In my opinion the must read economist is no longer the likes of Krugman, or even Martin Wolf. The economist who is delivering most value, at least in the UK and on the web right now is Duncan Weldon at the TUC.
Duncan is not just a good economist with his political sentiment firmly grounded, he's also good at presenting complex narrative in about as approachable a way as possible. Take his blog yesterday; he summarised a long and complex debate on what has been called secular stagnation in macro-economic policy and produced this list of observable facts that summarised the basis for the thinking:
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Rising GDP growth does not necessarily feed through to rising standards of living for households in the middle and below.
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Periods of growth are associated with a falling household savings ratio.
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Periods of growth are associated with a widening trade deficit.
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Household borrowing is more responsive to low interest rates than corporate borrowing.
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The marginal propensity to invest is falling. There is, in times of growth, a large surplus of profits over investment.
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There is a long term tendency for the share of consumption in GDP to rise.
It takes skill to do that.
What that list say, fundamentally, that relationships long held to be true in economics don't any more. As Duncan puts it:
During periods of decent GDP growth the fruits of that growth are not distributed as used to be assumed.
Income growth is accruing to those at the top of distribution where as those in the middle increasingly grow their spending by more than their income.
And that has real consequences:
In terms of financial balances, that of the household sector is negative and that of the corporate sector positive. This is reversal of the assumed disposition whereby households are net savers and through financial intermediation those savings are channelled to the corporate sector to fund investment in the capital stock.
The result is rising household debt, rising imports, weak investment and an increase in financial vulnerability to external shocks.
This suggests to me that timidity will be the economic theme for a long time to come; conventional thinking will suggest inappropriate macro-economic solutions which will be deliberately muted in impact to avoid risk when in fact new thinking is needed to create a different economic paradigm based on these new facts, of which as Duncan (again) says:
The drivers of which are increasing corporate short termism and rising inequality.
That's about it, in a nutshell.
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Are these individual points only true for the UK or do they apply to other Western Countries as well?
It would show whether it is UK politics / policies that are the main factor or Global changes to how economic wealth is spread around.
Most data compares UK with UK, this time and last year
I’ve just read the whole Sam Brittan article which you quote in another blog. The headline “Britain is growing – this is no time for a stimulus” was irritating and put me off reading it earlier. However I can now contrast a good economic analyst with a poor one, like Brittan, thanks to this blog.
It’s quals not quants.
Brittan quotes simplistically the OBR forecast of “nearest possible approximation to full employment by 2017″” – a wholly meaningless goal in current circumstances where we have a crisis of underemployment which the stats do not reveal. Then again, Brittan suggests that any fiscal expansion is to be avoided – quoting Keynes in1937. But both taxes and public expenditure are about quality, not just quantity. He really is past his sell-by date – I shall be buying Weldons.
I agree re Brittan’s argument – the world should remember that FDR followed that advice and the US crashed
Brittan is reading the runes wrong
I like Duncans take on things, a rather more general look at economics through the eyes of Shaun Richards at Mindful Money is also one of my reads.
However, looking at things with a global perspective would seem to be required, and Alt-Market.com provides that. In particular there is an interesting read at http://www.alt-market.com/articles/1866-is-war-with-china-inevitable:
¨In March 2009, U.S. military and intelligence officials gathered to participate in a simulated war game, a hypothetical economic struggle between the United States and China.
The conclusions of the war game were ominous. The participants determined that there was no way for the United States to win in an economic battle with China. The Chinese had a counterstrategy to every U.S. effort and an ace up their sleeve — namely, their U.S. dollar reserves, which they could use as a monetary neutron bomb, a chain reaction that would result in the abandonment of the dollar by exporters around the world . They also found that China has been quietly accumulating hard assets (including land and gold) across globe, using sovereign wealth funds, government-controlled front companies, and private equity funds to make the purchases. China could use these tangible assets as a hedge to protect against the eventual devaluation of its U.S. dollar and Treasury holdings, meaning the losses on its remaining U.S. financial investments was acceptable should it decide to crush the dollar¨
Don´t bother reading it if you are an optimist.
Ultimately, every great economic collapse has been followed by conflict.
Note the major player in London property asset purchases: China.