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Ms Mazzucato and economics

The UK trade deficit seems to be running around £10 billion a month or so:

A proactive solution to the problem must think clearly about the sources of our rapid rate of inflation — rather than its simple existence — and the need for an investment-led growth track to beat the capital flight from Brexit.

Professor Mazzucato seems to think that it’s possible to have capital flight while running a trade deficit. This is not so.

Aren’t we lucky in having such well informed people aiding in designing public policy?

10 thoughts on “Ms Mazzucato and economics”

  1. About this “proactive solution”. Does the professor define her terms, distinguishing between reactive, inactive and unadjectived solutions.

  2. It’s lucky that TW claims not to be an economist so that I can be sure he won’t be offended if I generalise that almost all economists talk rubbish. Macro-economists, anyhow.

    Of course I don’t know what they say in private, but in public they are sheisssprechers.

  3. Strictly speaking it is possible to have a trade deficit and capital flight: you sell foreign assets. It’s not really what the pink book shows happening though.

    Asset sales sometimes financed our trade deficit, usually when everyone sold but we sold more. Even then, our total assets still increased due to rising values.

    As for capital flight, investment inflows have been good since 2016. Volatile and not our best ever, but overall a lot better than anytime between 2008 and 2015. So, no evidence of capital flight.

  4. [It’s not] possible to have capital flight while running a trade deficit.

    Presumably that’s an overall measure. There must always be some people from time to time who take a look at the economic state of a country (including the trade deficit) and decide to get their capital the fuck out of dodge.

  5. Trade deficit came up in the pub last week. I say , I thought it was a non issue, because a)it always matches so there’s nothing that actually needs to be done b)foreign investment e.g. converting welsh fields into amazon warehouses may harm our wool exports but is overall better. Yep it has to be paid for, but there’s a bigger wallet to do that from. But the thing i don’t quite get is the counter point, selling chelsea townhouses to arabs and spunking the proceeds in lidl middle aisle? Is this a recipe of being owned over time?

  6. selling chelsea townhouses to arabs and spunking the proceeds in lidl middle aisle

    HB, mate, the way prices are going, owning a place in Chelsea will soon be the only way to finance even a trip to the local Iceland store.

  7. Ad absurdum take a banana republic, or tea republic. Owing to gross mismanagement, even the kleptocrats in charge take their money out of the country as soon as they get it. So that’s the capital flight. Owing to gross mismanagement, green organic affirmative mandates and so on, the country can’t even produce enough food for its own citizens, let alone export. So that’s the trade deficit. Ultra-simplistic economic models don’t cut it in the real world.

  8. The source of our rapid rate of inflation is furlough payments, money going into the pockets of ex-workers for zero production.
    The result is that there are nearly as many pound notes chasing far less goods and services – this is the elementary recipe for inflation (forget 101, this inflation 001).
    The temporarily unemployed benefit (or suffer less than they would otherwise do) – the cost is borne by those with savings of which the cash portion is net positive and pensioners. I come into both categories, but I still think Rishi was right to do it.
    Professor Mazzucato is correct, for a change, to want investment-led growth – but when will she recognise that we need savings in order to enable (not just fund) investment? Investment can only be made by using resources for something other than immediate consumption.

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