Dear Friends,
I think the broader point to be noted here is not so much a comparison of growth rates between Labour and Conservative regimes. The point is that the Conservatives successfully adopted a semi Keynesian agenda. Their current budget deficit of 4.5% is the highest amongst the Advanced Economies (equalling Spain). Their debt to GDP ratio has been rising constantly to near 97%. The Pound has devalued against the Dollar in the past year.
Hence GDP growth has picked up into a median AE range. Unemployment has come down.
But productivity growth has been weak because the numeratior - output - has not been that strong.
But the Conservatives have only been semi Keynesian, because they have wekened real wages, and social protection. Therefore aggregate demand has been weak, with resulting investment at 17% of GDP, well below pre crisis levels of 19%.
Of course Osborne 2.0 could reverse budget balaces now, into bigger expenditure cuts. That would lower growth and employment even according to their own semi Keynesian model adopted so far. What is needed in fact is more unconventional monetary policy like QE. The space is certainly there, seen in the much higher costs of borrowing in the UK, with Governemt bonds at 2% yields, compared to the Eurozone at 0.6%.
Best
Moazam Mahmood
Deputy Director Research Department ILO
4 Route des Morillons
CH-1211 Geneve 22
I think the broader point to be noted here is not so much a comparison of growth rates between Labour and Conservative regimes. The point is that the Conservatives successfully adopted a semi Keynesian agenda. Their current budget deficit of 4.5% is the highest amongst the Advanced Economies (equalling Spain). Their debt to GDP ratio has been rising constantly to near 97%. The Pound has devalued against the Dollar in the past year.
Hence GDP growth has picked up into a median AE range. Unemployment has come down.
But productivity growth has been weak because the numeratior - output - has not been that strong.
But the Conservatives have only been semi Keynesian, because they have wekened real wages, and social protection. Therefore aggregate demand has been weak, with resulting investment at 17% of GDP, well below pre crisis levels of 19%.
Of course Osborne 2.0 could reverse budget balaces now, into bigger expenditure cuts. That would lower growth and employment even according to their own semi Keynesian model adopted so far. What is needed in fact is more unconventional monetary policy like QE. The space is certainly there, seen in the much higher costs of borrowing in the UK, with Governemt bonds at 2% yields, compared to the Eurozone at 0.6%.
Best
Moazam Mahmood
Deputy Director Research Department ILO
4 Route des Morillons
CH-1211 Geneve 22
