UK Politics - From Russia with Love

[SeanF]

6 hours ago, Werthead said:

The alternative choice, and the one favoured by anyone with an understanding of economic theory greater than George Osborne's (which includes sea urchins and some types of rock), is state reinvestment to grow the economy, which has been the solution to most major depressions and downturns larger than a standard recession. Osborne and Cameron's approach was to take advantage of the aftermath of the 2008 downturn to justify a mass cutback in government spending for ideological purposes, the erosion of workers' rights and the resulting crippling of our military and NHS, the mass-reduction in policing, the meltdown in the prison service, the mass explosion of homelessness and the appalling situation in education is the result.

One alternative to austerity, for example, would be making sure that companies paid the damn taxes they're supposed to, which would have made up a large chunk of the "living within our means" gap by itself without the need to start dismantling the country.

Austerity was a deliberate political choice, not one borne of necessity, and the way it was handled did long-term damage to the British economy, as can be seen by our poor recovery compared to just about every other country affected by the recession (apart really from Greece, and their problems were much deeper-rooted and systemic).

NY.GDP.PCAP.PP.KD

As far as I can tell, from these World Bank numbers, UK growth has been much in line with the average since 2010.  Output per head is about 11% higher than it was then, which is much the same as the EU average.  The UK had hardly been alone in cutting its budget deficit.  Austerity has been much more severe in most Eurozone countries than it has here.

[Hereward]

12 hours ago, Notone said:

Hum, Art. 176 ?

That'S about the European funds to help regional disadvantaged regions?

 

Anyway 106 looks more relevtant. but it doesn't explicitly forbid state ownership.

The ther sutff is basically monopoly/fair competition rules.

Sorry, got confused! Try Article 119 instead.

[SeanF]

17 hours ago, mankytoes said:

Basically, they're considered guilty unless they can prove they're innocent. 

I see she played the race and gender cards in the tweet she replied. I always wonder in these situations, do you think these people really believe a white man wouldn't be criticised for making these sorts of comments? Or they just see it as the best way to defend themselves?

We had a young councillor in my own ward (Hightown, Luton) who had to resign after posts came to light of hers that praised Hitler and justified the Holocaust.  A couple of years earlier, she had been anti-racism officer at Warwick University.

[OldGimletEye]

4 hours ago, SeanF said:

NY.GDP.PCAP.PP.KD

As far as I can tell, from these World Bank numbers, UK growth has been much in line with the average since 2010.  Output per head is about 11% higher than it was then, which is much the same as the EU average.  The UK had hardly been alone in cutting its budget deficit.  Austerity has been much more severe in most Eurozone countries than it has here.

I usually don’t comment in this thread as my understanding of UK politics is limited being that understanding what is going on in the US takes enough time.

I do believe that several years ago a UK finance minister was heard singly loudly when the UK decided not to adopt the Euro as it’s currency. His joy now seems pretty justified given the Euro has proven largely a disaster forcing many countries into unnecessary austerity, the country of Spain likely being the worst case or example.

Given that the Euro made matters worse, and where one could draw analogy between the Euro and the Gold Exchange standard of the 1920s, which made things worse, I don’t think comparing the economic performance of the UK to other countries in the Euro is much to write home about, particularly where the UK retained control over it’s own monetary policy.

Here in the US people like Newt Gingrich declared that if Obama had gone down the path of Ronald Reagen it would mornin’ in America would have followed shortly thereafter. But, what Gingrich didn’t understand or was just plain lying about is that recession and recovery in the 1980s had to due with the actions taken by Paul Volcker and little to do with tax cuts. In that case monetary policy was extremely powerful and the fact that it was made the RBC models of Lucas and Prescott look ridiculous.

But when central bank policy rate falls and can’t really go down much further, known in the technical literature as the Zero Lower Bound condition, austerity is very bad, nor is it really an exercise in fiscal prudence given that the government can borrow very cheaply and because of the damage done to the supply side of the economy, where labor skills are lost because people remain unemployed and investments don’t get made. First year macro students are often introduced to the old AS/AD model, which might suggest that the AS curve is independent of the AD curve. But, the evidence is mounting that the AS curve isn’t really independent of the AD curve, at least during significant economic downturns, and that a shift in the AD curve can cause the AS curve to shift.

But other than the fact much of Europe was forced into austerity because of the Euro, much of the turn to austerity or the justification around 2010 was due to a paper by Alberto Alesina which proclaimed the wonders of the expansionary austerity and was seized upon many conservatives on both sides of the Atlantic as justification for austerity. But we know now, that paper was very flawed, and empirically dubious, to the point that even Alesina was wiling to acknowledge it. But, the damage had already been done as conservatives got the talking point they needed.

