Financial Times News - Samuel Brittan Column

Simple truths about the economy

Thu, 12 Nov 2009 20:15:43 GMT

The truth is sometimes simple, however elaborate the detail. The main feature of the world economy over the past few years has been the growing savings surplus of China and other Asian countries. Until recently it was offset by consumer borrowing in the west, especially in the US and the UK.

Goodbye to the pre-crisis trend line

Fri, 30 Oct 2009 00:20:29 GMT

There is a pleasing myth about the business cycle. This is that it is just a fluctuation around an underlying trend. Output in a boom is above a sustainable level. In a recession it is below it. Budget deficits in the recession phase can be and should be offset by surplus in boom years. Whether you are optimistic or pessimistic about stabilisation policies they exist in a sphere of their own, and economic policy can concentrate on so called "supply side" measures.

Whatever happened to imbalances?

Thu, 15 Oct 2009 22:30:26 GMT

Do you remember all the fuss about international imbalances? China, some of the emerging countries, the oil exporters, Germany and Japan were building up huge current account surpluses, while the US, the UK, Australia, some other European countries such as Spain and Ireland, and central and eastern European countries were enormously in deficit.

A cool look at the current deficit hysteria

Thu, 01 Oct 2009 22:25:36 GMT

The British political classes are going through one of their occasional bouts of masochism, with party leaders vying with each other on the theme of who can cut public spending faster and more effectively. Spice is added by talk of leaks and secret plans; and ideology by arguing about the balance between tax increases and spending curbs. My own bottom line is that all this is in response to a largely imaginary budget crisis. If we have a normal economic recovery the red ink will diminish remarkably quickly. If we don't, it won't and won't need to.

Worse evils exist than corruption

Thu, 17 Sep 2009 23:00:25 GMT

Did you know that a global poll of business executives found two in five have been asked to pay a bribe when dealing with business institutions? Half of these estimated that corruption raised project costs by at least 10 per cent. One in five of the executives claimed to have lost business because of bribes by a competitor. More than a third felt that corruption was getting worse.

We do not prosper by income or happiness alone

Thu, 03 Sep 2009 18:50:32 GMT

The wellbeing of a society cannot be judged by national income indicators alone, even when these are augmented by so-called happiness measures. And it is worth removing specific injustices on a piecemeal basis even if it is impossible to construct a perfectly just society or even agree on what such a society would look like. These two propositions might seem blindingly obvious, but they go against the grain of much recent political philosophy and highbrow economics.

Why the case for assisted dying is unanswerable

Fri, 07 Aug 2009 19:30:22 GMT

Let me declare, as parliamentarians sometimes do, an interest. I am neither a legal nor a medical expert, but I am a rather inactive member of Dignitas, a British organisation which campaigns for better-quality palliative care for terminally ill people, but also for "the option of medically assisted dying" when such people "are of sound mind and are experiencing unbearable suffering". My only qualification is that as an economics writer I have some experience of assessing the costs and benefits of alternative courses of action. Nor am I going to detail the sufferings of terminally ill people who have lost all will to live but cannot find a dignified, legal exit.

Economists shuffle the deckchairs

Thu, 06 Aug 2009 17:20:17 GMT

On a visit to the London School of Economics last November, the Queen asked why no one saw the financial crisis coming. For if people with enough authority and influence had foreseen it, some preventive action would have been taken and either the crisis would not have occurred, or it would at least have taken a different form.

How the budget hole developed

Thu, 23 Jul 2009 21:35:28 GMT

Conventional commentators have been horrified by the British government's estimate of public sector net borrowing of 12.4 per cent of gross domestic product for this financial year. Even if you believe that the deficit will decline to 5.5 per cent by 2013-14 this will not prevent the public sector net debt from climbing to reach 76 per cent of GDP by that year, according to official projections. Never mind that the debt ratio was far higher not only after and between the two world wars, but in the supposedly virtuous mid-Victorian period. Never mind the historian Lord Macaulay's mockery of the debt obsession. This is clearly far from what the Labour government intended when it came to office in 1997 full of talk of "prudence for a purpose".

A new guide for the perplexed

Thu, 09 Jul 2009 18:20:23 GMT

At one of many recent roundtables on "the crisis" a well-known historian called upon economists to abandon the gods of their profession. If only there were still such gods. There are not even clearly defined schools of thought. A typical discussion will consist of a series of overlapping points of view, leaving the innocent listener at best "confused at a higher level". What follows is an attempt to outline the main issues. It is inevitably subjective and selective.

'Green shoots' debate misleads policymakers

Thu, 25 Jun 2009 19:35:27 GMT

Those with short memories have forgotten that "green shoots" became notorious in the UK when Norman Lamont, then British chancellor of the exchequer, proclaimed the beginning of the end of the 1990-92 recession. Lord Lamont later argued that he was not all that wrong in the light of subsequent statistics. We need not enter this historical debate. The point is that his political opponents and many in the financial markets did not believe him and used "green shoots" as an ironic taunt. Yet the same people, or their successors, now talk about green shoots with a straight face, oblivious of historic connotations.

It is time to put Europe on hold

Thu, 11 Jun 2009 18:00:23 GMT

The 43 per cent of the European Union electorate who bothered to vote for the European parliament clearly did so on national issues. We still need to reflect on the EU itself.

