Post Election Blues

[MooseBreath]

His argument, and Keynes said the same I think, is that you should wait until the boom after you have had a successful recovery before doing the austerity measures and trying to run a surplus. Keynes never said that you should do the austerity so soon after growth returns after a recession. We're certainly not in a boom yet. What do you think he got wrong in 2010?

A typical economic cycle is about ten years. We're seven years on from the crisis and the economy has been growing well for several years. Brown did not usher in the end of boom and bust. We are now fairly likely to be closer in time to the next recession than we are to the last one, so if we're not running a surplus now when will we ever?

I think it's pretty clear Keynes never accounted for deficits to be anything like as large as they are, or anything like as difficult to eradicate as they are now. Maybe if Labour had applied Keynesian thinking during the last boom instead of relentless spending, we might have had the luxury of being able to loosen the purse strings during the worst times of the crisis. Keynes obviously intended for it to be fairly easy to switch between deficit and surplus. Labour's reckless spending made it realistically impossible to achieve within the short time span of a typical boom, hence we're left with no choice but to cut spending now regardless of the underlying economic circumstances.

[TimG]

A typical economic cycle is about ten years. We're seven years on from the crisis and the economy has been growing well for several years. Brown did not usher in the end of boom and bust. We are now fairly likely to be closer in time to the next recession than we are to the last one, so if we're not running a surplus now when will we ever

The economy has not been growing well for several years , it grew slowly in 2011 and in 2012 we had 2 quarters of negative growth. We have not seen growth rates anywhere near as high as you would expect after a recession.

 

Maybe if Labour had applied Keynesian thinking during the last boom instead of relentless spending, we might have had the luxury of being able to loosen the purse strings during the worst times of the crisis. Keynes obviously intended for it to be fairly easy to switch between deficit and surplus. Labour's reckless spending made it realistically impossible to achieve within the short time span of a typical boom, hence we're left with no choice but to cut spending now regardless of the underlying economic circumstances.

This is nonsense, the deficits in the lead up to the crisis were quite small, backed by the IMF and (at the time) barely challenged by the Tories. As a percentage of GDP the deficits under John Major's government in the early to mid 90s were higher than those under labour. The deficits only became very large as a result of the crash and the bailout of the banks.

[MooseBreath]

The economy has not been growing well for several years , it grew slowly in 2011 and in 2012 we had 2 quarters of negative growth. We have not seen growth rates anywhere near as high as you would expect after a recession.

This is nonsense, the deficits in the lead up to the crisis were quite small, backed by the IMF and (at the time) barely challenged by the Tories. As a percentage of GDP the deficits under John Major's government in the early to mid 90s were higher than those under labour. The deficits only became very large as a result of the crash and the bailout of the banks.

You're the one bringing Keynesian arguments into it. I'm just pointing out that if you're going to do that, you have to appreciate that labour made mistakes. You can't just pick and choose whenever it suits you. Labour ran deficits at a time when they should have been running a surplus. Labour thought they had ended boom and bust, shortly before one of the biggest busts in history. They didn't directly cause the crash, but their reckless spending did mean we were ill-prepared.

[Rincewind]

There is a petition on Facebook calling for theNorth of England to join Scotland. They have 5000 sigs.

 

Not April 1st is it?    The Tories would like to get rid of Northerners though.

[Spiritwalker]

Gove as Justice secretary really is shameful. Ballsed up education so got shifted out, now back in cabinet as a crucial cog. Tories can now finally repeal the HRA they have been so desperately trying to do for the last 5 years. 

 

 

I think half the problem is what they stand for is not what people want. Left wing politics will never win another election because a large part of the electorate care far more about self interest than the needs of those who need protecting. Most Blairites said following the defeat that moving away from the centre has cost Labour the election. But most core Labour supporters want the party to stick to its socialist values. In terms of the future for Labour it is a difficult one, either move more central but abandon a large part of what the Party is founded upon or stay towards the left but never win another election.

 

I don't buy into all this rubbish that it's an illegitimate government because of only receiving 36% of 60% of the electorate. This is they way the system has worked for years and people who don't vote can be blamed for that. I am worried though about the direction the UK will be heading in over the next 5 years. Potentially losing Scotland, leaving the EU, repealing the HRA and the Hunting Act are all pretty worrying developments.

Can't argue with any of this.

[Strokes]

Depends which criteria you look at, doesn't it?

