Millions of self-employed workers are set to lose their benefits after Christmas and lawmakers have yet to find a solutionSuzy Young, an artist in Winterport, Maine, cheered when Congress enacted an innovative program that provided unemployment benefits to artists, freelancers and the self-employed after Covid-19 hit the US. But like many others, Young – whose art sales have plunged in recent months – is angry that this pandemic aid program is due to expire the day after Christmas.Related: Joe Biden's economic team beats Trump's goon squad – but it faces a steep challenge | Robert ReichWe need to help people out here from starving. We need Congress to hear us, we’re in the worst place Continue reading...
Inflation and policy errors would put an end to any consumer spending spreeLondon’s blue-chip FTSE 100 index closed at a nine-month high on Friday, finally recouping all the ground lost since the UK went into lockdown in March. The City is not alone. In New York, shares are at levels never seen before. As someone once said: they think it’s all over.And in a sense it is. Current share prices do not reflect the current state of the major global economies, which, outside of China and a few other Asian countries, is grim. Rather, they are looking ahead and trying to predict what life will be like in six months or a year’s time.Related: OECD: UK economic recovery will lag behind all rivals bar ArgentinaThe pent-up demand story is already evident in the housing market Continue reading...
Coronavirus vaccines promise a rapid economic rebound, but many of the 2.6 million thrown out of work have a grim futureWhen the prime minister announced, in the last week of October, a second national lockdown in England, the best thing to do, it turns out, was to buy shares in pub companies, airlines, gyms, retailers and restaurant operators – in other words, those businesses that were about to get clobbered again.No stock-picking skill was required. Everything has gone up. Here’s a sample of representative names: JD Wetherspoon up 37%; easyJet 88%; the Gym Group 64%; Marks & Spencer 60%; and Restaurant Group, owner of Wagamama, 83%. Continue reading...
Even Adam Smith, whose writings have been misused by rightwingers, believed there was an ethical dimension to sellingMark Carney stuck it to laissez-faire capitalists in his Reith lecture last week. There has always been a moral dimension to selling stuff, the former Bank of England governor told any listening free marketers. Their own bible would tell them so.The bible in question was written by Adam Smith, the 18th-century Scottish moral philosopher and economist whose phrase “the invisible hand” is trotted out by every pro-market evangelist keen to justify the idea that governments should let businesses get on with selling, unfettered except by the most basic regulations.Carney believes forcing companies to be transparent gives shareholders the ammunition to impose moral obligations on the managers of their assets Continue reading...
The first female US Treasury secretary must tackle the damage wreaked by the pandemic while keeping Wall Street happyOf all the 78 US Treasury secretaries since Alexander Hamilton first took up the office in 1789, few have faced an in-tray piled quite so high as the one that will greet the first woman in the job: Janet Yellen.The choice of the Brooklyn-born doctor’s daughter to succeed Steve Mnuchin was a statement of intent by president-elect Joe Biden. Where many of her predecessors have been scions of Wall Street, Yellen’s background is in economics and public policy, and she has made it clear that her priorities are with Americans struggling to get by rather than with investment bankers. “There is a huge amount of suffering out there,” she said in September as she urged Congress to agree a new stimulus package.The appointment was probably one of the most well received in the history of the US Treasury Continue reading...
Janet Yellen and fellow leaders have called for more government intervention and a stronger safety netJoe Biden’s incoming economic team is filled with firsts. The lineup that the incoming president introduced this week will, if approved, place women and people of color at the controls of the US economy during one of the darkest periods in recent history.While the team is historic, it also faces a historic challenge. Unemployment has fallen dramatically since the early days of the coronavirus pandemic. It fell to 6.7% in November. But it remains 3.2 percentage points above its level before Covid-19 struck, jobs growth is slowing sharply, long-term unemployment is growing and people of color are still suffering hardship at far higher levels than white Americans.Related: 'Help is on the way': Biden introduces economic team as pandemic ragesImagine a world where Mitch McConnell is not in the Senate. Now let's go make that happen. https://t.co/iOwO3GgDf1 Continue reading...
While he was at Sussex University John Weeks did much to bring the concept of the informal sector to world attention. At the time, it was limited to a single study – of illegal brewing in Ghana – by Keith Hart. In the ILO Kenya Report on Employment, Incomes and Equality (1972), Weeks contrasted the popular view of informal sector activities as “primarily those of petty traders, street hawkers, shoeshine boys and other groups underemployed” on the streets of the big towns with the evidence he had found. The bulk of employment in the informal sector was economically efficient and profit-making, though small in scale and limited by simple technologies. Carpenters, masons, tailors and other tradesmen, along with cooks and taxi drivers, provided goods and services for a large though often poor section of the population.“From the vantage point of central Nairobi, with its gleaming skyscrapers, the dwellings and commercial structures of the informal sector look indeed like hovels,” he wrote. “For observers surrounded by imported steel, glass and concrete, it requires a leap of the imagination and considerable openness of mind to perceive the informal sector as a sector of thriving activity and a source of Kenya’s future wealth.” Continue reading...
