Friday 3 April 2015

103 business executives or two thirds of macro-economists?

It would be nice to think that one or a tiny group of business leaders thought that George Osborne had done  a cracking job on economic policy, told their pals, and  another hundred or so spontaneously  jumped in to offer support and  put their names to  letter which claimed:

"We believe the Conservative-led government  has been good for business  and has pursued policies which have supported  investment and job creation."

They then go on to advise that voting other than Conservative would be a terrible thing and lead to economic chaos and collapse (I paraphrase this bit as I have not read the actual letter -   it was in the Daily Telegraph, aka the Torygraph.

It is however more likely that this was a wheeze thought up by Conservative Central Office, which has the resources and time to concoct these media opportunities. (They out-spend Labour by three to one, the Liberal Democrats by umpteen to one and other parties by even more.)  It would be interesting to know how many business leaders were actually contacted and what percentage  signed.  There are hints in today's paper that some of them with they hadn't.

By what I believe to be a genuine coincidence the Centre for Macroeconomics (CFM) published the results of  its monthly survey on the same day.  This month the question was:

 "Do you agree that the austerity policies of the coalition government have had a positive effect on aggregate economic activity (employment and GDP) in the UK"

For detailed results see

In summary:
  • no-one at all "strongly agreed"
  • a third , however "agreed"
  • but another third "disagreed"
  • and yet another third "strongly disagreed."
Perhaps it's no surprise that leading businessmen, who tend to have leading incomes ( signatory Stuart Rose pocketed about £1.3m a year whilst at Marks and Spencer; Duncan Bannantyne is alleged to have a net wealth of £175m)* tend to favour the party least likely to put up the top rate of income tax and most likely to lower yet further the rate of corporation tax.  Whether this is good for the whole economy is another question.  The Tories pretend to the "trickle down effect":  the experience of the last couple of decades tends to show "trickle up" rather than "trickle down."

The Tories have no shame in repeating ad nauseum the alleged success of their "long term economic  plan," and the claim goes unchallenged, even by the BBC.  So, without embarrassment, though at the risk of seeming boring, here yet again is what I see as being closer to the truth:

  • the "world" economic crash was sparked off in Wall Street, not Downing Street, through the reckless behaviour of the financial sector  made possible by deregulation introduce and supported by the Tories in the UK;
  • Gordon Brown was not unduly profligate, and saved, if not the world, at least the western banking system, by his prompt action through the G8;
  •  the UK's key debt/GDP ratio, though high, was not dangerously so, when the coalition took office:
  • and the economy was already  recovering when George Osborne became Chancellor;:
  • this recovery was stifled by Osborne's policy of austerity, fancifully called "expansionary fiscal contraction;"
  • the justification for "savage cuts" to reduce the government deficit was the claim, almost certainly false, that without prompt deficit reduction  the UK was in danger of losing the confidence of the markets in the same manner as Greece;
  • the economy then flat-lined for two years;
  • things picked up again when this "Plan A" was quietly abandoned in 2012 and some Keynesian infrastructure expenditure was injected into the economy. This probably stimulated the present modest recovery;
  • Osborne's two stated policy priorities were to retain our AAA rating and eliminate the deficit in one parliament.  He has failed on both;
  • the claim that the UK is now "walking tall" and "paying its way" is demonstrably false.  The balance of payments deficit is at an historic  high at nearly 6% of GDP, and productivity is shockingly low.  These are the deficits that are really important.
The Tories are relieved that, on some measures at least, the average family is now richer than it was in 2010. Using this measure, this means that the government  achieved an average annual growth rate of 0.2%.  Those of us with long memories remember ridiculing someone, I think  Alec Douglas Home, as "Mr 3%" since 3% annual growth, regarded as a pathetic level in those high and far off times, was all his government could achieve.



  1. Excellent post, Peter, which I have circulated more widely. Unfortunately the Lib Dem leadership feels obliged to buy into the Tories' economic fiction to justify the coalition, and Labour also to deflect the media onslaught on their economic 'credibility'. So phoney!

    1. Thanks for your kind comment. Simon Wren Lewis, professor of economics at Oxford, is doing a series of eight posts, which started Monday 20th April on his blog:

      Well worth looking at. If only the media, and in particular the
      "red-tops" were taking notice. Amazing that the Tories can get away with these blatant distortions.

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