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April 29, 2020


James Peach

I have never understood the immense popularity of the liquidationist school (the idea that we need regular recessions to reallocate capital and labour). It has a social darwinist tinge that would cause moral outrage if the debate was about human beings and not the economy (even though they are one and the same). Despite having no empirical backing its intuitive pull makes it popular - the idea that you can 'clear the dead wood'.

Recessions surely put good businesses as well as bad out of business.They destroy human and physical capital which are fundamental to long term growth. And shouldn't the process of reallocation occur during a regular business cycle anyway as weak businesses shut down or downsize relative to more competitive ones?


See, I'm confused. I've got a lot of uneducated years behind me and not cocooned from the apolitical or 'blockheads' as some will have it. No one I know believes governments can do no more on the bases of that's just how the world works.

For what its worth I'd say you're conflating understandings of how a political economy is working with understandings of how the world works. Right or wrong, of the former a recognition of ideology is integral to the formation of an opinion. For the latter, there's no such requirement.

Unsurprisingly therefore (given the current state of play) being ideological or “politicising” is marked-up and displayed by the dominant crew as anti whatever – most successfully, anti-British.

But I'm beginning to see pretending not to recognise there's always distinction to, but never automatic value for all in an educated opinion is just the mark of the devil – class bigotry. And there's a lot of it about.


I think part of the problem is that, while governments do have a lot of power to change societies etc, a lot of that takes a very long time. The DWP we need right now - high capacity, focused on saving people rather than saving money - is not the one we have. Even if the government went on a hiring spree, institutional change takes time. Even if the political will were there, even if you threw money into the system like it was going out of fashion, you'd still have a DWP workforce trained to assume claimants were guilty until proven innocent. That means you would be stuck with the six-week period between claim and payment for probably longer than the crisis will endure.

Ralph Musgrave

Chris claims the rise in unemployment “is largely preventable.” Well that depends on how much of the rise is due to the ban on various activities: meeting in pubs, restaurants, flying off on holiday, etc. To the extent that the rise is due to the latter cause, the rise is most certainly not “preventable”. Thus Chris really needs to quantify how much unemployment is due to the latter sort of ban before claiming the rise in unemployment is largely preventable.

Re James Peach’s above point, I quite agree.


@Ralph Musgrave
You state that the rise in unemployment is certainly 'not' preventable...but why?
It may or may not be desirable to prevent it but if as Chris claims that companies and individuals are largely made whole by the means, as suggested in article then the rise can surely be 'largely' avoided.
Any fall in income falling on gov shoulders. This as pointed out has the advantage of reductions in longer-term structural unemployment which otherwise naturally follows. This is the case even if many of those pilots and waiters etc are sitting idle for some period of time until economic activity resumes its former path.

Dave Timoney


The frontline staff who work for the DWP were not hired because they hold particular views on welfare but because they have particular skills. They will moderate the expression of their own views (they need to earn a living), but the inertia you talk about won't come from them (institutional culture tends to be top-down). I'm sure many would be more than happy to operate a more generous, less punitive regime.

To reinforce Chris's point, the state is much more powerful than we generally imagine and it could radically change its operations (if not the institutional culture among DWP management) rapidly. After all, we've just seen a Chancellor agree to pay the bulk of the wages of millions of workers while they sit idle, something that was inconceivable a few months ago.


Dave T and AJ

I think you're both right. AJ generally, Dave in this case.

Generally it's top, middle and bottom. The top can't just change culture of an organisation with a snap of their fingers. It takes time.

That said, in this case they really can make top down decisions that say these people people are to get this money and it should happen. Maybe with some technical difficulties, but they can do it in such away that any anti claimant culture lower down shouldn't matter.

And you get all sorts working for the DWP. Including those that really want to help, and those that think everyone's a scrounger.

kardinal bierkutzki

'between we Marxists'

Grammar please, Timothy!

Should read 'between us Marxists'....

Ralph Musgrave

Paulc 156,

The recent sharp rise in unemployment is to a significant extent down to the fact that various categories of employer have been plain forbidden to continue operating, i.e. their workers have been plain forbidden to go out to work: e.g. resturants and airlines.

Any idea that that unemployment can be quickly cut simply by raising demand is plain unrealistic. Of course if restaurants and airlines were closed PERMANENTLY, then consumers would turn to alternative products eventually. But that would take several years.

Bobby Dents

I don't think creative destruction creates growth at all. I think science creates growth by creating new products. When science can't do that, growth stops. Which is what we have been seeing lately.

The problem with liquidation now is that the market will demand population to drop as well because growth due to science driven slowdown in products, will demand it. In this regard the damage to market based economies could be bad. In a spiritual and moral senses. I could see capital owners set up dying facilities for older people.

Classical Marxism and Traditionalism have far more shares than either ideology would like to admit too. They hate the current aristocracy. Both seek a "natural aristocracy" which is based on nature and not the stupid divinity the families that battled Rome started taking liberties in around 100CE, destroying its Democratic traditions of merit. Its no wonder Nazi Germany had in many respects, a foundation more built on Marxism than the Russian Soviet, with its Asiatic foundation. History is fascinating that way.


"Of course, the lockdown means that output and incomes must fall. But in principle, all of this fall could be borne by the public finances, leaving firms and individuals cocooned." I guess you mean that governments could try harder to redistribute the pain. But if GDP really does fall by a third in Q2, there's not a lot anyone can do? The remarkable thing is that we choose to pay the price: the loudest dissenting voices are those saying governments should have done more, sooner.

Robert Mitchell

"The only constraint on government borrowing is inflation."

This orthodox economic catechism is disproved by Lincoln's printing his way through high inflation to a Civil War victory, as well as states such as Turkey and Syria today continuing to access world money markets despite high inflation.

If inflation is mostly noise as Fischer Black proposed in his essay "Noise", then inflation is an arbitrary psychological constraint, not real. Inflation is easily fixed by indexation and unlimited central bank currency swap lines, which effectively eliminate exchange rate risk.


very blog thanks

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