Analysis: exasperation as fates and fortunes of large industries reliant on efforts to expand much smaller oneAn island nation can be forgiven for a preoccupation with fish. But with less than a month until the UK’s trade with the EU moves to new rules – whether under a deal or no-deal scenario – it is possible that continuing attempts to gain a win for British fishing industry could scupper much larger parts of the UK economy.Fishing is a politically charged issue on both sides of the Channel. Boris Johnson has talked of the UK becoming “an independent coastal state” and exploiting the “recapture of our spectacular natural marine wealth”, while Michel Barnier, the EU’s chief negotiator, has warned the UK against using fish as a “bargaining chip” (apparently not a pun on Britain’s national dish). Meanwhile, far bigger industries in the UK economy are left waiting. Continue reading...
President-elect says he won’t sign any new agreements until US is more competitiveBritain’s hopes of securing an early trade deal with the US have been dashed by a warning from Joe Biden, the president-elect, that America will not sign a trade deal with anyone until the US has sorted out its competitiveness.Britain had been closing in on a trade deal with the administration of Donald Trump, a fierce opponent of the European Union, but Biden has said in a New York Times interview that his priorities will be to improve investment in US manufacturing and the protection of American workers. Continue reading...
by Richard Partington Economics correspondent on (#5B2NJ)
Thinktank says Brexit represents double threat to UK growthThe UK’s economic recovery from the coronavirus pandemic will lag behind every other major economy apart from Argentina, according to the Organisation for Economic Cooperation and Development.Warning the UK and other countries to resist cutting government spending in order to ensure a stronger rebound, the club of 37 rich nations said severe risks to growth and jobs still remained despite the prospect of a vaccine being deployed earlier than first anticipated. Continue reading...
With Hungary and Poland vetoing the EU budget and Covid recovery fund, the case for issuing perpetual bonds has never been strongerI have written a lot in the past about the desirability of the EU issuing perpetual bonds. But today I am proposing that individual member states should do so.Right now, it would be impossible for the EU to issue perpetual bonds, because the member states are too divided. Poland and Hungary have vetoed the next EU budget and the Covid-19 recovery fund, and the so-called Frugal Five (Austria, Denmark, Finland, the Netherlands and Sweden) are more interested in saving money than in contributing to the common good. Investors will buy perpetual bonds only from an entity that they believe will continue to exist for the foreseeable future. That was true of Britain in the 18th century (when it issued consols) and of the US in the 19th century (when it consolidated individual states’ debt). Sadly, it is not true of the EU today.Related: Brexit: what will change for Britons in the EU on 1 January? Continue reading...
Markets respond as manufacturing in China and South Korea grows at fastest pace in a decadeHopes that the world will bounce back from the ravages of coronavirus in the new year have been buoyed by strong growth in output from Asia’s huge manufacturing centres, led by an accelerating post-pandemic boom in China.China’s factory activity expanded at the fastest pace in a decade in November, a closely watched survey showed on Tuesday, in the latest sign that the world’s second-largest economy is recovering to pre-pandemic levels.Related: Why China's dramatic economic recovery might not add upRelated: How the Covid vaccine success can fuel a sustainable UK economic recovery Continue reading...
The question is not whether the state picks losers, but whether government failure is better – or worse – than the market failure it seeks to correctRichard Nixon, a Republican president, apparently declared in 1971 that “we are all Keynesians now”. Mr Nixon seemed to admit that a serious shift in thought on the right of politics had occurred. But the decades of Thatcherism and Reaganism proved it to be a rhetorical move, not an ideological one. Rishi Sunak, the Conservative chancellor, attempted the same sleight of hand in last week’s budget.Mr Sunak unveiled a national infrastructure bank and a strategy to tilt spending towards the north. He also repeated his March promise of £100bn in public investment. While the money, reorientation and the institution are welcome, they are less substantial and radical in scope than that prescribed by mainstream economics. This will lead to predictably poor outcomes for employment and GDP in the UK. Continue reading...