Its ironic that JM Keynes homeland would adopt expansionary austerity. On an interesting footnote the man who brough Hayek to the Uk, to battle with Keynes, Lionel Robbins would go later to say that his disagreement with Keynes was the biggest mistake of his professional life. But unfortunately the expansionary austerity idea caught on, much of it because of Robert Lucas inspired nonsense with his mindless Walrasianism.

Turning to the actual affect of the austerity decision, in the UK, here is one paper by Jorda and Taylor (2013) of its effect:
 

Quote

Alas, this did not come to pass, as shown by the solid line in the chart using actual UK (ONS/OBR) data to depict the outturn of events (actual plus latest 2013 forecast, as shown). Everything was going more or less according to the above two forecast paths until 2010. After 27 that, a double-dip recession took hold and the U.K. real economy virtually flatlined for three straight years. (In per capita terms, it actually sank.) How much of the dismal performance can be attributed to the fiscal policy choice of instigating austerity during a slump? The answer, using our model as described above, is: about three fifths. This is shown by the dotted line in the chart, which cumulates the effects of each of the three years of austerity on contemporaneous and future years’ growth from 2010 to 2013. By 2013, the last year in the window, the cumulative effects of these choices amounted to about 3.0% of GDP (in 2007 units) where the total gap relative to the OBR’s June 2010 forecast was 5.2%, thus leaving an unexplained residual of 2.2% relative to OBR’s forecast. Our model also suggests that additional drag from the 2010–12 policies will also continue to be felt into 2014–16, even not allowing for any further austerity

 

Quote

The residual relative to the forecasts in Figure 4 could be accounted for by various omitted factors, some as noted: export patterns and the Eurozone, idiosyncratic U.K. sector shocks, or overoptimism in the 2010 forecast. For example, Schularick and Taylor (2012) argue that the banking and shadow banking system in the U.K. (as in the U.S.) created unusually large credit overhang and hence a further drag on the recovery, compared to historical norms. However, one major caveat suggests that we also likely have a biased underestimate of the effects of U.K. fiscal policy. This caveat is the zero lower bound (ZLB) of monetary policy: the U.K. out-of-sample counterfactual corresponds to a liquidity trap environment, but the in-sample data overwhelmingly do not. In that case, the true residuals in 2010–13 could be much smaller than above, and the effects of austerity (i.e., the fiscal multipliers) even bigger, big enough to possibly explain most or all of the growth shortfall after 2010. Why? Our estimates were based on empirical work using a sample from the 1970s to 2007, when the ZLB was virtually absent from any country-year observations during consolidation periods in our IMF dataset (the only exceptions being 7 country-year observations, out of a total of 173 consolidation episodes, all of these relating to Japan in the 1990–2007 period). As is well known in theory (Christiano et al. 2011; Eggertsson and Krugman 2012; Rendahl 2012) and also from historical evidence from the Great Depression (Almunia et al. 2010), fiscal multipliers are much larger in such conditions than in normal times when monetary policy is away from this constraint. In theory we could try to estimate this difference using stratification on the interest rate, but our in-sample estimation cannot hope to convincingly capture the ZLB effect with just a handful of observations from Japan, and so this must remain a goal for future research where we hope to apply our new estimation methods to a larger set of both contemporary and historical data. But in the post-2008 forecast period for the U.K. the ZLB was a binding constraint which would tend to make even our already large estimated fiscal impacts an underestimate of the true impacts. If so, then the vast majority of the difference between the actual U.K. recovery and the ex ante forecast (or the typical historical path) could be attributed to the Coalition’s austerity policy choices in 2010–13.

 

[SeanF]

32 minutes ago, OldGimletEye said:

I usually don’t comment in this thread as my understanding of UK politics is limited being that understanding what is going on in the US takes enough time.

I do be

Turning to the actual affect of the austerity decision, in the UK, here is one paper by Jorda and Taylor (2013) of its effect:
 

 

 

The ONS has revised up the growth numbers for 2010 to 2013 since that paper was written, although growth was certainly weak for much of that period.  There was in the end, no double-dip recession.

The problem with the Euro (like the old Gold Standard) is not so much that it depresses growth overall, as it exaggerates boom and bust.  So, countries like Spain, Ireland, and Greece could go from a wild boom in 2007 to a wild bust a year or two later. 

[A Horse Named Stranger]

2 hours ago, Hereward said:

Sorry, got confused! Try Article 119 instead.

Quote

1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.

2. Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.

3. These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.
 

Not sure what you see there.

The first bit is essentially harmonized economic policy. Growth etc.

Open market and free competition doesn't also rule out state owned companies to compete. To use a pretty trivial example. The British Railroad cold still be state owned (including the tracks and stuff) as long as does not set undue burdens on competitioners, likesay charging them ridiculous amount for using the tracks system (charging them a fair amount for maintenance etc. looks rather unproblematic).

