Friday, 2 June 2017
Ann Pettifor says spend, spend, spend.
That’s in this two minute video clip. (Click on the latter "video" link, not the image below.)
The clip is full of emotionally satisfying sound bites and convincing facial expressions. The sucker section of the human race (that’s 99% of the human race) will fall hook, line and sinker for this.
AP makes two quite separate points, or perhaps I should say “gets two quite separate points confused”. One (quite clearly true) is that if government can find money for nuclear weapons and the like, then it can find money for an improved social security system.
Well clearly that’s true. £Xbn can always be switched from defence to social security or vice versa, or from education to law enforcement or vice versa.
Her second claim is that government can spend, spend, spend like there’s no tomorrow because “Our private sector is still heavily in debt and very weak and lacking in confidence. And it’s at times like that that government has to step in by investing.”
Well this is an interesting new economic theory.
The conventional wisdom, which I fully support, is that stimulus (i.e. aggregate demand) should be expanded as far as is consistent with not exacerbating inflation too much. Indeed, at a guess, the twenty or thirty largest economies in the world have an inflation target of around 2%.
But AP seems to be saying that it’s not inflation that matters or which should be the yardstick, but “indebtedness of the private sector” and the “lack of confidence” of the private sector.
I look forward (not with much confidence - pun intended) to her explaining this new theory and why the above twenty or thirty countries are wrong.
I’m also intrigued by her claim that given excess debt and insufficient confidence that the particular form of spend, spend, spend that should be adopted is “investment”.
Gordon Brown, Britain’s former finance minister, always said “investment” when he meant current rather than capital spending. That one always fools the suckers.
But more seriously, if more aggregate demand is needed, I know of no economist who claims that extra money should go exclusively to “investment”. Some widely touted possible forms of investment are very questionable. For example the viability of the UK’s proposed multi billion HS2 rail project is hotly disputed. As for investing more in education, there are plenty of graduates working at MacDonalds because they can’t find jobs that use their skills (if you count sociology or media studies as a skill).
Of course there will always be investment projects here and there which make sense. But allocate 100% of extra spending to investment?? I think not. Anyway, I look forward (not with much confidence) to an explanation as to why 100% of extra spending should go to investment.