Doug Simpson, Dr Nicholas Falk and Susan Zagor respond to an article by Martin Kettle on the polarisation of politics. Plus Terry Ward on Labour’s source of inspirationPerhaps the liberal democratic managed capitalism desired by Martin Kettle did exist in the 1950s, including the new welfare state in the UK (The toxic polarisation of our politics can be reversed, but it will take humility, 26 November). It didn’t prove robust – the Conservatives moved to the right and embraced free-market capitalism; regulation exists but is weak and largely captured by “experts” from the relevant market sectors.It is difficult to see how the idealised consensus can be created today, especially within one state. Multinational companies moving activities to poorly regulated locations and tax havens means that regulation must be multinational. The EU is attempting to regulate and tax tech and online firms, cooperation with which the UK has abandoned. The replacement of Donald Trump by Joe Biden doesn’t mean that economic nationalism will go out of fashion. Continue reading...
Stamp duty cut contributes to property boom but Britons cautious about credit card debtUK mortgage approvals reached their highest level in 13 years last month as tighter Covid-19 restrictions failed to dent strong demand for home loans.Figures from the Bank of England showed there were 97,500 loans approved by lenders in October – the highest figure since September 2007, the month at the start of the financial crisis when queues formed outside branches of Northern Rock. Continue reading...
After Donald Trump, the US should work with others on the climate crisis and economic stimulusLike the Joni Mitchell song puts it, “You don’t know what you’ve got ’til it’s gone.” For example, classroom education was often deemed boring by students and obsolete by tech visionaries. Then, Covid-19 made it difficult or impossible to meet in person. Now we yearn for in-class experiences.Perhaps the same is true of international economic cooperation. Multilateral institutions such as the World Trade Organization, the International Monetary Fund, and the UN agencies have long been unpopular among much of the public for supposedly encroaching on national sovereignty. But then Donald Trump came along and made international cooperation wellnigh impossible. While other G20 leaders discussed pandemic preparedness at their recently concluded summit, for example, Trump evidently tweeted more false accusations of electoral fraud and then played golf.Related: The US is on ‘inequality autopilot’ – how can Biden's treasury pick help change course? Continue reading...
by Richard Partington Economics correspondent on (#5B0W4)
Covid-19 restrictions weigh heaviest on capitals with large retail, leisure, hospitality and office sectors, study showsLondon has suffered the biggest fall in job opportunities among Europe’s biggest cities, according to a report showing that national capitals across the region have been damaged most by Covid-19.Britain’s capital is also among five of the biggest cities in western Europe – London, Berlin, Madrid, Paris and Rome – that have recorded a larger drop in new job adverts than elsewhere in their respective countries, according to Indeed.Related: City of London faces Brexit uncertainty over access to EU markets Continue reading...
In economic terms Rishi Sunak’s saving of up to £4bn is chickenfeed, stupendously bad value for money and hence politically ineptBritain is on course to borrow the thick end of £400bn this year and so, according to Rishi Sunak, the aid budget has to be cut. The UK will always be a good global citizen, the chancellor said last week, but times are tough. There’s a pandemic going on and so hard choices have to be made.This argument failed to convince Andrew Mitchell, a well-regarded international development secretary under David Cameron, who is organising a rebellion among like-minded Conservative MPs. Rightly so, because it is utter nonsense. Continue reading...
Household income will rise by just £220 in five years, thinktank says, as unions warn of harm to self-employedBritain is on course for one of the worst periods of income growth since records began, according to an analysis outlining the economic fallout from the Covid-19 pandemic.With the government already under pressure to improve the financial aid it is providing, it emerged that real household disposable income is set to rise by just £220 from 2019 to 2024, the expected period of the current parliament, a lift of just 1%. Continue reading...
The boom of a century ago was checked by British self-harm – a story set to be repeatedBritain’s return to the gold standard in 1925 has become a byword for a self-inflicted economic fiasco. The idea was to seek stability by fixing a price for an ounce of gold on demand – trade and confidence in sterling would flood back and Britain would continue with the roaring 20s, the boom that followed the First World War and the 1918 flu pandemic.However, the exchange rate was pitched so high that industry, instead of seamlessly adjusting its prices and costs, was devastated. The consequent public austerity, deflation and attempted wage cuts triggered mass unemployment and the General Strike.No advanced country has ever tried to borrow so much for so long – and at the same time so ruptured its trade relations Continue reading...
