Blog 2023 Malcolm Blair-Robinson

The Deficit

There is a rather entertaining exchange of letters in the papers with scores of economists taking opposing views as to whether to cut the deficit this year with immediate action (or at least halt its rise) or to go on borrowing. Ordinary people find this a bit unnerving  as they suppose economists know all the answers. Unfortunately economics is such a moveable feast that I have for years doubted whether, as a single discipline, it really exists at  all. Throughout my life economists have argued and disagreed. None from Keynes to Friedman to Blanchflower have been proved entirely right, yet neither have they been proved entirely wrong. This is the point. Both sides of the argument are valid and it is somewhere in the tension between the two that the least bumpy road will be found.

But that is by no means the end of the matter. Having selected the least bumpy road the question must be put, where does this road lead? Here the number of experts willing to scout forward diminish to a handful whose observation are largely ignored.

The nature of the recovery presently being engineered is not only hesitant but useless, since it ignores the calamitous structural imbalance that put the West in to this mess in the beginning, in which grouping we are actually in the biggest mess of all. It is a fundamental strategic imperative that we re-structure our economy on a socially fairer model which relies far less on borrowing and which makes more of what it consumes, whilst saving much more significantly for the future both at national and personal levels. Relying on asset inflation to accumulate wealth is in the long term a mirage. If a restructuring programme begins, the issue of the national debt, when and how to reduce it, falls  more readily into context and leaves some choice about how soon and by how much.

Failure to restructure voluntarily will, after a false dawn of failed recovery, force upon us the biggest economic and social upheaval of the last hundred years whether we want it or not.

This entry was posted on Friday, February 19th, 2010 at 1:36 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.