Wednesday, May 13, 2015

On "No More Boom & Bust"

I mentioned Benjamin Studebaker's excellent article on the British economy since 2008 in my post on Monday.

After his article went viral in the UK, as might be expected he received a lot of critical responses. To address these, he followed up with another thorough post, addressing "13 Terrible Tory Counterarguments".

I subsequently posted on Benjamin's new Facebook page a 14th counterargument that I anticipated receiving in making the points that Labour weren't to blame for the recession and that austerity wasn't the answer in 2010:
Doesn't Gordon Brown promising "no more boom and bust" reveal that Labour didn't know what they were doing with the economy?
Benjamin very kindly wrote the following response, and has given me permission to reproduce it here:
When Brown said this, he was referring to a particular kind of British problem that Brown liked to associate with the Tories in his speeches, which he called "boom and bust". This is a refrain he repeated many times going back to the 90s. (Guardian)

By "boom and bust", he meant the bouncing up and down of British performance independent of the global economy under Thatcher and Major, not global macroeconomic cycles. Here's annual GDP under Thatcher & Major.

In comparison, under Labour pre-crash, there was more consistent growth, with annual rates never exceeding 5% or falling under 1%.

Brown's defense is that the 08 recession is a global crisis, not a product of UK policy, and that before the crash, the IMF estimated that the UK would be fine provided there were no international shocks. In 06, it estimated that the deficit would continue to fall during the crisis period.

The full report is interesting--the IMF was remarkably enthusiastic about Brown's economic policy pre-crash. In particular, it praised the government for its economic stability and consistency, and it denied that the UK was overheated, claiming it was at full employment.

But because of the global crisis, Brown's comments about UK performance relative to the rest of the world have been misconstrued as a bombastic claim that there would never be a global crash ever again. In fairness, Brown left himself open to this by choosing to use unnecessarily bombastic rhetoric (similar to when he claimed to have "saved the world").

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