I never thought a column on economics could make me smile so much. Professor David “Danny” Blanchflower, former independent member of the Bank of England’s Monetary Policy Committee (MPC), and our new economics columnist, writes in this week’s relaunched New Statesman:
Unemployment is going to continue to rise this year and may keep on rising. If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn, unemployment could easily reach four million. If large numbers of public sector workers, perhaps as many as a million, are made redundant and there are substantial cuts in public spending in 2010, as proposed by some in the Conservative Party, five million unemployed or more is not inconceivable.
Five million unemployed under the Tories? If it is to have any chance of stopping Cameron’s Conservatives in the general election next year, the Labour Party should be plastering this damning quote across every available advertising hoarding in the country. (I note that the shrewd Business Secretary — and First Secretary of State — Lord Mandelson, managed to work it into his speech to the British Retail Consortium last night, referring hilariously to “Bullingdon Club economics”.)
Professor Blanchflower warns against the current economic complacency and the misplaced focus on paying down the debt — and aims his criticisms squarely at the shadow chancellor, George Osborne:
We must not repeat the mistakes of the 1930s by assuming a recovery is taking place and then cutting spending and raising interest rates too early. Such action could push the economy into a decade-long depression . . . The time for cutting public spending is not now, not next year and not the year after.
It is not hard to work out that, with unemployment rising fast, it isn’t the right time to cut public-sector jobs, wages or public spending, for that matter. These are automatic stabilisers. Mr Osborne, I really don’t know which economists are advising you on this brilliant strategy to increase unemployment, but feel free to give me a call.
The Telegraph has the (rather lame) Tory response:
A Conservative Party spokesman said: “When David Blanchflower says Britain shouldn’t even start reducing the deficit until 2012, he is disagreeing not just with the Conservative Party, but with the governor of the Bank of England, the IMF and even the government’s own current plans.
Hold on. Blanchflower’s claim to fame is that he called the crash correctly, voting consistently for interest-rate cuts and warning of a recession throughout 2008, while the governor of the Bank of England (“old iron fist”, as Blanchflower calls him) joined the hawks on the MPC and opposed any cuts in rates until it was far too late and the economy was already in free fall. To cite Mervyn King’s views on economics in response to David Blanchflower is akin to citing Neville Chamberlain’s views on diplomacy in response to Winston Churchill. It is a mad, silly and self-defeating strategy.
So, the fundamental question remains: whose views do you trust on how to get the British economy back up on its feet? Gideon George Osborne or David “Danny” Blanchflower? It’s a no-brainer, isn’t it?
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