Opinion

Anatole Kaletsky

Osborne: Stealth convert to ‘Keynesian Thatcherism’

Anatole Kaletsky
Mar 20, 2014 18:46 UTC

Britain’s government budget released this week is not a statement of economic policy. It is a program for winning next year’s general election.

In this sense, Chancellor of the Exchequer George Osborne’s speech was a natural development from the 2013 Budget, which launched Britain’s current economic recovery. I was one of the few analysts to perceive the remarkable transformation of the British economy that immediately resulted from last year’s budget because what Osborne did was deliberately obscured by what he said.

Osborne’s mantra last year was “you can’t cure debt with more debt.” Yet he did precisely that with his audacious plan to provide $198 billion (£120 billion) in government guarantees for additional mortgage borrowing.

Osborne has continued this Machiavellian technique — proclaiming a virtuous-sounding principle and then doing the opposite.

After labelling his speech as a “Budget for Savers” and declaring “Britain has for decades borrowed too much and saved too little,” the most powerful fiscal measures Osborne announced were designed to reduce savings, mainly by encouraging pensioners to dip into their pension funds to finance consumption. As a result, the budget forecasts, which Osborne did not mention, predict that Britain’s savings rate will fall from 7.2 percent in 2012 to 3.3 percent by 2018.

Britain’s strength is its weakness

Anatole Kaletsky
Feb 14, 2013 16:19 UTC

Mirror, mirror on the wall, who’s the weakest of them all? As G20 finance ministers warn of the threat of a “global currency war” at their meeting in Moscow this weekend, two odd features of this looming financial conflict tend to be overlooked.

The first is that every country’s objective in this war is to “lose” by making its currency weaker. This is because a weak currency tends to support exports, employment and economic growth (if all other things are equal, which they never quite are). The second oddity is that the clear winner in this global currency war has not been Japan, Switzerland, China or any of the other usual suspects, but a country rarely accused of financial aggression: Britain.

Since the global financial crisis started in mid-2007, the pound sterling has been, by a wide margin, the weakest major currency. The Bank of England’s trade-weighted sterling index fell by a record 30 percent in early 2009 and, despite a modest rebound in 2010-12, it remains 24 percent below its level of mid-2007. Japan, by contrast, has endured a rise in its trade-weighted exchange rate of 60 percent from July 2007 to late last year, when Prime Minister Shinzo Abe committed his new government to a more competitive rate. Japan is therefore fully entitled to resent other countries’ accusations of currency warfare, when it has in fact been a long-suffering pacifist, exposing its export companies to the full burden of other countries’ post-crisis currency adjustments.

David Cameron pushes his EU luck

Anatole Kaletsky
Jan 17, 2013 17:16 UTC

Editor’s note: After this column was published, Cameron announced he would be delaying his speech in Amsterdam due to the hostage crisis in Algeria.

Some think the prospect impossible. Many think the outcome inevitable. Most think the question irrelevant.

Will Britain pull out of the European Union or fundamentally renegotiate the terms of its EU membership?

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