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March 12, 2020


Ralph Musgrave

Chris seems to have fallen for the popular fallacy that because interest rates are low, ergo having government borrow and invest in whatever, makes sense. That sort of thinking certainly applies to a household, but govt budgets etc are very different to a household's.

When govt wants to spend £Xbn more, private spending absolutely must be cut by £Xbn, assuming the economy is already at or near capacity. And that can only be done by raising interest rates, say by Z%. That applies regardless of whether interest rates are high or low. Thus the cost to the population as a whole of having govt make £Xbn of investments is the same regardless of whether interest rates are high or low.

Dave Timoney

The media response is not so much a case of double standards as a recognition that when a Tory Chancellor turns on the spending taps, the beneficiaries tend to be Tory voters. They don't object to Labour spending qua spending but its incidence. Ditto taxation.

Likewise, they were unabashed by the failure of austerity to conform to the nonsense of "expansionary fiscal contraction" because growth was incidental to their aim.

Winning the argument on spending is a hollow victory for the left because the argument is framed in terms of the quantity of money not its quality.


@Ralph Musgrave
"When govt wants to spend £Xbn more, private spending absolutely must be cut by £Xbn..." or we could have reductions in private savings and or increases if foreign direct investment.

"assuming the economy is already at or near capacity..."
Despite low official unemployment figures their are large numbers of people either looking for 2nd jobs or working part time or on zero hours who would prefer a full time job. This suggests far more capacity than is often assumed.



Given business investment is negative and has been for at least four years (Currently -1%)


How is private investment been crowded out? Of course, as Paul suggests, the UK is also not near capacity.


Policy response.

"That is, the government can step in to spend because the private sector can’t"

"it can also reduce private debts to allow the debtors to spend again." - By increasing incomes - NI/Minimum wage.

The left has won because Thatcherism is dead! Keynes is back. Globalisation is in retreat. Investment in Pubic Research is in vogue.

New Labour made it's peace with neoliberalism and globalisation and as been proven wrong.

The old/alt left has many battles still ahead, given the revival of New Labour leadership, and should, sup with long spoon, with the environmentalists.


I thought the budget contained two themes, spending cash to keep the economy going in the near term and paving the way for ongoing spending to cover up the failure that is Brexit. Corona virus has come along as a convenient cover.

In this sense it would not matter if Labour was in power or not, the only game in town is spending and hoping. This is because there is no clear investment path for UK investment. So far as solving the UK's longer term problems is concerned we are no further forward. Brexit is no help at all and CV makes a distraction.

Ralph Musgrave

Paulc156, At full employment or "capacity" (i.e. having unemployment as low as is consistent with acceptable inflation) always has involved several hundred thousand, if not a million or two people still looking for work, for looking for more work than they currently have. I'm simply using the word capacity / full employment in the latter sense: to mean having unemployment as low as is feasible.

Aragon, If the economy is at full employment, and govt wants to spend more, then spending somewhere else just has to be cut. That could be private investment, even if private investment is already to low. It could be less spending on beer, lolipops, women's fashion, you name it.

Re your point that "That is, the government can step in to spend because the private sector can’t", that sentence assumes there is spare capacity. If in fact there is spare capacity, then I'm all in favour of Keynsian stimulus: I've backed MMT for the last ten years.



It is your assumption that the UK is at capacity that seems extraordinary.

Outside the South East the UK is an economic wasteland.

Industrial capacity has been destroyed since before Thatcher and immigration has added millions to the workforce (Blair).

Yet healthcare and social care have vacancies. The public sector pay cap didn't help.


"There has been speculation in recent weeks the cap could be lifted in response to worries about its impact on staff recruitment and retention and morale in the public sector."


"“Workers today too often find themselves stuck on the shop floor with no chance to move up the ladder. Many are employed by one of a handful of big-hiring but low-paying firms in an industry or local area with few other options available. Women remain far more likely to be trapped in low pay than men."

If you are willing to pay above the minimum wage upto 25% of the workforce is potentially available.

We have only just recovered to 2008 levels in real terms. But not for people on benefits.

What resource is exhausted/limited?


Examining the Problem


"So it’s not that European social democrats failed to sell their economic message, or that economic redistribution became unpopular. It’s that economic issues receded in importance at the same time as Europe was experiencing a massive, unprecedented wave of nonwhite, non-Christian immigration.

That, in turn, brought some of the most politically potent nonmaterial issues — race, identity, and nationalism — to the forefront of Western voters’ mind. How comfortable were they, really, with multicultural, multifaith societies?

The traditional social democratic message didn’t really speak to these cultural anxieties. But the right’s did."

But Thatcher and Blairs globalisation has destroyed the Social Democratic settlement.

The poor have the gig-economy providing pseudo employment and the welfare state threadbare.

The public are fatalistic about economics, while the 0.01% grow ever richer.

Labours' cultural identity politics repels the indigenous population. Not surprisingly as woke is anti-white racism!


It is wealth that is the greatest source of privileged, supplementing private school boy with private school girls and private school BAME is not a solution.

Every £ gets a vote.

Tony Blairs advice:


"First of all, my view of the populism is you’ve got to be very careful when you’re from the liberal or progressive side of politics, because if you’re not careful you tend to say that, ‘These people who are voting for Donald Trump or Brexit, they’re just irrational people, I don’t understand why they’re doing it and you’ve just got to hope this is a moment that passes.’

“No, they’re doing it for reasons, and whereas populism can exploit grievances they don’t invent them. The grievances are real.”"

Yet Blair advocated 'Remain' at the last election, which in my view caused the

"the British Labour party and our election defeat in the UK, which is essentially the worst in our 120-year history.""

Blair was the source of disillusion with the Labour party, from loosing Scotland to Mass migration, Loss of the Working Class vote and Globaliation to the Labour Brexit policy shift at the last election.

Tony Blair is hardly a political sage. I agree about the culture war, but the economic war has to be won, before we loose another generation.

The Tories are unlikely to increase the wealth of the majority of the population.

Biden is a poor candidate represents the status quo IMHO.

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