The chancellor’s hawkish turn is strange in a man so relaxed about the loss of output, and revenues, from leaving the EUMy Irish mother taught me always to “try to see the good in people”. Alas, with this government it’s a bit of a problem. George Osborne and his needless austerity programme was bad enough. But this lot are taking bad government to new depths.Last week was very much Chancellor Sunak’s show. His speech on Wednesday was preceded by so many media leaks that very little came as a surprise. But I fear that behind that ingratiating smile lies an insouciant cynicism that, whatever it achieves for his almost naked ambition, will do this country no good at all.Frankly, both Brexits are 'hard'; it is just that no-deal would be even harder Continue reading...
by Dominic Rushe and Amanda Holpuch in New York on (#5AYZV)
Janet Yellen will likely be the US’s first female treasury secretary – but as Covid shutdowns loom, she will have to win Republican votes for any major initiativesTeresa Marez has never heard of Janet Yellen, likely to be the next treasury secretary of the United States. But she and millions of other Americans have a lot riding on the decisions Yellen will make if and when she is confirmed next year.The coronavirus has upended Marez’s life. Her savings are almost exhausted and she is worried about her unemployment benefits, which run out next week. “It’s so hard. It’s just such a mess,” said the mother of two in San Antonio, Texas. “We just need Congress to make a decision,” Marez said. “As long as they are in limbo, we are in limbo.”Related: Biden says 'America is back' at the head of the table – but is that a good thing?Thousands pour into Fair Park for North Texas Food Bank’s largest distribution yet during pandemic https://t.co/EzY6o8Gc2MJanet Yellen would be an outstanding choice for Treasury Secretary. She is smart, tough, and principled. As one of the most successful Fed Chairs ever, she has stood up to Wall Street banks, including holding Wells Fargo accountable for cheating working families.[Republicans] rammed through a supreme court nominee but have done nothing to help American families Continue reading...
Rolling coverage of the latest business and markets news, as England prepares to exit its national Covid lockdown4.22pm GMTThe FTSE 100 has managed to pare its losses and is now trading just 0.1% lower, having been down nearly 0.9% in morning trading.But the more domestically-focused FTSE 250 is still taking a hit, down 0.9% for the session.2.35pm GMTUS stock are climbing at the open:U.S. stocks open higher https://t.co/pwJnv88tel pic.twitter.com/e7pt0LonqZ1.51pm GMTLoss-making lender TSB has reportedly been put up for sale by its Spanish owners, less than five years after its £1.7bn takeover.Reuters, citing a source, says Goldman Sachs was hired in July to explore various options for the lender. However, it has now been tasked with the sale of TSB. There are no details about whether there is any deadline for its planned sale.1.08pm GMTBREAKING: Sabadell has given Goldman Sachs a mandate to sell its UK bank TSB.That’s according to Reuters, citing a source.1.05pm GMTWe’re less than an hour and a half out from the US market open.Wall Street is expected to trade higher in a truncated session following Thursday’s Thanksgiving holiday:12.28pm GMTSir Philip Green’s retail empire is teetering on the brink of administration, putting 15,000 jobs at risk as months of high street shutdowns take their toll, our retail correspondent Sarah Butler reports.Arcadia Group, which owns Topshop, Miss Selfridge, Dorothy Perkins, Wallis, Evans and Burton, admitted it was “working on contingency options” to secure its future after a “material impact” on sales from the coronavirus pandemic.The forced closure of our stores for sustained periods as a result of the Covid-19 pandemic has had a material impact on trading across our businesses.As a result, the Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands. The brands continue to trade and our stores will be opening again in England and the Republic of Ireland as soon as the government Covid-19 restrictions are lifted next week.Related: Philip Green's Arcadia on brink of collapse, putting 15,000 jobs at risk11.49am GMTTime to check back in with European stocks.The FTSE 100 and 250 are the outliers, trading lower on the back of regional lockdown news, Brexit jitters and questions over the Oxford/AstraZeneca vaccine which is set to undergo a new trial.One would have thought the lifting of the month-long lockdown would have given a boost to investor sentiment, yet we’re rounding off a week where markets ground to a halt.The FTSE 250 was always going to be more sensitive to developments with business and society restrictions as it has a greater amount of UK-focused companies than the FTSE 100.11.21am GMTFollowing up on reports that the Sir Phillip Green-owned Arcadia Group is on the brink of administration, Reuters says the group is working on “contingency” plans.Arcadia has said that its boards have been working on a number of contingency options to secure a future of the group’s brands.
It’s too easy to cut overseas aid and screw the public servants who have kept the country running while the government has been busy ladling out money to its friends, writes Nick Ward. Plus letters from Sue Rabbitt Roff, Adrian Cosker, Ian Hodge, Rae Street, Bill Bradbury, Tim Tozer and Margaret Squires
Weak growth and pressure on NHS and welfare budgets will add to Covid woes, warns IFS thinktankBritain’s struggle to emerge from the Covid-19 pandemic will result in pay packets being squeezed and taxes rising to fill a £40bn hole in the public finances, two leading thinktanks have warned.Despite record peacetime borrowing of £394bn this year, the Resolution Foundation and the Institute for Fiscal Studies said the run-up to the next general election would be marked by a hit to earnings and pressure on the government to balance the books. Continue reading...
