Scottish Economy Watch

The Krugman-Layard Manifesto

I support the Krugman-Layard Manifesto and urge others to do so.

Krugman and Layard in today's Financial Times suggest that

As a result of their mistaken ideas, many western policy makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s. It is tragic that in recent years the old ideas have again taken root.

With the crisis well into its fourth year, Scottish GDP remains 4 percent below its pre-recession peak, employment is 3 percent below, the ratio of employment to working population is nearly 6 per cent below, and unemployment at 8.2 percent is significantly above the pre-recession peak of 3.9 per cent and the 5 to 6 percent range that economists believe is associated with stable inflation.

Fiscal austerity isn't working. The evidence is overwhelmingly against it producing an expansionary effect on GDP. It is making the crisis worse.

Sign the manifesto here.

Innovation not stagnation

Good article I have just noticed in today's online Herald by University of Strathclyde colleague Colin McInnes. Colin argues that neither the current slump nor growth scepticism, for product saturation, equity, or environmental reasons, should make us adopt a stagnation, or zero growth, aspiration. He argues:

Ultimately, the zero-growth outlook is simply a limit-setting view. Arguing that growth should cease at this entirely arbitrary juncture of history displays a degree of apocalyptic angst. Insisting we need to regress to a simpler way of life displays a degree of contempt for future generations.

We should aspire not to a future of eternal stagnation, but to an upswing of innovation-driven growth which can deliver both shared prosperity and the means to de-couple human needs from the environment.

I couldn't agree more. Go read the piece.