Martin Wolf: “The Government doesn’t have a plan for growth”

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

Martin Wolf: "The Government doesn't have a plan for growth" | Left Foot Forward http://t.co/BNuzWvq

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @leftfootfwd: Martin Wolf: "The Government doesn't have a plan for growth" http://bit.ly/h7kHae

OK.Export growth based on investment in toll roads , wind farms,and HSR.Who are you kidding?Sure, the deficit reduction plan may be risky(btw that is CAPITALISM), but not half as risky as thinking you can sell gilts in whatever quantity you like. What has happened to Oxford PPE?Going for growth’ in public and private borrowing was what destroyed the Labour government, and ruined the UK.

I think we’ve known for some time that the government doesn’t really have a growth strategy…

There is no explicit government plan for growth, no picking of winners, no state subsides etc. This is a feature not a bug.

Just as there is no government plan for Silicon Valley to develop new software.

Higher growth comes from free markets. Lower growth correlates with highly taxed and over-regulated economies.

Guido Fawkes,

You say:

“Higher growth comes from free markets. Lower growth correlates with highly taxed and over-regulated economies.”

Problem with this argument is that the US and Japan, for example have considerably higher taxation rates than the UK, and of course Ireland’s is considerably lower. So the correlation falls. Similarly UK corporate governance and regulation is far less complex than SEC Regulation, SOX etc.

Couldn’t agree more Bill; I’m afraid we’ve heard this from the right before

@Guido

“Higher growth comes from free markets.”

China being an excellent example of this…oh no wait…they’re the commies. What about Germany? Nope, they’re highly regulated with lots of state support for key industries. Ermmmmmm where are the actual examples of your theory working in practice that hasn’t ended in tears for the vast majority?

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

All that China tells you is that if you suppress the private sector for hundreds of years and stifle economic growth, then you’ll see massive economic growth when you relax the restrictions. I’m not sure how you’d apply those lessons to UK policy.

While we’re on the subject of Germany, I’m not sure their recent strong performance is a strong endorsement of tight economic policy. Certainly if we were to compare unemployment rates on average over the last 10 years we’d reach a rather different conclusion.

Thanks for the comments:

william – I suggest you give Gerry Holtham’s chapter in ‘Going for growth’ a full read. The argument is that there is another side to the balance sheet.

Guido – What’s the correlation you’re referring to? As others say, China and Germany would be significant outliers.

Mark – What do you mean by ‘tight economic policy’? Britain’s active labour market policies under Labour were to thank for both the highest employment levels in history and the lower impact on unemployment of the recession. Wendy Carlin’s slides cover the latter point. Germany has also used active labour market policies to reduce the impact of the recession on unemployment. Where we have something to learn from Germany is how you support industry with government-led measures.

Lazy typing on my part. The point being that a liberalization of Germany’s labour Market had contributed, at least in part, to their outperformance on a variety of metrics following a decade of significant underperformance. Germany’s outperformance of late isn’t a ringing endorsement of active government intervention at all. I’m not sure which slide of Wendy’s you’re referring to, I suspect it might be slides 8 and 9, but given that there’s no cross country comparison it more than a little tenuous to draw the conclusion that it was “Labour wot dun it”.

Incidently, a good Construction PMI reading this morning, highest for 8 months. Huzzah! Let’s see how services turns out tomorrow.

RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

RT @BrokenOfBritain: RT @leftfootfwd: Martin Wolf tells @ippr event: "The Government doesn't have a plan for growth" http://bit.ly/f07kXt

Guido Fawkes,

You say:

“Higher growth comes from free markets. Lower growth correlates with highly taxed and over-regulated economies.”

The evidence does not support this. Finland, Norway and Sweden have grown faster than the US over the past 10 years. This was at a time when the US was bingeing on cheap credit. In fact, all Western European nations grew faster than the US between 1950 and the late 1980s. This is the sort of nonsense I hear repeated by half-wits down the pub who read the Daily Mail. The Tories have had their right wing Think Tanks working on this for the past five years and have failed to find any credible evidence. If you don’t think government can pick winners then I suggest you look at the growth performance of S. Korea – from third-world levels in the 1960s to G20 forty years later.

[...] him; this chart disagrees by Duncan Weldon     March 4, 2011 at 9:10 am On Monday, at the launch event for the IPPR’s collection of essays on growth, Wendy Carlin gave an excellent talk on growth, [...]

Guido, and other free-market dogmatists, should read, The myth of the rational market: a history of risk, reward, and delusion on Wall Street, by Justin Fox (Harriman House Ltd, 2010.)
In this fascinating book, Justin Fox, the business and economics columnist for Time magazine, charts the rise and fall of the myth of the efficient market. Fox shows how life has exploded the idea that the market processes information rationally and allocates resources efficiently.

This is in part a history of those looking for a sure-fire way of making money from the stock market. They share the fantasy that they can know where share prices are going and the level of risk, and that they can produce a ‘scientific forecast of the market’. Of course, when markets crash, most investing ‘stars’ crash too. If the market is that efficient, surely speculators could never beat it?

But the crash of capitalism has crashed its theories too. As Alan Greenspan admitted, “the whole intellectual edifice collapsed.” Adair Turner, chairman of the Financial Services Authority, said that we had experienced ‘a fairly complete train wreck of a predominant theory of economics and finance’.

Prices do not reflect real values. As Clive Granger and Oskar Morgenstern wrote in their 1970 book, Predictability of stock market prices, “It is … a subterfuge going back at least to Adam Smith and David Ricardo to say that market price will always oscillate around the true (equilibrium) price. But since no methods are developed how to separate the oscillations from the basis, this is not an empirically testable assertion and it can be disregarded.”

Eugene Fama, who formulated the efficient market hypothesis in the 1960s, admitted in 1991, “Irrational bubbles in stock prices are indistinguishable from rational time-varying expected returns.” There was no way to know if the market was irrationally volatile or not. He now believed that prices could go wrong and stay wrong. In sum, markets’ behaviour determines the economic reality that market prices are supposed to reflect. The market is created subjectively; it does not reflect the real world.

The market is not about allocating capital efficiently but about giving speculative parasites the chance to make vast profits with our money. As Larry Summers, Clinton’s Treasury Secretary, once concluded, “We might all be better off without a stock market.”