The government has borrowed huge amounts during the pandemic, but this is no reason for renewed austerityThe November spending review arrived with a loud reminder of how austerity has distorted the public’s understanding of fiscal policy. Journalists used fatuous analogies to explain the situation facing chancellor Rishi Sunak, claiming the government had “maxed out” its credit card and had “no money left”. These soundbites weren’t just economically illiterate: they were indicative of a deeply conservative worldview.Attitudes to fiscal policy can be divided broadly into three camps: the fundamentalists, the centrists and the heretics. Fiscal fundamentalists pray to the god of small government. They are outraged that a Conservative chancellor who has borrowed £400bn to fight the Covid-19 pandemic – taking public debt from 85% to 100% of GDP – wasted the opportunity to make the necessary cuts to prevent Britain facing ruin. As true believers, they refuse to confront the facts that the UK government is borrowing at record low interest rates and that next year, it will pay back £20bn less in interest than it had planned for.Daniela Gabor is professor of economics and macrofinance at UWE Bristol Continue reading...
People are crying out for inspirational leadership, secure jobs and investment. But all we get is austerity in disguiseAlthough it was billed as delivering “the people’s priorities”, Rishi Sunak’s spending review only demonstrates how distant the chancellor is from the experiences and priorities of our people.The million workers who are predicted to lose their jobs by the end of the year – and the millions of others who have had their wages cut – will be unimpressed by cute slogans while Sunak bathes in the adoring glow of a pliant media. If, like workers at Heathrow, you’ve been ruthlessly fired and rehired with your wages savagely cut – or you have seen your jobs shipped abroad by a taxpayer-funded company, as workers at Rolls Royce in Barnoldswick have done – you would feel entitled to shout, “What about us?”Related: Sunak's Covid rescue plan 'will fail to help long-term wage stagnation'Related: UK aid cuts 'unprincipled, unjustified and harmful', say experts and MPs Continue reading...
Decade-long squeeze on pay packets in UK set to continue despite extra Treasury spending, thinktank saysThe government’s plans to rescue Britain from the Covid crisis will fail to end a decade-long squeeze on wages, leaving average pay packets by the middle of the decade £1,200-a-year below the level forecast before the virus outbreak, a leading thinktank has said.The Resolution Foundation said the combined effects of weaker pay growth and higher unemployment will prolong Britain’s living standards squeeze, despite the extra spending by the Treasury.Related: Rishi Sunak’s £4.8bn ‘levelling-up’ UK fund met with scepticism Continue reading...
by Richard Partington Economics correspondent on (#5AVPW)
Groups warn chancellor’s plan may pit local communities against each otherThe government will launch a “levelling-up fund” for England worth £4bn to support towns and communities with regeneration projects, Rishi Sunak has said.The chancellor used his spending review statement to announce details of the new funding package as part of Boris Johnson’s election promise to boost the economic prosperity of areas outside London and the south-east of England. Alongside the £4bn for England, there will be funding worth £800m for Scotland, Wales and Northern Ireland.Related: By freezing pay and benefits, Sunak will be levelling down, not up | Polly ToynbeeRelated: Some of England's most deprived towns left out of £3.6bn funding scheme Continue reading...
Rishi Sunak’s move in spending review could result in pension holders receiving thousands of pounds less in incomeThe government will stop using the retail prices index measure of inflation in 2030, the chancellor has announced, in a move that will spell bad news for investors and retirees with payouts linked to it.The RPI has not been used as an official national statistic since 2013 but it is still the figure used for returns on index-linked gilts issued by the UK government. It is also used when calculating annual increases in rail fares and student loan interest. Continue reading...
Combining pay freezes with levelling up, the chancellor seems intent on cementing the deal that gave Johnson his landslidePick a Labour chancellor, any Labour chancellor, from Stafford Cripps to Alistair Darling. Now imagine the jeers, the jibes, the public derision they would endure after confessing in parliament to racking up a budget deficit of almost £400bn, total debt of more than £2tn and the sharpest dive in GDP in three centuries; they would be exiled to some speck in a faraway sea. Yet this afternoon Conservative Rishi Sunak, who only moved into No 11 in February, did all that, warned of “an economic emergency”, and still made it look like a not utterly awful day at the office.This must be what they mean by the “natural party of government”.Related: We needed long-term spending and higher taxes. Rishi Sunak gave us foreign aid cuts | Tom KibasiAditya Chakrabortty is a Guardian columnist and senior economics commentator Continue reading...