Tumbling stock markets, riots in the streets and rising unemployment are not signs of economic confidence, despite George Osborne’s assurances. The British economy remains in a depression, defined by the authoritative National Institute of Social and Economic Research asany period in which output remains below its previous peak. The UK depression has already lasted three years, and NIESR argues that islikely to last five years or more – longer than that of 1930s.
Yet economic debate is dominated by counterproductive attempts to reduce the deficit through cuts in public spending, which are now the single most important cause of the depression. Before the cuts of last October’s comprehensive spending review, the economy had grown by 2.5%. Because of the slowdown the government will miss its targets to reduce the deficit by some distance, an entirely self-defeating policy.
Interesting article on Comment is Free by three economists who are arguing that the state owned banks must invest in order to create growth. This is again an example of the profession of economists as a whole having a far better grip on the situation, and what needs to be done, than the politicians.