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Gordon Brown urged to concentrate on spending
9 Feb 2010Gordon Brown should forget about reducing the budget deficit and continue spending to speed up Britain's recovery from the credit crunch, a leading economist said.
Professor Joseph Stiglitz, a former World Bank chief economist and senior advisor to Bill Clinton's administration, urged the Prime Minister to ignore the financial markets and make plans for a further boost to the economy in case Britain relapsed into recession.
In an interview with The Independent, the Nobel Laureate dismissed David Cameron's suggestion that the confidence of the financial markets might be regained by comparatively small cuts in public spending and the budget deficit.
He warned that the markets were like a "crazy man" that could not be appeased with cuts to public spending.
"You're dealing with a crazy man. You're asking what I can do to placate a crazy man? Having got what he wants he will still kill you."
He also said that it was "unconscionable" for the ratings agencies to threaten to downgrade Britain's creditworthiness, which would mean the Government would have to pay more to borrow money. "Fiscal fetishism is really dangerous," he said.
Prof Stiglitz said that given Britain's feeble return to growth, Mr Brown should plan to keep up, or even extend, the fiscal stimulus.
He said: "The likelihood is of a marked slowdown from current growth, which is very weak. Whether that means negative territory or stagnation will depend on what the Government does. If there is a premature withdrawal of stimulus it is more likely that there will be a 'double dip'."
He added: "You want to show a sensitivity towards the deficit but also sensitivity towards the timing (of a withdrawal of stimulus), and the fact is that recovery is not robust."
Reader views (16)
I cannot see that piling more debt on the already horrendous total Brown has amassed will help anyone. In any case Stiglitz is just one economist with a record of Socialist fundamentalism. Just the other day another IMF economist was urging the UK to get its debt under control or face joining the basket case group with Greece and Spain. Debt is never a good idea and I am with Cameron and the Tories on this one.
- James Elliott, Eastbourne, UK, 09/02/2010 18:28
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This usefless wretch is determined to wreck his party's chances in the election. I hope he is not replaced before May. What an idiot, and an unstable one too.
- Michael, London, UK, 09/02/2010 18:09
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His advice: when in a hole, dig deeper.
My advice or opinion? Give the toxic debt back to the banks and remove all Government ownership of them. Let them sink or swim.
Change the law to give jobs first and foremost to British citizens, that is, those who were citizens BEFORE the LIEbore party came to power in 1997.
All foreign workers, unless they applied beforehand, i.e. in their own country to work here, allowed to stay until their contract ends. Renewals allowed, but with strict controls, and only if a British citizen can't do the job.
Train our own people for the jobs needed, instead of importing foreigners.
- Ralph, London, 09/02/2010 14:38
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Brown has already destroyed this country.
- Dee Jay, Fleet Hampshire, 09/02/2010 13:33
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Joe, That is no answer to the problem. We do not need to throw millions onto the dole. We have hundreds of thousands of immigrants working in this country, doing jobs which the indigenous population should be filling. Its now a case of saying to people. Here`s a job you are qualified to do. Either take it or there`s no dole. We have been too soft for too long. Everyone, including those sitting at home on benefits who are too lazy to go to work, must be made to realise that we are in this together. The only way out is for everyone to do their bit and that means a lot of people working for a living for once. You can`t go on living on credit for ever and ever, which seems to be Brown`s barmy idea of economics.
- Brian G, Norfolk Gorleston, 09/02/2010 13:25
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Does anybody really think McBroon needs encouragement? I had to laugh at the part about the horrible ratings agencies downgrading British debt. That is there job! The government have spent too much money and the chances of a default have increased. Where is your point?
- Mark, London, 09/02/2010 12:16
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Easiest way to cut public spending is to get rid of Brown. This is Exchequer who "did not see the recession coming". The man is a fool, plain and simple. Clinton's government started the whole cycle of sub-prime lending despite warnings at the time that it was a time bomb waiting to go off. These 2 fools together will destroy what little is left. A hamster could do a better job of running the economy than these prize idiots.
- Dannyp, Egham, 09/02/2010 10:24
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He put the country in the mess in which it is. Why does anyone think he can sort it out?
- Alexis Dogilewski, Kingston-upon-thames. England, 09/02/2010 10:11
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Funnily enough, my credit card company didn't see it the same way when I reached my spending limit .....
- Marianne, SW France/London, 09/02/2010 10:10
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He [Stiglitz] is known for his critical view of the management of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank.
- Wikipedia
Stiglitz is a socialist, throwing more money at the problem is their answer everytime. Of course he is going to advise Broon to carry on throwing good money after bad.
It is time to pay the piper folks, thanks to this drastically failed Labour government, the cost is in the trillions. I suggest we don't leave a tip.
- Frank, Home Counties, England., 09/02/2010 09:45
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Not all public spending is good, or even productive. We can cut spending (in particular waste) and still support the low growth we are set to have. The alternative is to keep spending and we will end up like Greece, which will be far worse.
- Nickspurs, London, 09/02/2010 09:39
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or Joe, we keep spending money we dont have. Eventually the "crazy" man wont lend us any more. Interest payments are already running at £50bn a year.
- Chris, Rochester, 09/02/2010 09:29
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Stiglitz is simply opining and whilst he has earned the right to be listened to, the contrary evidence of the "Swedish solution" which involved huge cuts across all public expenditure and resulted in a rapid recovery cannot be ignored. Brown is destroying this country's finances forever, as well as destroying our souls.
- Londoner, London, 09/02/2010 09:20
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Or Brian,we can make severe cuts in Public Services that will effect the most vulnerable,and add a further two,or three million to the unemployment figure,plus of course these extra unemployed would not be paying taxes,and instead claiming benifits.
- Joe, London, 09/02/2010 09:04
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Is this the same Economist who advised Clinton about cheap mortgages and credit in the USA which fuelled the problems we have today?
- Tojo, Hythe, 09/02/2010 08:42
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There is so much conflicting advice on what to do it is difficult to take any of these so called experts seriously anymore. I don`t know with what, the good professor thinks we can afford to boost the economy with, should we go back into recession. One could hardly say we came out of recession in the last quarter of 2009. What with the worst retail figures for January for 15 years we have hardly got off to a brilliant start. To keep on borrowing, just to allow the govt to keep on spending money like water, seems to be the economics of the mad house. We must start clearing our debt asap - the economics of Mr Micawber, like him are just pure fiction.
- Brian G, Norfolk Gorleston, 09/02/2010 08:27
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