Employment is better, GDP marginally better but from a higher population, so GDP per capita is worse, I think. Productivity is worse.

After falling for years, real incomes are roughly back to where they were; like inflation, this is mainly down to the slump in oil prices.

As for growth, here's the official data: http://www.bbc.co.uk/news/business-32493745

So, growth has been falling for more than a year - not necessarily a good time to introduce swingeing cuts to public spending and to the real incomes of those with the highest propensity to spend....

Oh! I've thought up another analogy for Keynesian economics: "If everyone tightens their belt at the same time, the food shops all go bust, the farmers don't plant their crops as they know they won't be able to sell at market and everyone starves"

Yes, requires some work, I know!

It's normal for productivity to be down following a recession, as employers are less likely to invest in staff training.

You can credit oil price slumps for inflation/wages but the oil price now only back down to 2010 levels. I doubt any concession was made by yourself for the coalition, when oil prices sky rocketed

[Alf Bentley]

It would be interesting to see what the GDP per capita was during Labour's years considering the population grew by 3 million approx. Take away the growth generated by public spending based on borrowing you have to wonder whether our growth was quite poor compared to the rest of the world during a world wide boom.

Haven't we had the fastest growth in the western world over the last couple of years?

 

Always pleased to help, Webbo:

 

- UK GDP per capita 2006-2014 (source: World Bank): http://www.tradingeconomics.com/united-kingdom/gdp-per-capita

As you'll see from the graph, UK GDP per capita was high and grew fast under Labour 2006-08, slumped with the 2008 financial crash and saw feeble growth under the Tories 2010-14; in 2014, after 4 years of "successful" Tory economic management, it was still below its 2006 level under Labour

 

No, we haven't had the fastest growth in the western world over the last couple of years:

- UK, EU & US growth 1999-2013 (source: IMF): http://www.economicshelp.org/wp-content/uploads/blog-uploads/2012/10/uk-us-eurozone.png

- UK growth 2003-2015 (source: ONS): http://www.bbc.co.uk/news/business-32493745

From these 2 graphs, it is clear that growth was mostly higher in UK than EU & US 1999-2008; slumped in all 3 in 2008; recovered in all 3 in 2010; slumped worse in UK 2010-12 due to Osborne's austerity; recovered in UK 2012-14 (the only period during which UK was outperforming the rest); but, as the second graph shows, now the UK growth rate has been falling consistently for 15 months - GDP in construction, manufacturing & agriculture actually FELL last quarter, only services were growing.

 

The lesson that the Tories draw from all this is that they should repeat the 2010-12 austerity programme that crashed the recovery...

 

#tories****inguptheecononyandconningpeoplewithlies

[Alf Bentley]

It's predicted that the US will grow faster than us this year, but we're still predicted to do better than the Eurozone this year and next. 2.7% is still pretty healthy though.

 

 

The figure for the last year is 2.4%, and this has been falling, quarter by quarter: 0.8%, 0.6%, 0.6%, 0.3% (yes, I'm aware that's out by 0.1%): http://www.bbc.co.uk/news/business-32493745

 

The last quarterly figure was the lowest for 2 years. In response, the Tories plan to slash public spending and benefits....let's hope private sectors employers are feeling generous with pay increases and confident about investment to compensate, eh?

 

Do you reckon legislation making it much harder to strike for a pay rise will boost real incomes and demand in the economy? 

[Alf Bentley]

The economy has not been growing well for several years , it grew slowly in 2011 and in 2012 we had 2 quarters of negative growth. We have not seen growth rates anywhere near as high as you would expect after a recession.

 

This is nonsense, the deficits in the lead up to the crisis were quite small, backed by the IMF and (at the time) barely challenged by the Tories. As a percentage of GDP the deficits under John Major's government in the early to mid 90s were higher than those under labour. The deficits only became very large as a result of the crash and the bailout of the banks.

 

Spot on, Tim.

 

Here's the graph proving your first point: http://www.bbc.co.uk/news/business-32493745(see first graph; the economy did grow fairly well 2013-14, but growth has now been falling for 15 months) 

 

For the millionth time, here's the graph proving your second point: http://www.theguardian.com/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data#zoomed-picture

 

Don't expect any reasonable engagement with the facts, though, Tim. These people are Tories so they are only interested in lies and distortion in the party/class interest (sorry if you find that a bit strong, lads, but Moose did refer to all lefties as "odious" earlier on; I assume you're happy to take it, if you're dishing it out).

