I disagree with a large part of Anatole Kaletsky's article in the Times this morning. He argues that the Government's crass Keynesianism has worked. I think that's hard to justify when we are having such an anaemic recovery.
Sure the unemployment figures aren't as bad as many people thought they might be, but that's a reward for the long standing relative liberalism of our labour market and a result of people giving up on finding work and becoming economically inactive (see Wat Tyler's blog for more) and - as I wrote yesterday - the continuing growth of the public sector flattering the figures.
The worst news is in manufacturing and exports. The graph I produced earlier this week shows that Britain is having a weak recovery in manufacturing compared to the eurozone:
The data on industrial orders also suggests Britain is lagging behind. And commentators were surprised at how bad the trade figures were, with the trade deficit widening from £2.6 billion to £3.8 billion. New statistics today from Eurostat show that Britain is running the biggest trade deficit in Europe:
So in terms of building a sustainable recovery, with business investment leading to growth and an erosion of trade imbalances, things aren't going terribly well. At a CPS event yesterday evening on "Why Growth is the Answer" the speakers set out a range of policies like tax reform and cutting back on burdensome regulation that would help get the growth which can get the economy going and help sort out the debt. I made the point that a big part of the problem right now is that the massive deficit in the public finances is creating an expectation that tax hikes might be coming. Why would businesses invest if their returns tomorrow are going to be clobbered to pay for today's taxes? Allister Heath - Editor of City AM - and Michael Fallon MP - from the Treasury Select Committee - both agreed that spending cuts are a pro-growth policy.
But, while Anatole Kaletsky is a Keynesian, he is an honest Keynesian. He isn't just using the policy as an excuse to avoid necessary cuts but argues that the parties need to set out specific plans to cut spending, so that they can show that whether or not they want to be borrowing right now they do have the finances under control:
One of the points I make in the new book is that setting out how they are going to cut spending will be a key test for the reputations of politicians. They need to show that they are interested in dealing with serious issues, that they are in politics for more than photo opportunities and expenses claims.