The costly legacy of Margaret Thatcher’s monetarism

Post-war British economic history is littered with failed policy panaceas. Keynesian demand management would solve the unemployment problem; the Exchange Rate Mechanism would provide an anchor for stability and end sterling’s perennial weakness; the Barber and Kwarteng budgets – separated by 50 years – would throw off the shackles of Treasury orthodoxy and put the country on a path to higher growth. On the face of it, monetarism – the theory that if you control the money supply, you control inflation – fits squarely into this paradigm. As soon as government sought to control the money supply, the historic relationship between money and inflation broke down. But partly because inflation

Why is UK retail doing badly?

This morning’s retail sales figures are not what Rishi Sunak will have hoped for as he pitches his case for re-election on economic recovery. They are yet more indication that Britain has fallen out of love with shopping. Sales volumes were 2.3 per cent down in April compared with the previous month, while the March figure was revised downwards from zero to minus 0.2 percent. Some of this might be connected with the timing of Easter: the holiday weekend straddled March and April, so people will have done their food shopping, Easter egg purchases, filled their car with petrol, and everything else, in March rather than April, but the bigger

Be more tiger mum!

‘What’s it to do with me if your boyfriend wants to break up with you? Or if you cried, or had a fight, these are not things that I as a supervisor care about. I’m not your mother. All I care about is results. Our relationship is just employee-employer.’ In a series of videos posted on Douyin (China’s version of TikTok), Chinese tech executive Qu Jing was a little too candid about her management style. Sharply dressed and with hair cut formidably short, she said she expected her staff to be on call 24 hours a day, including at weekends, even at the cost of their personal relationships. If Qu

What does Rachel Reeves stand for?

As the world discovered when she was caught lifting other people’s work for her book on women in economics, Rachel Reeves is not the most original of thinkers. But she has political talents. She has cultivated her image as an uninspiring technocrat in order to present herself as someone who will not spring surprises or take risks as chancellor. She thinks the state is inefficient and taxes are too high. She believes in ‘securonomics’, which sounds like a pleasing contrast to years of Tory policies. It is easy to preach fiscal discipline, but in office Labour would find it very difficult to contain spending Polls show that voters now think

China is set for a serious economic fall

 The future trajectory of the Chinese economy is a subject for doctoral theses rather than casual column items. But the advent of the Year of the Dragon, at last weekend’s Lunar New Year, was greeted with such pessimistic commentaries that the natural contrarian should ask whether the consensualists are getting it wrong: maybe the dragon is merely marking a pause before martialling its mighty resources for the next transglobal burst of fire? The negative narrative goes like this. In spite of deflation in consumer prices, Chinese shoppers are frightened of spending. Despite central bank interventions aimed at boosting asset prices, the property market is crashing after the collapse of the

How many criminal convictions are overturned? 

Power play The former energy minister Chris Skidmore resigned in protest at a bill to issue more licences for oil and gas extraction in the North Sea. What are other countries doing? – US oil production hit a record 13.3m barrels a day last month, up from 10.8m five years ago. – Qatar is investing $150 billion toincrease oil production by 50% to 5m barrels per day by 2027. – Brazil plans to increase oil production from 3.1m barrels per day in 2022 to5.4m barrels per day by 2029. – Canada increased oil production by 375,000 barrels per day between 2021 and last year. Judgment call The Criminal Cases Review

Milton Friedman – economic visionary or scourge of the world?

The Keynesian economist Nicholas Kaldor called Milton Friedman one of the two most evil men of the 20th century. (Friedman was in distinguished company.) The ‘scourge’ he inflicted on the world was monetarism, a product of what Kaldor called Friedman’s Big Lie – of which more later. Moral judgments aside, how does Friedman rank in the world of 20th-century economists? By common consent, he stands with Friedrich Hayek and John Maynard Keynes at the apex of his profession. All wrestled with the defining problem of their age: the radical economic and political instability of the 1920s and 1930s. Their responses reflected their national situations. Keynes, economically secure and confident in

What was banned this week?

For the love of dog XL Bully dogs were banned in England from this week, although there is an exemption for animals which are neutered, registered, insured and kept on leads and muzzled in public. Some other things that have been banned this week: – Parking on the pavement in Edinburgh. – Importing disposable vapes in Australia. – Selling new homes with gas boilers in the Australian state of Victoria. – Displaying toys in Californian shops under male and female sections. A gender neutral section must now be included. – English councils trying to charge for disposing of waste from DIY projects. – Withdrawals in dollars from banks in Iraq.

Has crypto finally had its day?

If you run an organisation, there are some reporters you definitely don’t want around: Ronan Farrow asking for comment; Madison Marriage or Dan McCrum with a couple of questions; Michael Wolff hanging out on a sofa taking notes. Michael Lewis is not one of those reporters. If he wants to spend time with you, you are about to be lionised as a decent person who sees just a bit more clearly than the fools who run the system of which you are a part, which will make you wildly rich (unless you’re an academic or a public servant) and famous. When Michael Lewis calls, people answer. Lewis raises enough questions

Bernard Looney shows why every board should be braced for scandal

Bernard Looney, the fallen BP chief, always had a certain swagger about him. I’ve no idea whether he was unsafe in taxis, but he was certainly prone to unguarded remarks. ‘Not every barrel of oil in the world will get produced’ was a bold way, back in 2018, to introduce BP shareholders to the idea that the world’s energy giants will one day have to strand remaining carbon assets if they really intend to achieve net-zero targets. ‘This is literally a cash machine’ was not the best way to describe BP’s profit performance in November 2021, when British households were beginning to feel the pain of soaring energy bills. And

Where were the longest A&E waits?

