Wednesday, March 03, 2010

Another Economists Letter

Writing letters appears to be the done thing for economists these days, the following is one written to the Guardian by a group of economic historians (my emphasis):

We are economic historians concerned at the recent tone of the debate as to the scale and scope of British public sector debt (Report, 2 March). History shows, first, that British public debt is not high by the standards of the last 200 years. It is rather low in comparison to the second half of the 18th century, the first three-quarters of the 19th century, and most of the interwar and post-second world war era in the 20th century. It is also low in the context of the developed world; only Germany's and Canada's are lower among the larger industrialised powers.

Second, the last 20 years has seen exponential escalation in the scale of each financial crisis: the savings and loan scandals of 1985-89, BCCI in 1991, Long-Term Capital Management and the Asian crisis of 1998; Enron in 2001; and then Lehman Brothers and the mayhem of 2008. Each step in this woeful narrative seems to have deepened the moral hazard involved, as speculators have been encouraged to believe that governments would always come to their rescue. Each crisis has demonstrated ever more clearly that, without radical global regulation, jobs and growth in other sectors are cruelly exposed to the costs of risk-taking in which the general public had no say but which it is always expected to pay for.

We urge policymakers to take into account these historical lessons and turn their attention to promoting the economic growth that can speed up the repayment of public debt. This is most likely to occur through enabling the knowledge economy to flourish, rather than continuing to be too reliant on the unreliable and profligate financial sector. The next government should develop a constructive strategy for growth, capitalising on the UK's clear advantage as the home of four of the world's top 10 universities, to invest in its role as an international hub for learning, science, innovation, advanced study and green jobs. Economic growth enabled Britain to escape from crushing debt burdens in the early 19th century and during the 1950s and 1960s. It could do so again, if the public spending cuts that would endanger such knowledge-based growth are ruled out in the short to medium term.
Dr Glen O'Hara Oxford Brookes University
Dr Simon Szreter St John's College, Cambridge
Dr Alastair Reid Girton College, Cambridge
Prof Martin Daunton Trinity Hall, Cambridge
Prof Jane Humphries All Souls College, Oxford
Dr Richard Sheldon University of Bristol
Prof Jim Tomlinson University of Dundee
Prof David Edgerton Imperial College London
Prof Roger Middleton University of Bristol
Prof Geoffrey Hosking University College, London
Dr Richard Toye University of Exeter
Prof Steve Hindle University of Warwick
Dr Hugh Pemberton University of Bristol
Prof Frank Trentmann Birkbeck, University of London
Prof Noel Whiteside University of Warwick
Dr Paul Ryan King's College Cambridge
Prof Patrick O'Brien London School of Economics
Dr Paul Warde University of East Anglia
Prof Ronen Palan University of Birmingham
Dr Scott Newton Cardiff University
Members of the History & Policy network

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