[Alf Bentley]

It's normal for productivity to be down following a recession, as employers are less likely to invest in staff training.

You can credit oil price slumps for inflation/wages but the oil price now only back down to 2010 levels. I doubt any concession was made by yourself for the coalition, when oil prices sky rocketed

 

The Tories claim that the economy has been recovering and prospering for several years. Indeed, growth first returned in 2010.....yet 2014 productivity was lower than 2006 (!!): http://www.bbc.co.uk/news/business-32493745

Are we in an extended recovery, as the Tories claim, or just coming out of an extended recession, as you claim?

You don't think it might just be that we're becoming a low-skilled, low-value-added, low-pay economy facilitated by mass immigration (300,000 last year), do you?

 

This chart suggests that 2015 oil prices are well below 2010 levels - and that oil prices peaked while Labour was in power, not the Tories: http://www.macrotrends.net/1369/crude-oil-price-history-chart

(May 2008: $136.68; May 2010: $79.89; May 2015: $58.92)

[Jon the Hat]

There is a petition on Facebook calling for theNorth of England to join Scotland. They have 5000 sigs.

Not April 1st is it? The Tories would like to get rid of Northerners though.

Where do you get this shit?

[Guest]

You're the one bringing Keynesian arguments into it. I'm just pointing out that if you're going to do that, you have to appreciate that labour made mistakes. You can't just pick and choose whenever it suits you. Labour ran deficits at a time when they should have been running a surplus. Labour thought they had ended boom and bust, shortly before one of the biggest busts in history. They didn't directly cause the crash, but their reckless spending did mean we were ill-prepared.

Probably as close as we'll get to Moose saying he doesn't know what he's talking about/Got it wrong.

 

Tim seems to have his number.

[Webbo]

Probably as close as we'll get to Moose saying he doesn't know what he's talking about/Got it wrong.

 

Tim seems to have his number.

Moose is right though. You can't claim to be Keynesian and increase the deficit during a boom like Labour did during their time in office. We're experiencing strong growth now and Labour still want to increase spending, it's not Keynesian, it's not any kind of economic policy.

[Guest Col city fan]

I can't see Labour getting back into power for a long long time personally.

They have no direction, no credible leader and made such a massive balls-up of things the last time whey were in power.

Blair's New Labour was political spin in the extreme. The electorate fell for it. I can't see them falling for the same thing again.

We now have an opportunity for genuine change. BUT what I don't want to see is too much austerity, too quickly. If the Torys let power go to their heads, unopposed, they could shoot themselves in the foot.

Change Mr Cameron, yes, but gently.

[Webbo]

I can't see Labour getting back into power for a long long time personally.

They have no direction, no credible leader and made such a massive balls-up of things the last time whey were in power.

Blair's New Labour was political spin in the extreme. The electorate fell for it. I can't see them falling for the same thing again.

We now have an opportunity for genuine change. BUT what I don't want to see is too much austerity, too quickly. If the Torys let power go to their heads, unopposed, they could shoot themselves in the foot.

Change Mr Cameron, yes, but gently.

I remember people saying the Tories would never get in again, and then after the last election that they'd never get a majority again. These things are in a cycle , they'll come again.

[Strokes]

The Tories claim that the economy has been recovering and prospering for several years. Indeed, growth first returned in 2010.....yet 2014 productivity was lower than 2006 (!!): http://www.bbc.co.uk/news/business-32493745

Are we in an extended recovery, as the Tories claim, or just coming out of an extended recession, as you claim?

You don't think it might just be that we're becoming a low-skilled, low-value-added, low-pay economy facilitated by mass immigration (300,000 last year), do you?

This chart suggests that 2015 oil prices are well below 2010 levels - and that oil prices peaked while Labour was in power, not the Tories: http://www.macrotrends.net/1369/crude-oil-price-history-chart

(May 2008: $136.68; May 2010: $79.89; May 2015: $58.92)

I'm not sure where you draw the line on recovery, you seem to know, maybe you could shed some light. It was never claimed it would be an overnight success that's for sure. Its funny how labour could do nothing about a global financial crisis but as the world still struggles and stutters the Tories are at fault for productivity

I'll have to recheck my facts on oil prices but I saw a chart that shown it similar to 2010 prices, maybe that was forecourt prices.

The Tories have been judged by the nation on the last five years, its now time to look forwards. If you are correct, they won't be able to dupe us for a further 5 years. Care to make any predictions?

