UK the new Chile

As the sun beats down relentlessly on Sofia (35), I have had to switch the air conditioner on for the first time.
I realise that it is a bit odd that a blog from the Balkans should so frequently be referring to British events – for which I do apologise. In defence, I can only say that Britain offers a fascinating case-study in governance. For three reasons –
• Its constitution gives governments free rein on whatever nonsense they wish to perpetrate on the public (provided the programme is acceptable to the Murdoch and other media/corporate interest agendas). In that sense the UK can be compared with Chile - which was the first country to be used as an experiment for neo-liberal doctrines.
• Its academic and other traditions ensure that we get serious, civilised and analytical commentaries on government programmes (even from government)
• The disparate parts of the "United Kingdom” have had their governance systems for the last few centuries – which are now developing even faster in different directions. The part of which from which I come (Scotland) has never bought into the neo-liberal agenda which is about to tear England apart.
The return of the public blog - which I discovered today - is ruthless in its appraisal of the british political system – and of the shape of relevant programmes to deal with the financial and economic crisis -

Ignorance of political economy is not normally a serious impediment to a career in politics, but Liberal MPs who want to stay in Parliament after the next election need to figure out what’s going on, and fast. They could start by listening to what Vince Cable is telling anyone who will listen: You have a model of economic growth that has broken down, comprehensively broken down. We had personal debt, which was unbelievably high, and this means you have an overhang debt on houses. You’ve got a property bubble, where property prices went out of control, and so now you have households worrying about falling house prices. Businesses that can’t use their property as security. We’ve got this long-term, systemic neglect of key productive sectors, including manufacturing, because the exchange rate was overvalued. We’ve got the hollowing out of industry: we now don’t have the skills. And then we have the deficit, which was the consequence of the bank collapse.Cable (Lib Dem Business Secretary in the Coalition government) has started to echo the critique of the British economic settlement offered by Ann Pettifor and others. Credit expansion fueled a boom in construction and consumption; credit expansion also created financial sector profits and asset price increases that could be taxed and channeled into the public sector. The triumph of the financial sector was accompanied by a spectacular maldistribution of capital and talent. This was the essence of Brown’s economic miracle. The stockbrokers Tullett Prebon provide a summary of the consequences of this miracle here. I suspect that Cable has been reading it, or something like it. And as Cable well knows, the economy cannot turn round in a few years. The Conservatives do not have a coherent plan to deal with the mess they inherited from Labour. They know that the economy cannot deliver broadly based private prosperity and public goods in its current form. They are hoping to reconcile us to lower living standards as the price of maintaining the existing structure of power.

And it was this post which introduced me to Anne Pettifor’s name – who (after publications about debt in the Third World) was apparently warning from 2003 about the coming debt crisis for the First World and who now has her own great blog – with, for example, this useful explanation of what is really going on with the "bail-out” of Greece.

And Colin Talbot draws on his experience to make some comments about this week’s british government white paper on open public services.

Finally a powerful post from Real World Economics -

What we are currently seeing is the end game of a clash begun in the height of the Great Depression, which like a dormant virus, has sprung back in a more virulent and potentially dangerous form. Back during that time, in the 1930′s, the intellectual world was heavily engaged in practical politics. It was a time of momentous change, and depending on your point of view, either danger or opportunity. The collapse of western economics was a threat, not just to political stability, but to the theoretical framework that lent credence to the governing principles that fed into policy. Theory and practice were being tested. And when policy failed the need to articulate new theory became not just evident, but urgent.
It was within this heated forum that modern economics was formed. It may have taken a while for the various alternatives then developed to to be formally worked out – to reach their final specification – but the seeds were all sown. Everything that came later was an effort to clarify or to synthesize the ideas presented during those years.
Thus we recall the great arguments over the feasibility of central planning. We see for the first time the argument that economics is strictly interested in allocation. We see the Keynesian revolution and the emergence of uncertainty as crucial, and his use of aggregation in methodology. We see the beginnings of the modern Austrian school and its emphasis on entrepreneurialism. The list goes on. This was a high point for economic theorizing. The arguments were both public and severe. Great divides opened up that have never been bridged adequately despite the efforts in the post war era to accommodate pieces of Keynes within the classical project. The divisions were so deep that the landscape of the social sciences generally was re-written: sociology peeled away and reserved certain aspects of behavior, very often economic behavior, for itself.