Ann Pettifor

And this year?

Ann Pettifor: 4th January, 2009, 11.00AM

First of all apologies for the long break. Like many others, I have been re-charging batteries, spending time with friends and loved ones, sleeping a great deal and briskly walking the wild, windswept and often freezing Suffolk coast. Highlights? Christmas day walk and picnic with my beloved on a windswept beach, celebrated with a flask of tea, a flask of brandy, a slab of last year’s Christmas cake, a candle in a tin, and two crackers.  And on the next, Boxing Day, at dusk, a startlingly beautiful  murmuration of about 10,000 – or was it 20,000? – starlings flying in unison and is if they were just one organism over North Warren, Thorpeness.

Awesome, humbling and very good for the soul. Good too for thinking and re-thinking our collective fates. Under globalisation we hang together pretty much as a murmuration of starlings do……..  Which brings me to the big question: where are our leaders taking us to roost in 2009?

Kenneth Rogoff and a colleague Carmen Reinhart are presenting a paper this weekend at the American Economic Association conference that provides clues as to what fate awaits the citizens of both the rich and poor economies.

They’ve reviewed post-war (and one or two pre-war crises) for historical comparisons. (Note there are no crises before the Spanish crisis of 1977 – that is during the period when Anglo-American economies were safely protected from financial crises by Keynes’ monetary policies – domestic and international. See the Facts page of this blog.)

Interestingly Rogoff and Reinhart ignore the Russian financial crisis of 1998, and do not dwell on comparisons with Japan – by far the most comparable crisis for the US and UK –  in my view. They find that real housing price declines averaged 35%, and these declines lasted on average for six years. Compare that to Japan – where house prices are still falling 18 years after the bursting of the Japanese Credit Bubble. Unemployment rose on average in crisis-hit countries by 7 percentage points, and this down-phase of the cycle lasted on average four years. Third, government debt exploded, rising on average by 86% – largely they find, as a result of the collapse in tax revenues.

Exploding government debt doesn’t bother me: as Rogoff and Reinhart argue, debt rises dramatically as tax revenues collapse; and debt will therefore fall as tax revenues rise – in other words, when the economy recovers. The government has a vital role to play in supporting that recovery.  For government to do less, would be criminal.

But the unemployment numbers – all averages –  are terrifying, as are the house price falls. Unemployment was at 6% here in the UK up until October, when the crisis began to gather traction. If it rises by another 7% – that implies a rise to 4-5  million unemployed.  In the US unemployment rose by a huge 1,256,000 in just three months (See Dean Baker’s assessment at CEPR).  According to the US Dept of Labor, unemployment is at 6.7% already – 10.3 million American citizens are without jobs or presumably, health care. If this number were to rise by 7% that would imply more than 20 million Americans without work or health care.

Herein lies a great deal of human suffering, anxiety and social and political dislocation – and I am not convinced that our leaders are sufficiently free of the old ideology – unfettered markets, unfettered and privatised financial systems and unfettered movements of capital – to address this grave threat of unemployment and house price falls. Today Gordon Brown has promised 100,000 jobs – for an economy in which unemployment is already close to 2,000,0000.

So while thousands of starlings were guided to warm, safe roosting sites on Boxing Day; my prediction is that we in the debt-burdened economies of the rich world may not be led to such safe havens in the year to come.


1 thought on “And this year?”

  1. Yes, Ann,

    we, the starlings as taxpayers, will see harder and harder times. And our friends

    in the US won’t be able to fly freely either, if you take the video on board which is on and predicts

    how Obama will influence the economy.

    However, it seems as if we each have to move our own wings – just as all other 19,999 starlings…

    With best wishes for an “interesting” new 2009,


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