Mason: A Crisis of Growth

Paul Mason has been incisive on current debt affairs:

Britain’s problem is its lack of manufacturing and high-skilled industry, combined with the low skill base of its workforce: when the one-time kick of £200bn quantitative easing and 20% currency depreciation wears off, we will begin to feel this.

And in the US the problem is writ even larger: even with $1.7tn of money pumped into the banking system by the state – and make no mistake, central banks, with one exception in the world, is part of the state – the jobs market has not recovered; growth is poor; house prices are still declining, although as the ever-optimistic rubbish that comes into my inbox from analysts constantly reminds me “at a slower rate”.

And that is before austerity. Much of Middle America already looks like a museum of the 20th Century. The stimulus has succeeded only in averting a slump; it has not pump-primed growth. When austerity comes, even if the pro-austerity economists are right, and the medicine eventually revives the patient, in the interim it should provoke a second dip, or a flat line.

2011 is turning into the year when the unabsorbed shocks of the credit crunch collided with the failure to find new sources of growth.

via BBC News – Behind the downgrades and the doubt: A crisis of growth.


  1. Nostradamus says:

    You say incisive, I say hyperbole.

    "Britain’s problem is its lack of manufacturing and high-skilled industry"

    Wow, really? I didn't get that memo from the Central Planning department. Maybe because we haven't actually adopted socialism in Britain, much to Comrade Mason's disappointment.

    "The new problem is the absence of an economic model emerging from the wreckage of the old, credit-based one."

    Right on, Comrade. We need a new economic model! Capitalism is wrecked!

    I recommend reading all of Scott Sumner's blog to purge your mind from this rubbish, or at just look at a graph of Nominal GDP to see what "Britain's problem" is, or what "America's problem" is.

  2. Nostradamus says:

    There was no "credit-driven" consumer spending boom over the last decade, at least in the UK, that's a total fallacy. There was price deflation in consumer goods (thanks China), which meant we got a lot more "stuff" for amount we were spending, but the rate of spending growth was remarkably steady. To argue otherwise is a failure to distinguish the real from the nominal.

    There was also a house price boom, tied to an increase in borrowing. (Sure, there was some sub-primey froth in the UK too, with 110% mortgages.) But the degree to which borrowing (in aggregate) is sustainable is inseparable from the central bank's willingness to control nominal income (NGDP) growth. Failure to control NGDP growth will necessarily lead to a bunch of "good" credit turning bad.

    Strongly recommend you understand Sumner's thesis here, because it is compelling.