contract.

    We also discover in today’s Daily Telegraph that the so called “Major Projects Authority” has allowed cost overruns of £134 billion to occur in the past year, amounting to an extra 40% of the original costs plus the Authority’s running costs.

    The MPA can it seems recommend but has no power to reign in high spending profligacy by Government Ministers so one might save a lot more by better Treasury controls and abolition of this white elephant.

    Boris Johnson as a replacement for David Cameron could secure the necessary inward investment which would also create jobs and much needed tax revenue, but I fear he will take too long to succeed David Cameron.

    The alternative, is therefore a Keynesian stimulus of the kind Dr Alf wants, plus lower taxes to stop avoidance on an industrial scale unless we want severe social unrest and an implosion of local authority and policing services which have recently reported a tripling of cases of stress related absenteeism and depression.

    Quarantining may not be achievable but perhaps shame about inequality and fear of social unrest may be a way to achieve the same end.

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