A successful degrowth strategy will require a massive redistribution of income and wealth towards the poorest

It is true that all big cities have areas of poverty that is visible from the streets. But I am always a bit shocked when I travel to London, where I am currently working, because the inequality is very obvious. As I work more on the degrowth, decolonisation project that I am currently involved in, one thing becomes paramount. An overwhelming proportion of the total fossil fuel energy usage is due to the consumption of the wealthiest households. And to dramatically reduce our ecological footprint will require dramatically reducing the capacity of the top end of the income and wealth distributions to consume energy. However, all the trends are moving against that requirement. Here are some notes on that topic.

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Those who invoke the ‘Truss Moment’ should look at what is happening in Japan

In the annals of ruses used to provoke fear in the voting public about government deficits, central bank currency issuance, and fiscal activism, the experience of Germany in the 1920s was a long-standing favourite, that could be wheeled out on demand and have immediate effect. Wheelbarrows full of money being pushed to the local bakery to buy the daily bread, etc. It was a very effective vehicle for advancing the interests of the ruling class because it created a political brake on government action to reduce poverty and maintain full employment. More recently, Zimbabwe became the vehicle. It was equally effective even though it, like the Weimar ruse, was largely based on fiction. Even more recently, we have a new ‘ruse on the block’, the so-called ‘Truss Moment’, which is particularly effective in the UK. The current Labour government is petrified to do anything that might resemble a Labour government because they have a deep-seated paranoid ideation that the ‘City’ is out to get them, and the ‘Truss Moment’ is used as the summary event that apparently justify that delusion. They might have looked to the East, to Japan, to see why the ‘Truss Moment’ was about something quite different to the popular narrative that accompanies the mention of the ill-fated few months in British politics.

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British Labour’s obsession with fiscal rules is untenable and ignores the reality of the situation

I have been a consistent critic of the way in which the British Labour Party, both in opposition and in government, is obsessed with rigid fiscal rules, thinking it is the only way that it can demonstrate fiscal credibility (whatever that is in their minds). The result is that they get cornered into situations that either lead them to make poor decisions which lose them votes and give the likes of Nigel Farage more fuel for his crusade or they are forced to admit they cannot achieve the (unachievable) fiscal rules. Either way it is a clusterf*)@. In the last week or so, we have witnessed the ludicrous situation of the British Office of Budget Responsibility failing to protect its own file systems and leaking information before the Chancellor presented her official fiscal statement. The leaked information just happened to contradict the messaging of the Chancellor which was a bit inconvenient. But the important issue that all this raises is not whether OBR can run a secure WordPress site (evidently it cannot), but that the information it generates is so inaccurate and systematically biased that it cannot realistically be used as the basis for assessing fiscal policy. Which means that the obsession with the fiscal rules leads to policy changes that damage things that matter – such as employment and services – but those policy changes are based on information (OBR forecasts) that subsequent revelations tell us would not justify those policy shifts. As I said – clusterf8x@.

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What does it mean for a nation to become bankrupt?

The reason I ask that question is because I read in the UK Guardian article yesterday (published August 11, 2025) – As dark financial clouds gather, Labour has to heed its past: when it chooses austerity, it loses elections – that “Britain is in danger of going bankrupt. It may happen slowly or quickly, but since Labour took office this possibility has increasingly been promoted and discussed in the press, by opposition parties and in the City of London”. And when the author of that article poses his own question: “What exact form will this bankruptcy take?” – he offers the rather tepid response that it will happen because the government is “spending too much, generally on people who have little”, which offers nothing by way of clarification or definitiveness. So it is useful to interrogate the notion of a nation going broke. Can it happen? Can Britain become insolvent?

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The British government’s obsession with the fiscal rules is driving the economy towards recession

The UK economy is heading into a malaise. The latest news – UK construction activity in July falls at steepest rate since Covid (August 6, 2025) – and – UK services sector has biggest fall in orders for nearly three years (August 5, 2025) – confirms that there is a slowdown underway. That was prefaced by rising unemployment and falling overall GDP growth in previous data releases. However, when we examine statements coming from the Labour government, the Prime Minister is hinting that there might be tax rises in the Autumn Statement because a neoliberal oriented ‘think tank’ has told it that there is a £40 billion gap in the fiscal outcomes, which will breach the self-imposed limits specified in their fiscal rules. So the Government is contemplating more austerity and contractionary policy at a time when private spending is subdued and the economy is going backwards. It just demonstrates how the obsession with these fiscal rules grossly distorts fiscal decision making and focuses government eyes on all the wrong things. I am still amazed when I think how stupid we all have become for thinking that any of the stuff is acceptable.

