First, George Osborne should watch this video of Nouriel Roubini (the economist credited with predicting the 2008 credit crunch) explaining why Karl Marx was right … the markets can self-destruct and are in great danger of so doing. http://online.wsj.com/video/nouriel-roubini-karl-marx-was-right/68EE8F89-EC24-42F8-9B9D-47B510E473B0.html
Then he should listen to the reactions of Andy Haldane of the Bank of England, and the economist, Jeffrey Sachs.
Haldane, in a Bank of England discussion paper today, compares the situation with the one facing Roosevelt in 1938, when Congress forced him to rein in stimulus, prompting a double dip: he ripped up bank regulations and forced banks to LEND. Policy “went macroprudential” and the recovery took off.
Paul Mason http://www.bbc.co.uk/news/business-14579710
Jeff Sachs in the FT flays the global rich for their capture of fiscal policy, condemns the outcome of globalisation and issues a plea for a policy u-turn:
“The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy. Instead, the US and Europe have veered between dead-end, consumption-oriented stimulus packages and austerity without a vision for investment. Macroeconomic policy has not only failed to create jobs, but also to respond to basic social values too.”
Paul Mason http://www.bbc.co.uk/news/business-14579710
For even better advice, he should turn to Richard Murphy.
Markets are falling.
The underpinnings of the banking system are falling apart again.
Of course we can save the banks, again. We can print money. We will have to.
But this time let’s get real. This time we don’t lend them that money. Or give it to them as quantitative easing.
This time we nationalise.
This time we take control. This time we do so with the aim of cutting out the cancer. This time we do it for the long term. This time we don’t take the crap (that) the bankers do. This time, surely, we get it right. And this time we change the management, for good.
http://www.taxresearch.org.uk/Blog/2011/08/19/this-time-we-must-nationalise/
And what government investment in infrastructure should George Osborne choose to implement?
He could do a lot worse than making a start with investing in the energy efficiency measures proposed by the Centre of Alternative Technology (CAT) http://www.zerocarbonbritain.org . These include a mass insulation programme and retrofitting of renewable measures into the existing housing stock. CAT estimate that 20 million homes need to be sustainably renovated over the next 20 years. By using ‘natural materials’, there would be a dual advantage of having a lower carbon cost and carbon would be locked away within the building structure. These measures would cut people’s bills (giving them greater spending power), cut carbon emissions and fuel poverty, cut the obscene number of cold-related deaths, and create jobs and apprenticeships in woodland management, manufacture, trades and fitting for some of the nearly one million unemployed young.
George Osborne could also put forward the finances for a nationalised HVDC grid (1) to be created across the UK and internationally which will facilitate the linking together of different renewable energy sources. The UK can then begin the move away from its dependence on oil which will become increasingly prohibitive in price and economic impact as we reach and pass peak oil production (probably 2013).
Another area requiring investment is the R&D, manufacture and installation of new renewable energy sources (such as tidal range, wind, wave and tidal stream, methane, geothermal, algal bio fuels, hydroelectric) and micro generation. The UK could be a net exporter of energy and again this would create jobs and provide the sustainable growth needed to reduce the structural deficit.
These are only some of the ways in which the disaster of the banking crisis and neoliberal capitalism could be transformed into a means to combat the powerful oil lobby, mitigate the effects of man-made climate warming and create a sustainable world aimed at benefitting the majority not the minority. (2)
But unfortunately George Osborne is not likely to heed this advice.
Richard Murphy writes:
And some will suggest quantitative easing. But that wouild be a mistake. QE right now can only give banks money. Nothing can make them pass it on, and maybe people won’t ask them to do so – because there is no demand for borrowing at present as no one wants to invest.
There is only one way out. It is government spending that will save us from this mess. There is no alternative. I’ll say it until I am blue in the face, and don’t care how boring it gets. Saving jobs, realising people’s potential, providing a future – these are all tasks for a Courageous State, and right now we have cowardly ones who will do anything but what is needed.
Yes, that’s a book plug. But I happen to think nothing could be more timely than the creation of a rash of politicians who believe that they have the power to solve this crisis – which as a matter of fact they have, and which only they can exercise.
http://www.taxresearch.org.uk/Blog/2011/08/19/qe-wont-work-now/
Think Left 