3. is basically saying keep your budgets in order. It doesn't say do not raise taxes by 3% in order to keep your railroad service running.

editorial note: ofc railroads are not essential services that should under all conditions stay in the public hands, I just used it as an example to illustrate the point.

[OldGimletEye]

1 hour ago, SeanF said:

The ONS has revised up the growth numbers for 2010 to 2013 since that paper was written, although growth was certainly weak for much of that period.  There was in the end, no double-dip recession.

I've prepared a chart similar to the one in the paper from the US federal reserve, which uses the latest estimates:

Here:

https://fred.stlouisfed.org/graph/?g=jAmn

Its true that estimates were revised up a bit. But, it took about 2.5 years or so from 2010, for the UK to reach it's 2007, level. Plus there is a lot of evidence that fiscal multipliers are large when you are up against the ZLB. And remember, from the paper, as the authors state the 3% estimate was likely a lower bound as they didn't have a lot of data from ZLB periods to estimate their model. And certainly, the revised estimates are still below ONS forecast from 2010.

1 hour ago, SeanF said:

The problem with the Euro (like the old Gold Standard) is not so much that it depresses growth overall.

Back in the old days (well I guess since at least the 1980s), the supply side of the economy was largely thought as being independent of the demand side of the economy being dependent mainly on technological growth, population growth, and labor productivity. And demand side failures were mainly inconvenient hiccups which you fought, but eventually would stabilize with monetary or fiscal policy, but eventually the economy would return to it's long term supply side growth path.

But, the evidence against that view is turning to the point it doesn't hold very well.

If a nation can't control it's own monetary policy then it's ability to implement fiscal policy becomes difficult. And if a country can't engineer effective demand, particularly during a deep recessions, then yes it's quite likely the inability to due that does harm growth.

It's hard to believe that the old Gold Exchange standard which played a part in creating the Great Depression did not harm long term economic growth just about everywhere.

1 hour ago, SeanF said:

 So, countries like Spain, Ireland, and Greece could go from a wild boom in 2007 to a wild bust a year or two later. 

Its true that a lot of money came flooding into those places pushing up asset prices, particularly real estate asset prices. For this reason, it would probably be a good idea for conservatives to drop the idea of the Efficiency Market Hypothesis. 

[Shryke]

16 hours ago, SeanF said:

It was a choice, in the sense that you can choose between trying to live within your means, or choose not to.  The budget deficit was 10% of GDP in 2010, compared to 2% now

A government does not have means to live within and saying so represents a fundamental misunderstanding of how a nation with it's own currency works.

Austerity is stupid, especially when the economy is in trouble. We were supposed to have all learned this back in the 1930s but apparently most people weren't paying attention.

[Hereward]

45 minutes ago, Notone said:

Not sure what you see there.

Bear in mind that Corbyn doesn't just want to nationalise the railways. He hasn't managed to get his full set of approved policies through the party conference yet, but he will. And his desired policies include public ownership of the means of production and the commanding heights of the economy. He also has no intention of keeping budget deficits low. I've highlighted the relevant phrases in light of this.

1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.

2. Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.

3. These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.
 

[A Horse Named Stranger]

3 hours ago, Hereward said:

Bear in mind that Corbyn doesn't just want to nationalise the railways. He hasn't managed to get his full set of approved policies through the party conference yet, but he will. And his desired policies include public ownership of the means of production and the commanding heights of the economy. He also has no intention of keeping budget deficits low. I've highlighted the relevant phrases in light of this.

That looks a wee bit over the top. I don't think Corbyn has any intentions to take over the carplant in Vauxhall. Anyway a state run company in a sector doesn't necessarily rule out free competition. I used the railways to illustrate that point. You can extend that to energy producers, or whatever sector you like. As long as the market access is not blocked with undue restrictions for competition from the private entrepeneurship (I am sure I made a spelling error there).

Sound fiscal policy is another issue, it's not like the Tories are particularly good at that either.

[Yukle]

11 hours ago, SeanF said:

We had a young councillor in my own ward (Hightown, Luton) who had to resign after posts came to light of hers that praised Hitler and justified the Holocaust.  A couple of years earlier, she had been anti-racism officer at Warwick University.

...

She must have been good at that job. 

Did she get another job? How would you possibly explain that to the next employer? Or... the next human you make contact with?

[SeanF]

16 hours ago, Yukle said:

...

She must have been good at that job. 

Did she get another job? How would you possibly explain that to the next employer? Or... the next human you make contact with?

