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Gordon Is Right About The Recession - Best Article Of The Day

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http://www.guardian.co.uk/commentisfree/20...sion-government

Bryan Gould

Gordon Brown gets no credit for his courageous stand on the responsibilities of government in a recession – but he is right

William Keegan and Will Hutton do not, I suppose, consult each other as they write their respective pieces for the Observer. If their contributions in this week's paper are read together, however, they make for a compelling combined message, and one that Gordon Brown and his government would do well to learn and apply.

First, William Keegan's piece laments (as I do) the opinion polls that reveal the number of voters who believe that, if they are having to tighten their belts, then the government should do likewise. I suppose it is understandable that people should feel, at a visceral level, that the government has got the country into the mess, and should therefore share in the pain that ordinary citizens are suffering. It is nevertheless disappointing that a gut reaction should take such precedence over economic literacy and common sense. It is even more disappointing, though perhaps more to be expected, that these sentiments should be encouraged by those who should know better.

The truth is that government must bear a responsibility not only for allowing the recession to develop but also for the measures needed to counteract it. Governments can and must act to correct market failure in ways that the market, left to itself, cannot. Economies are robust things. They would recover sooner or later without intervention. But – as all but the most purblind now recognise – it is the responsibility of governments to hasten the recovery process, and thereby limit the misery that recession inevitably brings about.

The reason for this is that governments, uniquely, have the ability to counter the inevitable tendency of recessions to feed on themselves. For most actors in the economy, the demands of self-interest mean that, in a recession, they spend less, invest less, cut costs, employ fewer people. Each individual decision taken by companies or businessmen may be – indeed usually is – rational and justified, but the cumulative effect for the economy as a whole is that recession is intensified.

There are those who wish to resist this line of argument. They are so hostile to the very idea of government that they are reluctant to accept that governments should ever have a special role and responsibility. They argue that governments should act (if at all) as though they were individual people or companies. According to this view, governments in a recession should also cut costs, spend less and lay people off, as though they were just like households or businesses. But, given – whether they like it or not – their importance to the level of economic activity, if governments behave like everyone else, the economy is condemned to a deeper and harsher recession than needs be.

As Keynes pointed out, only governments have the capacity and the duty to defy market logic. Only governments have the resources to override what would normally be market-based self-interest and to substitute for it the wider interest in getting the economy as a whole moving again. Only governments can afford to live with and fund long-term indebtedness if that is what is required to protect the interests of their shareholders – and that means everyone. You don't need to be a Keynesian to accept this; all you need is common sense.

At this point, enter Will Hutton. He makes the point that – perhaps belatedly – Gordon Brown and his government have recognised that common sense requires them to use the power of government to fight the recession. As a result, the recession – bad as it is and will yet be – will be shallower and shorter than it would otherwise have been.

In doing this, they have opened up a clear and significant gap between their approach and that of the Tory opposition. As far as we can tell, the Tories would have done nothing, other than wring their hands at the inevitable and growing size of the government deficit – and ironically, that very inactivity is the one thing guaranteed to make the deficit bigger. A longer and deeper recession would mean yet more damage to the government's finances; a less severe recession, counteracted by judicious government spending, would by contrast bring the deficit under control and limit its size.

Yet, as Will Hutton points out, Gordon Brown gets no credit for his courageous (and surely correct) stand on the responsibilities of government in a recession. It is his opponents who, for reasons of opportunism, prejudice and perhaps sheer ignorance, continue to make the running.

He is not, of course, alone. The right, in the United States, Europe, Australia and New Zealand, continue to exploit public sentiment in order to undermine confidence in the power of government. But surely, for Gordon Brown as for other more enlightened leaders, this is stronger ground on which to fight than the disastrous argument about which party will cut more severely. I remember a young Gordon Brown who, with an eye for a phrase that was hardly new but nevertheless full of meaning, proclaimed that "good government matters". That has never been more true than at the recession-ravaged present. Why not say so – again and again and again?

:lol::lol::lol::lol::lol:

This is just too funny for words.

I really wish I had this guys economic expertise I would understand the world so much better.

Edited by interestrateripoff

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This can't be the same Bryan Gould surely?

I disown this government

But even that failure pales by comparison with the latest revelations about the abandonment by New Labour of any pretence to civilised standards. We now know that this government connived with the Bush administration to hold people illegally, to kidnap them in secret, and to torture them while in custody – all in the name of a war against the forces of darkness. The perpetrators of these outrages seem to believe that they can be washed clean by simply declaring their superior morality.

But they are courageous on the economy, so thats OK! Hurrah!

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Yeah I've just found that after doing a quick search on who this idiot is.

I'd love to write crap like this and get paid.

He used to be Neil Kinnocks spin doctor :lol: Partial New Labour.

I can remember him being dragged onto BBC shamefacedly when it was being revealed that John Major was going to win the election. Gould fled to NZ in disgrace.

Edited by HostPaul TAFKA Rover2000

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Yeah I've just found that after doing a quick search on who this idiot is.

I'd love to write crap like this and get paid.

The labour party are wheeling out all the old labour stalwarts to try and avoid the electoral disaster that will come as sure as night follows day.

I saw Roy Hatterjee on the Beeb the other day, blustering and frothing his way through his prepared statement about how Gordon will be proved right.

Whoever next?

