In response to the article in the Sunday Times that featured twenty economists backing the Conservative’s calls for spending cuts, the Labour government has released a letter with the signatures of more than sixty senior economists backing their proposal to delay government spending cuts until 2011.
Where economics is concerned, it’s all about numbers, and sixty definitely beats twenty. The argument of the original twenty was that spending cuts are necessary to ensure interest rates aren’t pushed up, undermining economic recovery. However, the Labour standpoint, and that of the sixty + economists, is that a cut now could draw the country back into recession.
The biggest point around this argument is that we currently have a public budget deficit of over £170 billion for the current financial year and that soon enough spending cuts & tax rises will be employed to manage this. No matter which party is in control at the end of the general election, the question is not if this will happen, but when.
The reality that our deficit is the lowest of the G7 countries, apart from Canada, seems to imply that comparatively the UK is dealing with the global economic crisis that has wracked the world for the last couple of years. With the general election expected in May, this is a topic that will become increasingly important in the coming months. Who’s going to be best to steer the UK back to a position of growth?
From my point of view, the situation, and the wider global economic recession, is a pretty good hint that the economic institutions (the world’s banks and the policies that govern them) have lost credibility. Incapable of ensuring global economic stability, and further entrenching the financial gap between the rich and the poor, they have proved themselves to be greedy, self serving and incapable of the insight to focus on prosperity for all.
