This post on the Speri blog looks at what happened to British relative economic decline and the country's continuing economic problems, following the recent retirement conference for Andrew Gamble at Cambridge University: The decline debate
Showing posts with label Andrew Gamble. Show all posts
Showing posts with label Andrew Gamble. Show all posts
Friday, 17 October 2014
Sunday, 13 March 2011
Labour still lacks new growth model
Labour still lacked a new growth model argued Professor Colin Hay at an End of New Labour? workshop at the University of Warwick last Friday. This would involve the channelling of credit out of the housing market to targeted export oriented sectors of the economy. An alternative account to the crisis of debt in terms of a crisis of growth could just about be detected.
It was difficult to see how a model of privatised Keynesianism (reliant on debt to fuel growth) could be resuscitated. High levels of private debt had increased the sensitivity of demand in the economy to interest rate variations.
There was a large interest rate spread between the LIBOR wholesale rate and mortgage and commercial lending. This functioned as a form of bank recapitalisation and was a drain on consumer demand and investment.
A manufacturing rebalancing of the economy would be very difficult to achieve. There was a need for downward pressure on the actual cost of borrowing. One could politicise the spread of credit, shaming banks. The Bank of England should be made responsible not only for base rate but for monetary policy more generally. Mortgage holders were likely to respond positively to such a strategy, but it was not sufficient.
Andrew Gamble asked how, given the extent of financialisation and individualisation, could this be reversed politically? How could the state change the supply of credit, what capacity would it need?
Peter Burnham raised the question of whether government needed a growth model. Jim Bulpott would have argued that it need it politically, but not economically. As far as manufacturing was concerned, the value chain was broken and three-quarters of what was left was in workshops employing small numbers of workers. One could not impose rates on any bank.
In summary the discussion suggested that there was no easy route out of the current crisis.
It was difficult to see how a model of privatised Keynesianism (reliant on debt to fuel growth) could be resuscitated. High levels of private debt had increased the sensitivity of demand in the economy to interest rate variations.
There was a large interest rate spread between the LIBOR wholesale rate and mortgage and commercial lending. This functioned as a form of bank recapitalisation and was a drain on consumer demand and investment.
A manufacturing rebalancing of the economy would be very difficult to achieve. There was a need for downward pressure on the actual cost of borrowing. One could politicise the spread of credit, shaming banks. The Bank of England should be made responsible not only for base rate but for monetary policy more generally. Mortgage holders were likely to respond positively to such a strategy, but it was not sufficient.
Andrew Gamble asked how, given the extent of financialisation and individualisation, could this be reversed politically? How could the state change the supply of credit, what capacity would it need?
Peter Burnham raised the question of whether government needed a growth model. Jim Bulpott would have argued that it need it politically, but not economically. As far as manufacturing was concerned, the value chain was broken and three-quarters of what was left was in workshops employing small numbers of workers. One could not impose rates on any bank.
In summary the discussion suggested that there was no easy route out of the current crisis.
Thursday, 25 November 2010
The privatisation story
The Institute of Government held a 'policy reunion' last night for ministers, civil servants and others involved in the Thatcher privatisations. Talking to Andrew Gamble beforehand, we agreed that it all now seemed very long time ago. It was very difficult to convey to contemporary students just how nationalised industries had dominated the economic and political landscape.
Privatisation had been selected because it was a policy success selected in a survey of PSA members. The story told last night was a familar one: privatisation had not been a significant part of the Government's original plans, but had developed into a political and administrative programme. There were a variety of motivations: raising money; reducing the role of the state in the economy; curbing the trade unions; widening share ownership (although this did not really succeed in the longer run); building political support etc.
The general tone of those involved was rather self-congratulatory and they explained the failure of the programme to do enough to boost competition in terms at the pace at which decisions had to be taken and the influence exerted by the existing managements of the industry who did not want competition at any price. Breaking up an industry would have extended the time line for a privatisation from two to five years and would have meant that the key BT sale, which really started the process, would have not gone ahead.
While I did not obtain any major new insights, there were some interesting points of detail which I may deal with in a subsequent posting.
Privatisation had been selected because it was a policy success selected in a survey of PSA members. The story told last night was a familar one: privatisation had not been a significant part of the Government's original plans, but had developed into a political and administrative programme. There were a variety of motivations: raising money; reducing the role of the state in the economy; curbing the trade unions; widening share ownership (although this did not really succeed in the longer run); building political support etc.
The general tone of those involved was rather self-congratulatory and they explained the failure of the programme to do enough to boost competition in terms at the pace at which decisions had to be taken and the influence exerted by the existing managements of the industry who did not want competition at any price. Breaking up an industry would have extended the time line for a privatisation from two to five years and would have meant that the key BT sale, which really started the process, would have not gone ahead.
While I did not obtain any major new insights, there were some interesting points of detail which I may deal with in a subsequent posting.
Wednesday, 4 August 2010
Salami slicing
An increasing concern is being expressed, particularly on the right of the Conservative Party, that the Comprehensive Spending Review is taken the form of salami slicing. Quite big slices, yes, but rather than starting from a zero base and asking whether government needs to be undertaking a particular activity, good programmes are being cut as much as bad ones.
In this context the presentation by Andrew Gamble on the 2010 spending review at a British Academy forum last week was of particular interest. Gamble looked at different conceptions of the state such as the mimimal state (Nozick), the frugal state (Bentham) and the active state (Keynes). He set out three models of government spending (each relating to a share of public expenditure in GDP):
1) 44 per cent, the social investment model
2) 38 per cent, the Anglo-Saxon model
3) 25 per cent model, the free market model with the 1920s and 1930s in Britain as the historical precedent.