Gerald Kaufman?

My goodness I was trying to think of a few more names from the late 80s and early 90s, but I can't think of any more names.

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He used to be a Labour MP, old Labour that is, before they ruined the country.

He's got to be on medication, surely?

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http://www.guardian.co.uk/commentisfree/20...sion-government

:lol::lol::lol::lol::lol:

This is just too funny for words.

I really wish I had this guys economic expertise I would understand the world so much better.

is this an article from the viz

written by terry fkwit economic guru

i cant go to sleep now with these fkin idiots with their outsized influence

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The age of Idiocracy is a lot closer than 500 years from now. We get ourselves out of a bind by doing the same thing that got us into it. If that doesnt work, we're obviously not doing enough of it.

Most of our finest got killed off in WW2, many of the rest emigrated. Us few on HPC live amongst the pond life that is 21st century Britain.

I dont know if these people are just stupid, or evil. Or so singlemindedly evil they became stupid.

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I remember a young Gordon Brown who, with an eye for a phrase that was hardly new but nevertheless full of meaning, proclaimed that "good government matters".

He has to be taking the p1ss surely.

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I hate to admit it and fully expect abuse, but I think that there is logic in his argument about maintaining spending in a recession. There is however a large BUT to be slipped in here! MAintaining spending and usingfiscal stimuli are one side of the coin. If you are prepared to spend in the bad times you also need to save in the good times. It is at this point that Mr Gould's argument falls totally flat with reference to Brown's handling of the economy and the recession.

Off the top of my head I believe that Brown has run a growing deficit since around 2000. Once famed for his close relationship with Prudence, he has since raped and pillaged her every orifice. He broke his own golden rules before this recession even started, with regard to borrowing at less than40% of GDP, (and that without his off balance sheet PFI projects). Having claimed to have abolished boom and bust, he has found himself faced with the biggest bust since 1930 and the coffers are bare despite the biggest boom of the last 14 years, due to his profligate spending.

Mr Gould is partly right in his article. The best way to steer an economy through a recession is to maintain spending by dipping into the reserves put aside in the good times. Gordon failed at the first hurdle, long before we got close to the current recession. Now his continued profligate spending just makes state failure and economic colapse more likely.

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So why is Brown wrong?

Surely it is right that the government increases spending on infrastructure projects and tax cuts to stimulate the economy?

I remember the last time that we had this discussion - aside from some old ******** that each public sector is job taking a private sector job (as if the economy is a zero sum game), or that every single public sector job is 'economically unproductive' ( :rolleyes ) - I couldn't find a proper argument for slashing public expenditure in a recession.

Edited by bateman

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he has found himself faced with the biggest bust since 1930...

Alan Sugar was bad enough, don't tell me they've wheeled in Dolly Parton as a SPAD too !?

I can just see it : Working 9 till 5...no hang on, these lyrics can't be right...

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So why is Brown wrong?

Surely it is right that the government increases spending on infrastructure projects and tax cuts to stimulate the economy?

I remember the last time that we had this discussion - aside from some old ******** that each public sector is job taking a private sector job (as if the economy is a zero sum game), or that every single public sector job is 'economically unproductive' ( :rolleyes ) - I couldn't find a proper argument for slashing public expenditure in a recession.

I think people might be scared that borrowing during in a recession, especially if you didn't save in the boom, means crippling interest payments back to whoever you borrowed it from (not necessarily UK investors). Can you argue interest payments are productive ? And that the next generation of public and private sector workers should have to pay them off ?

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I think people might be scared that borrowing during in a recession, especially if you didn't save in the boom, means crippling interest payments back to whoever you borrowed it from (not necessarily UK investors). Can you argue interest payments are productive ? And that the next generation of public and private sector workers should have to pay them off ?

Furthermore, gordo's current borrowing is only possible because the markets assume that the tories will get in soon & cut spending. If not, the markets would already have called time at the bar.

This argument that somehow public spending needs to be maintained at all costs really p's me off. It's nothing more than a "theoretical" fig leaf, to give some kind of credence to what is becoming an unpopular policy. The economic textbook doesn't say "keep spending even if you're already drowning in a well of debt". Nor does it say "keep spending even if you're not in a position to borrow more- oh and, by the way, taxes must go up too".

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http://www.guardian.co.uk/commentisfree/20...sion-government

:lol::lol::lol::lol::lol:

This is just too funny for words.

I really wish I had this guys economic expertise I would understand the world so much better.

They are f*cking idiots. I want to punch them, they do so much harm to real people with their nonsense.

The governmnnt has done enough damage, just please p*ss off out of the way and let real people find their way through.

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So why is Brown wrong?

Surely it is right that the government increases spending on infrastructure projects and tax cuts to stimulate the economy?

I remember the last time that we had this discussion - aside from some old ******** that each public sector is job taking a private sector job (as if the economy is a zero sum game), or that every single public sector job is 'economically unproductive' ( :rolleyes ) - I couldn't find a proper argument for slashing public expenditure in a recession.

Debt deflation? Your interest repayments become unsustainable.

Spending your way through a recession only works if you have reserves and it's a short recession. If you have already created a huge debt bubble creating even more debt is only going to end in disaster.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

How about the argument that we have witnessed growth via unsustainable debt expansion and the public sector as it is cannot be sustained?

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