The bare platform A 112-space car park built to serve the railway station in the Cambridgeshire village of Manea was used by just three cars in its first week. — The station, formerly a ghost station with one train a week, has been revived but even so is only served by two trains every hour. — Yet had it not been for the Civil War, it could have been the capital of England. Charles I planned an English Versailles there, surrounded by a great city called Charlemont – all built on land reclaimed from the fens. Thanks to the war, however, nothing ever got built. — The name Charlemont lives on

Will Brits feel richer if inflation halves?

The government’s objective to ‘halve inflation’ by the end of the year seems to be back on track – for now. Last week’s interest rate hike was delivered with an updated inflation forecast from the Bank of England, showing the rate slowing to 4.7 per cent by the end of the year, just below Rishi Sunak’s target. The better-than-expected fall in the headline rate last month has forecasters thinking things are finally moving in the right direction. As Ross Clark reports on Coffee House, Capital Economics is expecting another major fall in the rate next week – down to 6.9 per cent on the year – when July’s figures are released.

How to increase your home’s value – with a sandwich

It is a tenet of neo-liberal economics that there is no such thing as a free lunch. This is obvious baloney. There are free lunches everywhere. The problem is that those free lunches are no longer served to people doing useful work. They are instead handed out to the owners of a few favoured asset classes through untaxed gains. We have created far more tax breaks for rent-seeking than for productive work… and then we wonder why Britain has a productivity crisis. Under a future Sutherland regime, there would be no tax paid on beer drunk in a pub I must admit I enjoy a few free lunches myself –

Russia’s complex relationship with the ruble

The most impressive banknote I have ever seen is the 500 ruble note produced by the Imperial Bank of Russia between 1905 and 1912. About four times the size of a modern £50 note, it is magnificently emblazoned with a portrait of Peter the Great and a profusion of cupids and classical pillars. It looks as high-denomination money should look – luxuriant, confidence-inspiring and valuable. The ruble (from ‘rubit’, to chop) was originally a chopped-off piece of Viking silver ingot Appearances can, of course, be deceptive. My Russian wife’s great-great-grand-father, the owner of the Volga Bread Bank of Saratov, unwisely chose to keep his considerable savings in the form of

Britain could come to regret moving away from China

China’s relationship with America is getting worse and worse. The Chinese Foreign Minister, Qin Gang, warned yesterday that ‘containment and suppression will not make America great. It will not stop the rejuvenation of China’. The Biden administration, meanwhile, recently accused China of readying to send weapons to Russia, and Americans are still fuming about the Chinese balloon that entered their airspace. China thinks they’re being hysterical. Britain will soon be forced to decide whether it will decouple from China. The Americans no doubt want Britain to join them in cutting ties to Beijing, but it is not clear that British policymakers are ready to do this yet. In 2020, China accounted for

Liz Truss: my part in her downfall

Now that the final curtain has fallen on Liz Truss’s brief and tumultuous premiership, it is time for reflection. A chance to set the record straight and also to own up to mistakes – especially for those of us who tried to advise her. What went wrong? Yes, the tipping point was Kwasi Kwarteng’s mini-Budget. But three problems were by then already brewing. First, the leadership campaign over the summer had become very focused on tax cuts. Even Rishi Sunak ended up saying he would cut the basic rate of income tax from 20 per cent to 16 per cent by the end of the next parliament, while Jeremy Hunt

These figures show the enormity of the next PM’s task

Next week we will have a new prime minister (again), but the economic problems facing the country will remain the same. This morning’s update from the Office of National Statistics shows public sector net borrowing was  £20 billion last month: the second-highest borrowing September record and significantly higher than the Office for Budget Responsibility’s last forecast, which put the figure close to £15 billion. It’s this rapid rise in borrowing that the markets have turned on in recent weeks Economists thought borrowing would rise, but even the consensus (roughly £17 billion) was lower than what the government borrowed in practice. While total borrowing for the financial year is slightly below

Can you feel sorry for Liz Truss?

It is not easy to feel sorry for Liz Truss. She has a deeply unattractive streak of vanity – when in the Foreign Office, she seemed more interested in posing for the official photographers who trailed her round than she did in building relationships with the places she visited. She campaigned hard and sometimes dirty to obtain a job for which she was manifestly out of her depth. Once in that job, she exercised power with peremptory arrogance. She rewarded people who had sucked up to her, cast out anyone who had spoken up for her rival, and allowed experienced civil servants to be hoofed ruthlessly out of their jobs.

Truss says no to spending cuts. Here’s the caveat

The mini-Budget was a spending spree. The ‘medium-term fiscal plan’ was meant to explain the funding. But what exactly is going to be in it?  Liz Truss and Kwasi Kwarteng were thought to have (finally) come to terms with the need to address the need for some restraint, after their mini-Budget led to market chaos which is yet to settle. Their fiscal statement – in other words, how they would fund their tax cuts – was moved forward by almost a month, to 31 October. Its contents were thought to include some major spending cuts, in a bid to convince markets that fiscal discipline still guides the Tory party. If there are

Kwasi Kwarteng’s easy ride

Tory MPs were in an anxious mood as they returned to the Commons this afternoon after weeks of conference recess and government meltdown. Their first session in parliament was, appropriately enough, Treasury questions, where they had a chance to air some of their anxieties with the Chancellor and his team. It could have been a much worse session for Kwasi Kwarteng, given the way things have gone recently. But the number of MPs seeking reassurance won’t have left him feeling very relaxed. Kwarteng told the Commons that his mini-Budget had been ‘really strong’ Kwarteng told the Commons that his mini-Budget had been ‘really strong’ and that MPs constituents would have