Erm, Willy, no

On its own terms it has to do everything in its power to achieve the economic growth on which its budgetary forecasts are based – not least the creation of some 2.5 million private-sector jobs over the next five years even as half a million public sector jobs are forecast to be lost. What will it do? And can it work?It\’s quite a challenge. According to accountancy firm PwC, Britain succeeded in generating 1.2 million private-sector jobs in the 1993-1999 recovery after the last big recession, but 900,000 of those were in financial and business services – which were hiring aggressively in the build-up of the credit and financial bubble.

Do stop, please, this is embarassing. You\’re a Director of the London School of Economics, remember? Used to be head honcho at the Work Foundation?

The private sector creates more than 2.5 million jobs each year.

You are quoting the net figures, the result after job creation and job destruction are paired off.

Most research seems to indicate that the rate of job destruction doesn\’t increase much in recessions: it\’s the rate of job creation that falls, leading to a net increase in unemployment. Coming out of recession (and as those peeps who got the Nobel this year, as Chris Dillow (pbuh) has reminded us, this is a lagging indicator for search and matching reasons) it does take time for the new jobs being created to be filled. But they are being created out there, each and every year, in the sort of volume that you\’re talking about.

The Bank of England, alone among the world\’s top central banks, refuses to buy any private sector loans from mainstream banks – a hyper-conservatism it justifies by saying any such purchases would be \”political\” (ie, choosing to take one company\’s loans over another\’s). It is not political for the Bank of Japan, the US Federal Reserve or the European Central Bank, all of whose banking systems are consequentially much more supportive of business than our own.

I\’m sorry, you what? Perhaps this is my own lack of knowledge but I\’m entirely unaware that any central banks anywhere buy private sector loans. Private sector bonds, yes, but not loans. And you can\’t just gloss over this difference: for one opf your constant mantras is that British banks don\’t lend enough to business….but you carefully avoid including what is lent in bond issues, counting only loans. You make this differentiation so you have to stick by it.

Entrepreneurs need to be able to find start-up capital more easily and finance themselves with loans that, like student loans, have repayment terms that vary with success….

We have this, it\’s called \”equity\”. It\’s one of the determining characteristics of Anglo-Saxon style capitalism, that much entrepreneurial activity is funded by equity, not by bank loans.

We need an infrastructure bank that can double the annual infrastructure spend from 2% to 4% of GDP.

Why? What merit is there to a particular target for inputs? We don\’t want to target inputs at all, we want to target outputs. What infrastructure do we need, how much will it cost? That\’s how to determine how much gets spent, not doodle some sums on the back of an envelope and insist that x% of everything we produce must be spent on train sets.

1 thought on “Erm, Willy, no”

  1. for some reason I am reminded of Andalusia. I drove extensively around that region of Spain in the late 80s and the roads were a little crowded but ok. I returned a few years ago and Felipe Gonzalez had obviously porb-barrelled a load of infrastructure spend, with the help of the EU. Massive autoroutes running everywhere, connecting all sorts of places, but hardly any volume of traffic using them. Preumably this mis the kind of spend that Will is talking about.

Leave a Reply

Your email address will not be published. Required fields are marked *