German electors rejected austerity this weekend. They were right to join the French and Greeks in doing so. As Jonathan Portes of the National Institute for Economic and Social Research has argued:
with long-term government borrowing as cheap as in living memory, with unemployed workers and plenty of spare capacity and with the UK suffering from both creaking infrastructure and a chronic lack of housing supply, now is the time for government to borrow and invest. This is not just basic macroeconomics, it is common sense.
He is right.
I am pleased that at long last Labour are now getting the point. As Ed Balls and Peter Mandelson argue this morning:
Europe needs to boost public investment in the demand that will help to drive growth, as the European commission is now urging. A serious capital lift for the European Investment Bank is desirable, to help to provide fresh sources of infrastructure investment, as are infrastructure bonds, which help to counter a failing private appetite for large-scale project finance.
It is an argument I've been making since 2003, and more recently (here and here). This is also the Green New Deal logic, of course, so I'm pleased to see Labour has finally bought into it.
As they should: there has never been a better time to build our future than now.
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Slightly off topic but this reminds me – I remember a little while ago you were calling for an ’empty property tax’, in order to bring speculatively-held housing stock back on line. I know it might not directly help the growth agenda, but I think this idea is worth pushing still in conjunction with building more houses, especially if it keeps house-price inflation in London down (and from a sustainability perspective of course).
Firstly, I’m disturbed by the misspelling of Peter Mandelson.
But, more importantly, there have been some very good pieces on the Euro recently. At Project Syndicate, Stiglitz’s ‘After Austerity’, in which he uses the phrase ‘automatic destabilizer’, and Barry Eichengreen’s ‘Is Europe on a Cross of Gold?’ is excellent also. And Krugman blog ‘Eurodämmerung’ finishes off a terrifying trio.
Oh for spell checkers!