The Guardian and the Center for Labour and Social Studies (CLASS) asked experts to give a short response to the Autumn Statement presented on the 5th December. Follow the links below and you will find my own contributions as well other commentaries on Chancellor Osborne announcements.
Osborne sees troubles ahead
by Ann Pettifor
Far from welcoming signs of economic growth, the chancellor opened his statement today with distinct uneasiness about the “Alice in Wongaland” recovery. In sombre mood, he referred to “spotting debt bubbles” before they burst, “unsustainable spending” and “effects on family budgets (from the crisis) still being felt”.
The fact is that economic recovery poses a severe political threat to the chancellor and his party. The worry is that Britain’s consumers will be swept away by the rising waters of recovery and consumption, and then beached by soaring interest rates – before the next election.
Households are indebted to the tune of 140% of their income. But companies – accused of hoarding cash and not investing – are scarcely in better health. The corporate debt to income ratio, like that of the household sector, was at 140% in June 2013. No wonder firms are hoarding cash, and failing to invest. No wonder the chancellor today offered subsidies to exporters, the construction sector and white van lorry drivers – to add to the effective subsidies offered to bankers in the form of various lending schemes.
And while the chancellor expressed the hope that the Bank of England “can keep interest rates lower for longer and support the country …” he also knows that the bank has deliberately abandoned its control over rates of interest on the whole spectrum of lending Continue reading… ›
The LSE blog British Politics and Policy asked me to give an interview for their “Five minutes with…” series. We ended up discussing much longer than five minutes and I thought I should share it with you. Enjoy the read.
Can you explain what you meant when you said we are living in an ‘Alice in Wongaland’ economy?
I made the Wongaland-analogy on the Today programme because of my fear that the UK is plunging down a metaphorical rabbit hole into the fantasy world of easy (if dear) money. And that this will lead those Britons with falling incomes into easy shopping/consumption and a re-inflated housing bubble. Piling more private sector debt on to our existing burdens and using expensive finance to raise consumption further, cannot drive a balanced recovery.
So what will? Continue reading… ›
Saturday´s first Class conference was a great success. The dynamic of the event was inspiring and I highly enjoyed being on a panel discussion with outstanding economists such as Mariana Mazzucato, Duncan Weldon and Costas Lapavitsas. My speech addressed the recent statements of Mark Carney. Labourlist kindly supported me on their web blog. Enjoy the read.
Today’s CLASS-YouGov poll should be a confidence booster for Labour. I write ‘should be’ because Labour’s deafening silence in response to the provocative speech last week by Mark Carney, the new Governor of the Bank of England, indicates Labour’s continuing lack of confidence. This is dismaying given that the City of London is an industry that is as much loathed by the British public as the energy sector; an industry that “generates instability and rising inequality” – to quote Martin Wolf in the Financial Times. This is an industry that allocates 34 per cent of its lending to financial institutions and a mere 1.4 per cent to manufacturing. And as the economy struggles to recover, the City shrinks its lending to SMEs.
Frances Morrell, the wise and effective, if now neglected, Labour leader of the Inner London Education Authority back in the 1980 and 90s, once taught me a profound lesson. Leaders are not born, she said. They become leaders. It takes time. They grow into the role.
Ed Milliband ought to be feeling really confident about the way he has grown into his role. Continue reading… ›
ABC Sydney´s “The Business Programme” asked Ann Pettifor for an interview on the current situation in international finance.
Ann made a strong case that nothing is being done to fix the structural imbalances in the global financial system, in particular the high debts that have accrued in advanced economies across all sectors – government, business and households.
Pettifor argues that governments should create the economic activity that is now lacking, including via infrastructure projects. “We need monetary and fiscal policy to work together, rather than monetary policy working alone”, she says. Central banks were delinquent in their risk management duties leading-up to the financial crisis, and have essentially escaped accountability in its aftermath. As such, they are repeating past mistakes. And while central banks can continue to pump liquidity into the financial sector via their quantitative easing programmes, there are not enough people in the real economy looking to borrow and invest, which means the extra liquidity is flowing straight into asset values, causing dangerous bubbles.
Click here to watch the full interview.
Last week I was invited to speak at the World Capital Markets Symposium in Kuala Lumpur, Malaysia. I urged politicians and regulators to focus on the management of interest rates for more financial sustainability. The speech was kindly featured by the “Malaysian Reserve”:
Pettifor: Onus on regulators to manage rates
Pettifor, a director of the Policy Research in Macroeconomics in the UK, is critical of regulators in both the developed and developing markets like Malaysia. She said the regulators are not doing enough to manage interest rates, which pose a critical impact on the economy.“At a time when most governments are complaining of fiscal pressure and investors are facing economic uncertainties, UK-based economist Ann Pettifor has brought forth a novel view of putting the onus on the states and not the corporate sector to manage financial sustainability in the economies.
“The interest rates, paid by people and corporate entities, are much higher than the base rates or policy rates that regulators decide,” she said in an interview with The Malaysian Reserve in Kuala Lumpur. She was in the city to attend the two-day World Capital Markets Symposium that ended on Wednesday.
Her prescription to the problem is simple — the government has to create assets like issuing long- and short-term bonds so that the people could invest in such assets.
“This way the interest rates can be managed,” she said.
Pettifor said she wants to see central bankers manage the interest rates in a much more active role than they are doing right now. “The interest rates are very important for the overall economy.”
Continue reading… ›
Should the US default on its debts? Jim Boulder from CNN interviewed me on the advantages and disadvantages of default. Click here to watch video in full.
I was invited to give a different perspective on the US debt crises on Al Jazeera´s “Counting the Cost”.
Click here to watch the full show.
I am a member of the Green New Deal Group, which now published its fifth anniversary edition – a National Plan for the UK. The first report was published in July, 2008, before the collapse of Lehman’s and was (in our humble view) far-sighted in its analysis and recommendations.
The purpose of this report is to advance a much-needed debate about how to move the UK out of the counterproductive politics of austerity and into the age of the Green New Deal. This is a matter of utmost urgency. If it isn’t introduced rapidly, we are likely to enter another economic slump. A Green New Deal could be implemented now if the political will existed. It calls initially for a £50 billion a year investment programme to boost economic activity, in a way which provides jobs on a living wage in every community in the UK, while reducing our ecological impact.
I have been invited to discuss with Max Keiser Britain´s `Alice in Wongaland´economy, the emerging interest rate Apartheid, carry trade and public unrest. Watch it in full here.
Photo source: Nicholas Jones via Flickr
Is Britain’s economy once again plunging down a metaphorical rabbit hole into the fantasy world of easy (if dear) money, easy shopping and a re-inflated housing bubble? This was the question I tried to address on BBC Radio 4′s Today programme in August, when I expressed concern that we might be turning into an “Alice in Wongaland” economy.
The Guardian subsequently asked me to write this piece. Feedback came immediately from the Telegraph and while Jeremy Warner did not agree with me, Carl Packman from the New Statesman supported my argument - just as many readers of the Guardian did. Alice may be stuck down this hole for a long time yet!