Compare and contrast

Siting here in my Europe: Economic Policy and Structural Change lecture (which is fun, as you’d expect). The course is taken by Wendy Carlin - economic advisor to Number Ten and widow of Andrew Glyn, the “famous” Marxian economist (I say “famous” because noone gives a shit about Marxians except Marxians).  Those aren’t sound credentials to begin with - plus she’s Australian, which doesn’t help.

Our Wendy has just shown how a long-term structural increase in government debt as a percentage of national income can only be resolved by fiscal readjustment or positive output shock. Quite obvious, really. Unlike last year, she’s ruled out printing ourselves out of the crisis (although, if the Bank of England buys government bonds, as it is… that’s the same).

But any econometric analysis shows that one way of doing that - increasing taxes - doesn’t work, because it impedes economic growth (not as much as maintaining the deficit, mind). The other method is to slash spending, which spurs on growth (average of 1.6% per annum), and shrinks the deficit by itself.

Given that we do have a structural deficit, and a real national debt of over 120% of GDP, we ought to take that advice.  Nonetheless, over the past 11 years, spending has skyrocketed.  So is it safe to asume that Browns too left-wing for Carlin, his most left-wing of advisers?

Update @ 12:53: Carlin now does believe that the Bank of England and European Central Bank ought to monetise - which is bureaucratic parlance for printing lots of money to buy up the debt that the government can’t sell to anyone on the market. Nice.  On the other hand, she does lambast the Euro for not allowing this - but is a rebuke to President Barroso, methinks.