Donnell's blog

Posted Mon 22 December 2014

The Trail To Nowhere Near Wigan Pier

OVER the past few weeks, debates over British fiscal policy have been conducted under the shadow of George Orwell's "The Road to Wigan Pier", a powerful description of the poverty he found in the north of England in the 1930s. On December 3rd, George Osborne, the chancellor of the exchequer, in his Autumn Statement, announced plans to turn Britain's deficit, which stood at £108 billion ($169 billion) last year, into a surplus of £23 billion by 2020. Because the government does not want to raise taxes to fund these plans, public spending is forecast to fall from 41% of GDP today to just 35% by the end of the decade.

The dark clouds around the silver lining

I think the Fed shares his view. Ironically, this is actually an exceptionally negative statement about the strength of the American labour market. Despite recent rapid job growth, there has been no recovery at all in the rate of participation in the labour force and only a very slight recovery in the  employment-population ratio . To conclude that America is closing in on full employment is to accept as permanent most of the damage done to labour markets by the Great Recession. That strikes me as far too gloomy a view.

The best of all worlds

A central bank in no mood to get in the way. That is the happy combination America now enjoys, and it explains the stock market's euphoric reaction to today's meeting of the Federal Reserve. In the statement releaed after its meeting, the Fed hailed "solid job gains" and diminishing slack in the labour market.

Two lost decades?

THERE IS no widely recognised, monetary measure of a country's natural, human and physical assets. Economists usually make do with GDP (which anyway gauges income rather than assets). But a report published by the United Nations offers a broader indicator: “inclusive wealth”. It is the second of its kind; the first was published in 2012. The report, overseen by Sir Partha Dasgupta of Cambridge University, puts a dollar value on three kinds of asset: “manufactured” capital (roads, buildings, machinery and so on); human capital (people’s skills and health); and natural capital (including forests and fossil fuels). Statistical wizardry is required: to calculate human capital, for instance, the UN uses figures on average years of schooling, the wages workers can command and the number of years they can expect to work before they retire (or die).

What's really there?

We are hosting a round-table discussion of the statement and the direction of British economic policy. Our final contributor is Matthew Whittaker, chief economist at the Resolution Foundation.

Thanks but no thanks

Even after this year’s drop, only a handful of countries have bigger reserves than Russia. But Russia’s official figures do not tell the whole story. About $170 billion of its assets sit in two big wealth funds, the Reserve Fund (worth about $89 billion) and the National Wealth Fund (worth about $82 billion). But much of what is in these funds could prove inaccessible if called on to meet short-term financing needs. Some people allege that the National Wealth Fund is tied up in long-term infrastructure projects, which mean that...

How rich we really are

By the time of the first funding operation, in September, that rate was a mere 0.15% a year.

Category: misc