Opinion – mainly macro: Balanced-budget fundamentalism – Simon Wren-Lewis – John Gelmini

English: David Cameron Deutsch: David Cameron

English: David Cameron Deutsch: David Cameron (Photo credit: Wikipedia)

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 stimuli.

I think this is unlikely to happen with someone like 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.

John Gelmini

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