This is the councillor.

https://antisemitism.uk/labour-councillors-twitter-account-praises-my-man-hitler-for-holocaust/

I don't know what she's doing now, but such opinions might not prove a bar to finding employment in Luton.

Edit:  It's possible that she's not a real Nazi sympathiser, but just someone shooting her mouth off on twitter, without engaging her brain, which happens a lot.

[Werthead]

Worth recalling that all parties have some very dubious people with dodgy views in their ranks, and this becomes more common as you go further down the ranks and the amount of vetting dramatically drops off. An ex-IRA arms supplier who now serves as a Tory councillor in London comes to mind.

Clearly this woman is unfit to stand an MP, and it's somewhat concerning that she's gotten as far as she had. Fortunately, it seems unlikely now she will be selected (or if she is, she'll win, the seat is pretty marginal and this will torpedo her chances of getting voted).

[mormont]

Friday the 13th.

You couldn't make it up.

http://www.bbc.co.uk/news/uk-43913414

Hopefully it'll be a nice day for a protest.

[SeanF]

1 hour ago, Werthead said:

Worth recalling that all parties have some very dubious people with dodgy views in their ranks, and this becomes more common as you go further down the ranks and the amount of vetting dramatically drops off. An ex-IRA arms supplier who now serves as a Tory councillor in London comes to mind.

Clearly this woman is unfit to stand an MP, and it's somewhat concerning that she's gotten as far as she had. Fortunately, it seems unlikely now she will be selected (or if she is, she'll win, the seat is pretty marginal and this will torpedo her chances of getting voted).

Nothing beats the 1970's Liberals who had Jeremy Thorpe, Peter Bessell, Clement Freud, and Cyril Smith among their small Parliamentary party.

[mankytoes]

I know this was a few weeks ago, but regarding the Nazi pug incident- http://www.bbc.co.uk/news/uk-scotland-glasgow-west-43864133

Do we need stronger freedom of speech laws? I think we do. To me, to convict someone of inciting racial hatred it should have to be absolutely clear that they appear to be voicing their views, and not making an attempt at humour (no matter how shitty- being unfunny can't be a crime). 

[Maltaran]

26 minutes ago, SeanF said:

Nothing beats the 1970's Liberals who had Jeremy Thorpe, Peter Bessell, Clement Freud, and Cyril Smith among their small Parliamentary party.

I'd never heard of Peter Bessell before, so I looked him up - seems his main claim to fame is being a witness against Thorpe, and most of his dodgy dealings happened after he left Parliament.

[Hereward]

2 hours ago, Werthead said:

Worth recalling that all parties have some very dubious people with dodgy views in their ranks, and this becomes more common as you go further down the ranks and the amount of vetting dramatically drops off. An ex-IRA arms supplier who now serves as a Tory councillor in London comes to mind.

As I recall, the existence of this person was the reason you gave for the Tories having no right to criticise Corbyn's fondness for terrorists. So which is it?

[Werthead]

2 hours ago, Hereward said:

As I recall, the existence of this person was the reason you gave for the Tories having no right to criticise Corbyn's fondness for terrorists. So which is it?

I believe you're referring to the seething hatred expressed for Corbyn doing exactly what the Conservatives did anyway (talking to the IRA and agreeing to a peace deal), just doing it a few years earlier? It should also be noted that whilst Corbyn advocated talking to the Irish paramilitary groups to make peace (y'know, like the Tories did a few years later and then Tony Blair sealed the deal), he wasn't suggesting giving them paying jobs in his party.

One of the problems of political partisanship is that you do fall into this silly situation of saying, "Well, it's outrageous when they do it, but when we do exactly the same thing it's completely fine because it's us doing it," which is amusing, but not particularly consistent.

Now this repugnant woman's tinfoil views have been exposed, I would hope that the Labour Party (which I am not a member of, and have only voted for once in my life on tactical grounds) removes her from contention forthwith. Whilst Maria Gatland remains a paid-up member of Croydon Council and of the Conservative Party.

Apologies if that's not what you were referring to. It might be that you were referring to Corbyn's support for peace in the Middle East, which is problematic for a party selling weapons used in the slaughter of innocent civilians to the Saudis.

[williamjm]

5 hours ago, Werthead said:

Worth recalling that all parties have some very dubious people with dodgy views in their ranks, and this becomes more common as you go further down the ranks and the amount of vetting dramatically drops off.

Today's example is a Tory council candidate in Cambridgeshire who posted a tweet that he was 'sweating like a Jew in an attic' http://www.bbc.co.uk/news/uk-england-cambridgeshire-43908496

If only I lived about a mile further to the east then I'd have been able to vote for one of his opponents.

I realise parties are maybe not going to do forensic in-depth vetting of all their local election candidates, but they could at least try to read through their twitter history.