At last, an article on the problems facing the British economy which is concise, clear and honest
What are the origins of the current deficit?
“Contrary to the Conservative portrayal of it as a spendthrift party, Labour kept the budget in balance averaged over its first six years in office between 1997 and 2002. Between 2003 and 2007 the deficit rose, but at 3.2% of GDP a year it was manageable.
More importantly, this rise in the deficit between 2003 and 2007 was not due to increased welfare spending. According to data from the Office for National Statistics, social benefit spending as a proportion of GDP was more or less constant at about 9.5% of GDP a year during this period. The dramatic climb in budget deficit from there to the average of 10.7% in 2009-2010 was mostly a consequence of the recession caused by the financial crisis.”
But, even if Labour didn’t cause the crisis, aren’t the Conservatives doing a good job tackling it?
“The success of the Conservative economic narrative has allowed the coalition to pursue a destructive and unfair economic strategy, which has generated only a bogus recovery largely based on government-fuelled asset bubbles in real estate and finance, with stagnant productivity, falling wages, millions of people in precarious jobs, and savage welfare cuts.”
Who says so? Ha-Joon Chang who teaches economics at Cambridge University and has contributed an article to today’s “Guardian” newspaper. You can read his piece here.