[Alf Bentley]

Moose is right though. You can't claim to be Keynesian and increase the deficit during a boom like Labour did during their time in office. We're experiencing strong growth now and Labour still want to increase spending, it's not Keynesian, it's not any kind of economic policy.

 

You're right on that first point (for 2002-2007, at least; not 1997-2001, when spending was tight and Blair/Brown ran a surplus for 3 years). But if you're going to criticise Labour for running a deficit 2001-2007, you also have to criticise Thatcher (ran deficits 9 years out of 11) and Major (ran deficits 7 years out of 7). If you argue that Thatcher/Major weren't Keynesians, where in monetarist or other theory does it claim that governments should run near-permanent deficits?

 

We were experiencing strong growth 2013-14. It's looking a lot less strong now: http://www.bbc.co.uk...siness-32493745

So, the growth rate has been falling for 15 months, and manufacturing, construction & agriculture all shrank last quarter, only the dominant services sector grew. Might be temporary, might not if Osborne slashes public spending.

[Alf Bentley]

I can't see Labour getting back into power for a long long time personally.

They have no direction, no credible leader and made such a massive balls-up of things the last time whey were in power.

Blair's New Labour was political spin in the extreme. The electorate fell for it. I can't see them falling for the same thing again.

We now have an opportunity for genuine change. BUT what I don't want to see is too much austerity, too quickly. If the Torys let power go to their heads, unopposed, they could shoot themselves in the foot.

Change Mr Cameron, yes, but gently.

 

You might be right, if Labour choose the wrong strategy or leader.

 

You might also be very wrong. I remember 1992 and people wondering whether Labour would ever form a government again...and look what happened in 1997.

The next few years are going to be massively difficult for the Tories (tiny majority, struggling economy, EU referendum, Scotland, strife over immigration...)

 

I agree with your last point: too much austerity will sink the recovery and cause massive social strife. If they do anything remotely like they promised in their manifesto (10% extra cuts to welfare budget; 20-30% cuts to departmental budgets other than health, foreign aid & schools), the change won't be gentle at all. But, as we all know,what parties say during an election campaign and what they do in office are not always the same! 

[Guest MattP]

I doubt the national debt will be paid  off  in the next 100 years. None of us on FoxesTalk will be around to see it end so why over worry about it?

 

This is exactly why I think my opinion on this is in the right and yours is totally wrong.

 

It's incredible to take the attitude of 'I'm alright as I won't be around to see the mess it creates' - totally immoral, what on earth gives you the right to want to borrow so you can live beyond your means and then pass the debt onto people who will have to suffer for that after you die? It's an appalling way to look at things.

 

Incredible to try to spin this as you being one who cares as well and the opposite being selfish, yours is the most selfish opinion of the lot when it comes to things like this. Why should my grandchildren have to pay excessive levels of tax and work until they are about 80 so you can sit in the pub all day at 62 at their expense? Unbelievable.

 

 

Here's an interesting article by a nobel prize winning economist about austerity and the UK election result: http://www.nytimes.com/2015/05/08/opinion/paul-krugman-triumph-of-the-unthinking.html?_r=0

 

And here's a survey of UK economists from CFM http://cfmsurvey.org/surveys/importance-elections-uk-economic-activity

 

Yet most people seem to think that the Conservatives are the economically responsible party.

 

Krugan has a hatred of the right anyway, he blames everything in the US on Geroge Bush still and I remember him banging the same drum before the 2010 election - I also remember someone like Daggers posting an article from him about 4 years ago with all the usual stuff coming out regarding how supposed austerity would create mass unemployment etc - very little if any of it came actually came true.

 

I don't know why we should treat his opinion as gospel now when his predictions over the last government we elected were off the mark.

[Jon the Hat]

Academic economists are terrible at forecasting.  If they were any good at it they would be wealthy traders surely.

[MooseBreath]

Probably as close as we'll get to Moose saying he doesn't know what he's talking about/Got it wrong.

Tim seems to have his number.

On labour causing the crisis? I never said they did. I don't think anybody says they did, that's just something the labourites have made up to use as a criticism against the tories. Nobody blames labour for the financial crisis. They do blame them for being ill-prepared, spouting nonsense like the end of boom and bust, and believing it too, even going so far as selling off billions of pounds worth of gold at the bottom of the market because they were confident that no bust was coming and so gold would remain low. How wrong they were, how spectacularly wrong.