He argued that after periodic forest fires public spending tends to grow back. The consensus in the discussion was that Britain was likely to revert to a 38 per cent model and indeed there were some indications that that was George Osborne's conscious intention.
Of course, it is possibly to become too preoccupied with the arithmetic (which in any case is substantially influenced by how fast GDP is growing) and the size of the state rather than its shape. What can the state do and how can it do it effectively?
In this context the presentation by Andrew Gamble on the 2010 spending review at a British Academy forum last week was of particular interest. Gamble looked at different conceptions of the state such as the mimimal state (Nozick), the frugal state (Bentham) and the active state (Keynes). He set out three models of government spending (each relating to a share of public expenditure in GDP):
1) 44 per cent, the social investment model
2) 38 per cent, the Anglo-Saxon model
3) 25 per cent model, the free market model with the 1920s and 1930s in Britain as the historical precedent.
He argued that after periodic forest fires public spending tends to grow back. The consensus in the discussion was that Britain was likely to revert to a 38 per cent model and indeed there were some indications that that was George Osborne's conscious intention.
Of course, it is possibly to become too preoccupied with the arithmetic (which in any case is substantially influenced by how fast GDP is growing) and the size of the state rather than its shape. What can the state do and how can it do it effectively?
Thursday, 29 October 2009
You ain't see nothing yet
A seminar at the British Academy yesterday on Andrew Gamble's book The Spectre at the Feast reiterated the unreal quality of the present political situation in the wake of the global financial crisis. As Andrew Gamble pointed out, the suffering had not been so great yet, but ultimately it would lead to heightened conflict and rougher politics. The crisis would shine a sharp light on who gains and who loses.
This theme was taken up by Peter Riddell who pointed out that there was not quite as acute a feeling as at the time of the rise of unemployment in the early 1980s. Was there a sufficient shock to stimulate change? In terms of Gamble's categories in his book, the preponderant response was that of muddled regulatory liberals: the reaction was 'let's regulate a bit better.' Riddell also noted that David Camerons' anti-state rhetoric had many ambiguities in it.
A widely shared view was that the global financial crisis was being seen as a technical problem to be solved by technical means. In part this was a consequence of the lack of any new thinking of the kind that had been stimulated by earlier crises.
This theme was taken up by Peter Riddell who pointed out that there was not quite as acute a feeling as at the time of the rise of unemployment in the early 1980s. Was there a sufficient shock to stimulate change? In terms of Gamble's categories in his book, the preponderant response was that of muddled regulatory liberals: the reaction was 'let's regulate a bit better.' Riddell also noted that David Camerons' anti-state rhetoric had many ambiguities in it.
A widely shared view was that the global financial crisis was being seen as a technical problem to be solved by technical means. In part this was a consequence of the lack of any new thinking of the kind that had been stimulated by earlier crises.
Wednesday, 25 March 2009
A spectre is haunting Europe
There is a spectre haunting Europe and it is the spectre of industrial policy. Some of the more ambitious dirigiste aims of President Sarkozy have been tamed by the European Commission, but there is no doubt that interventionism is back in town. I even heard someone argue the other day that the market is finished as a form of social organisation.
Whether politicians and bureaucrats can make better decisions is far from proven: rather the contrary. Those of us who studied industrial policy in the 1970s came to the conclusion that it was a highly dysfunctional form of policy for the following principal reasons:
1. It enables multinational companies to play one country off against another to extract funds (which is why we need an EU state aids policy).
2. It is very difficult to demonstrate 'additionality', i.e. that the additional funds made available lead to investment that would not otherwise occur.
3. It is very difficult for politicians and bureaucrats to pick winners (or 'losers')
4. Often decisions are made on electoral grounds, e.g., the sensitivity of a particular constituency or region.
5. Often investments were replicated in different parts of the country for political reasons when there was no good economic case: steel and aluminium provide good examples.
6. Large companies were generally favoured over smaller countries.
7. Industrial structures were ossified, particularly in terms of over capacity.
The political pressures to 'save jobs' are nevertheless enormous which is why it was encouraging last week to hear Lord Mandelson say that government (or the taxpayer) is not a huge bail out fund.
Capitalism has recurrent crises, but they also have a purgative effect, producing a leaner and fitter economy. In this respect I await one of the first books by a leading political economy academic on the global financial crisis. The Spectre at the Feast by Professor Andrew Gamble FBA of Cambridge University will appear from Palgrave-Macmillan in the next couple of months. Gamble
Whether politicians and bureaucrats can make better decisions is far from proven: rather the contrary. Those of us who studied industrial policy in the 1970s came to the conclusion that it was a highly dysfunctional form of policy for the following principal reasons:
1. It enables multinational companies to play one country off against another to extract funds (which is why we need an EU state aids policy).
2. It is very difficult to demonstrate 'additionality', i.e. that the additional funds made available lead to investment that would not otherwise occur.
3. It is very difficult for politicians and bureaucrats to pick winners (or 'losers')
4. Often decisions are made on electoral grounds, e.g., the sensitivity of a particular constituency or region.
5. Often investments were replicated in different parts of the country for political reasons when there was no good economic case: steel and aluminium provide good examples.
6. Large companies were generally favoured over smaller countries.
7. Industrial structures were ossified, particularly in terms of over capacity.
The political pressures to 'save jobs' are nevertheless enormous which is why it was encouraging last week to hear Lord Mandelson say that government (or the taxpayer) is not a huge bail out fund.
Capitalism has recurrent crises, but they also have a purgative effect, producing a leaner and fitter economy. In this respect I await one of the first books by a leading political economy academic on the global financial crisis. The Spectre at the Feast by Professor Andrew Gamble FBA of Cambridge University will appear from Palgrave-Macmillan in the next couple of months. Gamble
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