David Blanchflower: Inequality Harms Growth – But The Chancellor Is Going To Deliver More Of It

[interestrateripoff]

http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-inequality-harms-growth--but-thechancellor-is-going-to-deliver-more-of-it-10288089.html

The failure of economic forecasting continues to be a big problem, especially as we are about to be hit by another austerity Budget. Recall that forecast made by the Office for Budget Responsibility for the Budget of June 2010? The OBR forecast GDP growth averaging 2.8 per cent every year from 2011-2015; paying off of the deficit by 2015; wage growth of 4.4 per cent in 2014 and 2015. Plus exports were going to be making a major contribution to GDP growth in every year from 2011, and business investment was supposed to grow at double digits every year for years.

None of that happened, of course, and the UK lost its AAA credit rating and never got it back. Brilliant. I await with interest what the OBR forecast will be for the impact of Austerity Mark 2 (AM2) in the July Budget, and whether they learnt anything from their disastrous forecast when Austerity Mark 1 (AM1) was implemented. I doubt it.

This week the ONS estimated that investment grew, not at double-digit pace, but at 3.7 per cent from Q1 2014 to Q1 2015, and net trade continued to subtract from growth. The UK trade balance widened from £9.6bn in Q4 2014 to £13.2bn in Q1 2015, with exports falling by 0.3 per cent on the quarter, while imports rose by 2.3 per cent. The UK’s negative trade balance is now twice the size it was in 2011. Great.

Plus the second estimate of GDP that so many commentators just “knew” was going to be revised upwards wasn’t. Growth in Q1 2015 at 0.3 per cent was one third of the growth rate observed in Q1 2014, suggesting the economy has slowed sharply. In fact, services output was revised down. This included the Monetary Policy Committee, who in their most recent Inflation Report forecast that this quarter’s GDP would be revised up a lot. Plus almost all previous quarters going back through 2011. The MPC in their backcast have been saying that for ages and ages, with no sign of the data obeying their admonitions. The average revision to quarterly GDP over the last twenty years has been zero. And US GDP for Q1 2015 was revised down from plus 0.2 per cent to minus 0.7 per cent annualised on Friday. We just know all revisions are up.

..

We should be mindful when we evaluate George Osborne’s AM2 Budget the impact it has on inequality and poverty, in light of an important study published this week by the OECD, who are not known for being squashy feely, entitled “In It Together: Why Less Inequality Benefits All”. Today, in OECD countries, the richest 10 per cent of the population earn 9.6 times the income of the poorest 10 per cent. In the 1980s, this ratio stood at 7:1, rising to 8:1 in the 1990s, and 9:1 in the 2000s. This rise in income inequality the OECD reported “tends to drag down GDP growth”. The rise of income inequality between 1985 and 2005, the OECD estimates, knocked 4.7 percentage points off cumulative growth between 1990 and 2010. The OECD argued that the long-run increase in income inequality does not only raise social and political but also economic concerns: and it is the rising distance of the lower 40 per cent from the rest of society which accounts for this effect.

Once more we have the nonsense that you can "pay off the deficit" and he's an academic.

It appears that there's something wrong with the neoliberal models and growth.

[LabConH8er]

Blanchflower is one of the most loathsome individuals i have ever heard in my entire life.

It was he who was partly responsible for QE 0.5 and HPI under Nulabour.

[iamnumerate]

Didn't he predict 4 million unemployed due to "Austerity"?

[onlyme2]

Blanchflower is one of the most loathsome individuals i have ever heard in my entire life.

It was he who was partly responsible for QE 0.5 and HPI under Nulabour.

Yep, the hypocrisy from this chap is something to believe. Is it possible he is so thick that he cannot it see it himself or do economists in general think so highly of themselves that they can spout any old shit and be respected regardless.

[zugzwang]

Didn't he predict 4 million unemployed due to "Austerity"?

He didn't predict anything. Prediction requires a zeroth order falsifiable model at the very least. Since Blanchflower doesn't have one - the Neoclassical/New Keynesian model having been comprehensively falsified by the GFC - the proper conclusion is that he guessed.

[davidg]

Yep, the hypocrisy from this chap is something to believe. Is it possible he is so thick that he cannot it see it himself or do economists in general think so highly of themselves that they can spout any old shit and be respected regardless.

I don't have a problem with Danny spouting gibberish like a wino on meths. That the Independent gives space to his ramblings is more worrying.

[ElPapasito]

Blanchflower is one of the most loathsome individuals i have ever heard in my entire life.

It was he who was partly responsible for QE 0.5 and HPI under Nulabour.

Former wife who turned lesbian probably agrees!

Edited June 1, 2015 by ElPapasito

[Fully Detached]

Yep, the hypocrisy from this chap is something to believe. Is it possible he is so thick that he cannot it see it himself or do economists in general think so highly of themselves that they can spout any old shit and be respected regardless.

Personally I don't even consider him an economist. I have no interest in anyone so politically blinkered, their judgement is always impaired at best.

Edited June 1, 2015 by Fully Detached