Ed Balls embraces fiscal austerity at Labour Party conference: A Major error

The shadow British Chancellor Ed Balls speaking at the Labour party conference has foolishly embraced the fiscal conservative principle of no new deficit financed funding for education or social investment or infrastructure when and if Labour is in office. This despite the fact that the rise in indebtedness is almost entirely due to the crash brought about by the private banking system and deregulation and rise in unemployment that neo-con governments had introduced over the previous several decades.Check out these historical charts on the debt to GDP in the UK.the debt to GDP ratio and the deficit The debt to GDP ratio is nowhere near its historical maximum of over 250 % as the charts illustrate.Furthermore almost 70 % of the UK debt is held by domestic UK investors including the Bank of England .(See in particular the last chart on the page which plots the ratio of public sector debt to the GNP over the period 1692 to the present) The current level of close to 80 % is in fact moderately low when viewed over the history of British finance since 1692. It is currently elevated only because of the crash and crisis and its quite foolish and unnecessary to pledge no debt financed spending on capital account when there is such a large need for it in Britain and the neglect of it has helped fuel right wing political movements like UKIP and nationalist movements like the SNP. I t may seem appealing as a defensive measure against Tory charges of financial lack of discipline but Labour ought to educate their electorate about how damaging austerity has been, what the alternatives are and how to repair the damage. Instead Balls has boxed Labour in with his pledge. Too bad.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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