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Britain’s Leeds Reforms – jumping the shark comes to mind

Last week (July 15, 2025), the British Chancellor delivered the – Rachel Reeves Mansion House 2025 speech – which is an annual event where the Chancellor outlines the state of the economy and what the government is doing. Mansion House, London – is the official residence of London’s Lord Mayor and is located in the heart of the City (financial district). If you want to see an echo chamber in action then this is one place where you will find one. All the self-important characters from the financial markets being duchessed by a sycophantic chancellor all in the one place. Perfection. Reeves was there to tell the ‘markets’ what they had longed for over the last 15 years – that the so-called – Leeds Reforms – would see the regulatory and supervisory framework that was erected after the GFC largely abandoned and that they could get back to relatively unfettered ‘greed is good’ operations again. Perfection. Apparently, the Chancellor has been convinced by the speculators that they hold the interests of the British working class at the centre of their hearts and that they will do everything in their power to advance those interests through their own operations. And, ladies and gentlemen – pigs might fly.

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British Labour Government should ignore irrelevant fiscal ‘black holes’ and worry about the political hole it is digging for itself

The lack of correspondence arises when a government tries to operate within the tight constraints of unjustifiable fiscal rules by proposing legislation that cuts billions in government support for programs that are the difference between abject poverty for millions and a modest standard of living is once again coming to the fore in Britain. The Labour government is obsessed with achieving fiscal rules that are not only arbitrary but cannot be precisely assessed given the deficiencies in the available data and the forecasting techniques. However, the Chancellor tries to convince everybody that there is precision and that major austerity has to be imposed to fit the government fiscal outcomes within the arbitrary constraints they have imposed. Those constraints do not have any context in the things that matter – reducing disadvantage, dealing with inequality, climate change, health care etc. Yet the constant reference to a ‘black hole’ – the difference between the estimated fiscal trajectory and the fiscal rules constraint leads the government to ill-considered policy hacks aimed at keeping the outcomes within the rules. The visceral reaction against the hacks then leads to the situation we have seen in Britain recently, which further undermines the political viability of the government. The only hole that the government should be worried about is the political hole it is digging for itself as a result of its obsession with imprecisely measured and essentially irrelevant ‘black holes’.

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What is the purpose of fiscal policy? Don’t ask Rachel Reeves!

It’s been a week of grand fiscal statements. Tuesday, it was for Australia as I discussed yesterday – Australian fiscal statement – rising unemployment amidst a moderate fiscal contraction (March 26, 2025). Then yesterday in the UK, the Labour Chancellor delivered the British Government’s – Spring Statement 2025. Both statements come at a time when the mainstream economics consensus is shifting with the US pushing protection and defunding many global initiatives. And, one of the statements was in the context of an impending federal election (Australia) and from a government that is in danger of losing that election to a bunch of populist Trump-copiers. And the content reflected that. The UK Statement was from a Government currently in no danger of losing office but which is progressively entrapping itself in its hubris and fiscal rules. An interesting juxtaposition. Anyway, the British Chancellor has lost all understanding of what the purpose of fiscal policy is. What is the purpose of fiscal policy? Don’t ask Rachel Reeves!

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British government spending cuts will probably increase the fiscal deficit and make the ‘non negotiable’ fiscal rules impossible to achieve

The British press are reporting that the Government there is planning further spending cuts of the order of billions of pounds because the economic environment has changed and the current fiscal trajectory is threatening their self-imposed fiscal rules thresholds. We already heard last week how the Government is significantly cutting Overseas Aid as it ramps up military expenditure. Now, it is reported that billions will be cut from the welfare area and the justification being used is that there is widespread rorting of that system by welfare cheats. There are several points to make. First, getting rid of rorting is desirable. But I have seen no credible research that suggests such skiving is of a scale sufficient to justify cutting billions out of welfare outlays. Second, quite apart from that question, the micro attack on the welfare outlays have macroeconomic consequences. The British Office of Budget Responsibility estimates that the output gap is close to zero which means it is claiming there is full employment. Even if that is true, that state is underpinned by the current level of government spending (whether it is on cheats or not). If the spending cuts that are targetting rorting are not replaced by spending elsewhere then a recession will occur and the Government will surely fail to achieve its ‘non negotiable’ fiscal rule targets. It is a mess of their own making.

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