[Guest MattP]

On labour causing the crisis? I never said they did. I don't think anybody says they did, that's just something the labourites have made up to use as a criticism against the tories. Nobody blames labour for the financial crisis. They do blame them for being ill-prepared, spouting nonsense like the end of boom and best, and believing it too, even going so far as selling off billions of pounds worth of gold at the bottom of the market because they were confident that no bust was coming and so gold would remain low. How wrong they were, how spectacularly wrong.

 

I was going to mention this, I've barely seen anyone saying Labour caused the crash recently. There is no doubt they engaged in profligacy when they shouldn't have done in years of growth and that helped to put us in a more precarious position when it happened but actually caused it? Nope.

 

Some people are inventing these accusations in their own head now for whatever reason. Probably part of the denial and delusion as to why they lost the election.

[MooseBreath]

I was going to mention this, I've barely seen anyone saying Labour caused the crash recently. There is no doubt they engaged in profligacy when they shouldn't have done in years of growth and that helped to put us in a more precarious position when it happened but actually caused it? Nope.

Some people are inventing these accusations in their own head now for whatever reason. Probably part of the denial and delusion as to why they lost the election.

I think the fiercest critic of labour's role in at has actually been Tony Blair, who did admit to being partly responsible for not seeing the risk of failing to understand some financial services.

If anything I think the tories could have played on that a bit harder during the election, so why we're getting all these articles claiming that the tories "sold a lie" I don't know.

[Alf Bentley]

I'm not sure where you draw the line on recovery, you seem to know, maybe you could shed some light. It was never claimed it would be an overnight success that's for sure. Its funny how labour could do nothing about a global financial crisis but as the world still struggles and stutters the Tories are at fault for productivity

I'll have to recheck my facts on oil prices but I saw a chart that shown it similar to 2010 prices, maybe that was forecourt prices.

The Tories have been judged by the nation on the last five years, its now time to look forwards. If you are correct, they won't be able to dupe us for a further 5 years. Care to make any predictions?

 

The stats show that a tentative recovery started under Labour in 2010, it was then choked off and stumbled along (some quarters up, some down) for 2-3 years under Osborne 2010-13; 2013-14 saw a stronger recovery (though how much of this was based on a housing bubble / household debt, and how much on looser fiscal policy is open to debate). For the last 15 months, the growth rate has been slowing.

 

So, overall, I suppose you could categorise it as a weak, fragile 5-year recovery that is now in serious danger of faltering....particularly if public spending is slashed.

 

Here's a graph comparing UK and G7 productivity (pretty disastrous on the Tory watch): http://static1.squarespace.com/static/541ff5f5e4b02b7c37f31ed6/t/553a2593e4b03e1f32a82bd2/1429874069460/productivity+uk+G7+2.PNG

Here's a very interesting article about productivity: http://www.primeeconomics.org/articles/o91sdlu312b90filbobylfincxj5sb

 

I couldn't make any precise predictions as too many variables are unclear, though the first budget of the new government will tell us a lot. I've no idea whether they'll cut to the extent they've promised or act more moderately; if they do the former, we'll be back into recession, I imagine. A lot (e.g. the EU economy, international trade) seems to be up in the air, though, and international economic factors can weigh even more heavily than domestic economic policy.

 

The Tories have indeed been judged by the nation as the most economically competent....just as LCFC fans once thought NP should be sacked or Germans once adored Hitler or almost everyone once thought that the world was flat. That's democracy, though, and a large part of the Tories' success in winning that argument was the failure of Labour to adequately argue an alternative over the past 5 years.

 

If you pushed me, I'd expect the Tories to be discredited economically by 2020, as they were by 1997, but whether that means they lose power by 2020 is quite another question. That will depend partly on whether Labour choose a good strategy and a good leader. I'm not even sure what their strategy/vision was last time! If Labour make poor choices or descend into infighting, there's every chance they'll lose again in 2020. They also need to avoid taking their eye off the ball if there's an extended leadership election (probably a good thing). In 2010, it was during Harriet Harman's temporary leadership, between Brown & Miliband, that the whole "Labour crashed the economy" lie was allowed to go unchallenged.... Of course, international events could be massively advantageous or disadvantageous to the outcome for the Tories and that's just the luck of the draw.

[Rincewind]

Where do you get this shit?

I thought it was shit too. Hence the April 1st and smiley bit. The North is predominally Labour  is it not? Hence  my tongue in cheek remark.

Do I have to  give a four minute warning regarding humour?