Inflation can act as a safety valve

Fri, 29 May 2009 02:58:56 GMT

Are we faced with inflation or deflation? It seems to depend on which analyst you read and on which day of the week. Complaints about a new inflation due to, say, government money creation or budget deficits come hot on the heels of moans that deflation is still a menace. Looking at actual numbers adds to the confusion. On the UK official consumer price index, year-on-year inflation was still 2.3 per cent this April, slightly above the government's 2 per cent target. On the traditional and more comprehensive retail prices index, it was -1.2 per cent.

Green shoots and dud forecasts

Thu, 14 May 2009 21:15:21 GMT

We have been told by that usual bringer of bad tidings, George Soros, that the "economic freefall" has stopped. The normally cautious president of the European Central Bank, Jean-Claude Trichet, has identified a slowing down of the rate of decrease in gross domestic product and, in some cases, "already a picking up". The Organisation for Economic Co-operation and Development composite leading indicator shows at least a slight uptick. The admittedly highly erratic Easter UK retail sales figures show an actual increase and surveyors report more property inquiries. Financial commentators talk of "green shoots" and one of them has even suggested that the recession came to an end in April. So - Bank of England dissenting - everything is all right and we can get back to normal life.

A catechism for a system that endures

Thu, 30 Apr 2009 20:21:49 GMT

Capitalism is not a system that some government decided to install, as the Soviet leaders did with "socialism". It evolved over many years. Once established, governments of many different stripes could try to copy it, with widely varying results. There has been a long cycle among opponents, who begin by declaring it immoral, go on to predict its inevitable collapse and, when that does not happen, return to its supposed immorality. The system will continue but with a less overblown financial sector.

A long cool look at budget deficits

Thu, 16 Apr 2009 21:05:25 GMT

The year 1992 was the last in which the Conservative party won a British election - to the surprise of most political pundits. It had some superficial similarities to the present. Public sector borrowing was on the rise and at its peak in 1993-94 reached 7.8 per cent of gross domestic product, regarded then as shockingly high.

Why UK should not fret about national debt

Thu, 26 Mar 2009 19:50:17 GMT

Some characteristically cautious words by Mervyn King, the Bank of England governor, about fiscal stimuli have been hysterically seized upon by the nation's Conservative press. The central bank chief said that the automatic stabilisers that "kick in" during recessions (such as increased benefit spending and lower tax revenues) "are bound to lead to higher fiscal deficits for the next two or three years . . . and it doesn't make sense to try and offset that". He added, however, that, given the very large deficits expected, it would be sensible to be cautious about further discretionary fiscal stimuli. "That's not to rule out targeted and selective measures that can do some good."

It seems not all recessions are created equal

Thu, 12 Mar 2009 19:10:27 GMT

As can be imagined, international economic organisations, whatever else they do or do not do, spawn vast numbers of research papers. Most of them are worthy but of limited interest, a hypothetical example being "Forward Markets and Cash Crops in Ruritania". But occasionally something of real interest arrives.A recent example is an International Monetary Fund working paper entitled "What Happens During Recessions, Crunches and Busts?"* Although there is no such thing as "letting the figures speak for themselves", this paper is relatively theory-light.

It seems not all recessions are created equal

Thu, 12 Mar 2009 18:25:19 GMT

It seems not all recessions are created equal

Thu, 12 Mar 2009 14:50:30 GMT

As can be imagined, international economic organisations, whatever else they do or do not do, spawn vast numbers of research papers. Most of them are worthy but of limited interest, a hypothetical example being "Forward Markets and Cash Crops in Ruritania". But occasionally something of real interest arrives. A recent example is an International Monetary Fund working paper entitled "What Happens During Recessions, Crunches and Busts?"* Although there is no such thing as "letting the figures speak for themselves", this paper is relatively theory-light.

Demand matters, not animal spirits

Thu, 26 Feb 2009 18:20:21 GMT

Citizen A cuts down on his purchases of widgets. Company B that makes the widgets cuts down staff, who in turn reduce their spending. Sales collapse in the local supermarket, putting yet more people on to the dole. Thus we drive ourselves into a slump, which has little to do with what some economists call "creative destruction". It is just a stupid downward spiral that is pushed even further down by media pronouncements about how people should cut their spending.

Economic dominoes are still falling

Thu, 12 Feb 2009 19:30:30 GMT

It is often said by wiseacres that we cannot spend more than we earn. That is, of course, true enough of the individual but it is exceedingly misleading if it is applied to the community as a whole ... It would be much truer to say that we cannot earn more than we spend.

Deflation is the wrong enemy

Thu, 29 Jan 2009 17:50:22 GMT

Say after me:

Where the bishops have gone wrong

Thu, 15 Jan 2009 18:55:24 GMT

The present severe setback to the world economy provides a heaven-sent debating opportunity to those who have always disliked competitive market capitalism. It has been seized most avidly not by socialist fundamentalists but by Britain's Christian bishops. These have been quick to denounce the materialism of the age.

The problem with all this economic doom and gloom

Thu, 01 Jan 2009 17:35:15 GMT

During the long period of the cold war, which lasted for more than four decades after the end of the second world war, nothing infuriated me more than the question often put to me: "Is there going to be another world war?"