After fleeing Hitler, brilliant Jewish economist Karl Polanyi was never welcomed by the British. Now, for the first time in 80 years, his masterwork The Great Transformation has been published in the UKIn 1944, the groundbreaking political economist Karl Polanyi published his radical magnum opus, The Great Transformation. In it, he accused influential liberal economists, including David Ricardo and Thomas Malthus, of commodifying human beings and the environment in the name of the free market.Their Industrial Age ideas, he argued, ushered in the barbarism and poverty that came with 19th-century globalisation and unfettered capitalism, and this led, in the 20th century, to far-right and far-left backlashes against the movements of socialism, individualism and liberalism that followed. Continue reading...
Without minimising the challenges faced by Starmer and Reeves, it is actually not a bad time to be arriving in officeLabour will win by a mile but is coming to power at the worst possible moment. The economy has been laid waste by the Conservatives, who have deployed a scorched earth policy that will ensure the incoming government has the inheritance from hell.That, at least, is the conventional wisdom, a view that Keir Starmer and Rachel Reeves have done nothing to counter. There is a reason for that. It suits Labour's campaign message to paint the blackest possible picture so that it can blame the Tories for any tough decisions they have to make. Continue reading...
A demographic timebomb caused by an ageing, shrinking population is looming for many western countries, so where are the policies to defuse it?A conference on changing demographics I attended last week tackled the fact that,while we are living longer - a great product of medical innovation - many of us will also experience extended periods later in life with physical and mental decline, so requiring more health and social care than inthe past. Yet falling birthrates mean there will be fewer working-age taxpayers, raising the question of how we foot the bill.As I listened, the Institute for Fiscal Studies' description of this general election campaign being aconspiracy of silence" came to mind. Neither the Conservatives nor the Labour party are confronting voters with the tough fiscal choices facing the country. Further cuts on already underfunded public services are baked into spending plans accepted by both parties. To avoid them, either taxes or the national debt would have to rise in a context of high interest rates, unless theeconomy somehow starts booming. And so the election has inevitably ended up feeling a bit like a phoney war. Difficult decisions inevitably await a new government on 5 July, but we are none the wiser on exactly how they will play out. Continue reading...
Starmer and Reeves plan to improve parts of the relationship with the EU. But what of becoming a member of the single market - or even a return to full membership?Labour's plans to re-engage with Brussels after a tumultuous and often acrimonious eight years since the referendum will be welcomed by all those who have recognised Brexit as an act of self-harm. Keir Starmer and Rachel Reeves have put forward tentative proposals tackling discrete issues in the UK's relationship with the EU. Here we look at what might be achieved - and the benefits of taking a bolder approach. Continue reading...
Caution is understandable, but, if elected, Starmer and Reeves will need to make bold decisions on investment and EuropeAre you familiar, dear reader, with the Ming vase" strategy?It seems to be a commonplace in inner Labour party pre-election discussion. It refers to the way that the man who is on the verge of being prime minister, and his chancellor to be, Rachel Reeves, are being so depressingly cautious in their electoral commitments that many natural Labour voters are asking themselves: what is the point? Continue reading...
With polling revealing 56% think Brexit has had a bad effect on the economy, Keir Starmer has wriggle room for renegotiationEconomic growth will be the linchpin of Labour's strategy for government if it wins the election, as it is comfortably expected to do in two weeks. Rachel Reeves, Labour's shadow chancellor, has ruled out raising those taxes that are the big revenue raisers, and has committed Labour to effectively adopting Jeremy Hunt's fiscal rule that debt should be forecast to fall as a share of GDP in five years' time. So if a future Labour government wants to invest in significantly improving financial support for children in poverty or in public services, it is vital it finds ways to grow the economy.Labour says its approach is centred around delivering greater stability in order to encourage higher levels of private investment. But many economists think it will also take higher levels of public investment to achieve anything like the business investment needed to generate growth. Yet after it scaled back its proposals to invest 28bn a year in the green transition, levels of planned public investment under Labour would only be marginally higher than under Conservative plans.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...
Labour leader told if elected he will have to rejoin the customs union to meet party's manifesto pledges, while 56% of voters say Brexit was bad for economyA Labour government under Keir Starmer will fail to maximise the UK's economic growth unless it takes the country back into the European Union's single market and customs union, leading economists and diplomats have said.The warnings come as an Opinium poll for the Observer finds that 56% of voters now believe Brexit has been bad for the UK economy as a whole, compared with just 12% who believe it has been economically beneficial. Continue reading...
About 1,500 Tata Steel workers will begin an indefinite strike in July over the company's plans to cut thousands of jobs, the trade union Unite saysOver in the eurozone, the economic recovery has suffered a setback this month as firms report a drop in new business.The latest survey of eurozone purchasing managers has found that new orders decreased for the first time in four months in June, leading to slower rises in business activity and employment levels.Is the recovery in the manufacturing sector ending before it began?Both we and the market consensus anticipated that the increase in the index in May would be followed by another rise in June, potentially setting the stage for an upward trend. However, rather than moving closer to expansionary territory, the HCOB Flash Eurozone Manufacturing PMI reading fell, dashing hopes for a recovery. Continue reading...
Exclusive: Sources say changes to inheritance tax and capital gains tax are being discussedThe Labour party has been drawing up options for how it could raise money through extra wealth taxes to help rebuild Britain's public services if it wins the general election, according to sources who have spoken to the Guardian.The proposals under consideration include increases in capital gains tax (CGT), first revealed by the Guardian two weeks ago, that could raise 8bn. Continue reading...
by Jon Henley in Paris and Larry Elliott on (#6NP6Z)
France's economy minister name-checked Liz Truss as he sought to warn voters of the risks of voting for RNIt's a big deal, of course it's a big deal," says Sophie Montanari, emerging from the Metro at Notre Dame de Lorette in central Paris to talk about her struggles to make ends meet.We never used to have trouble at the end of the month. Now we do. It'll certainly influence our vote." Continue reading...
by Phillip Inman and Pamela Duncan with graphics by T on (#6NNDX)
The effects of austerity, Covid, war and the cost of living crisis are still haunting government and domestic financesWhile inflation figures usually generate a news story in their own right, last month's figures led to the biggest news line of them all.Rishi Sunak's surprise announcement that he would hold a snap election on 4 July came hours after April's inflation figures were announced. They were widely reported to have heavily influenced his decision to take the country to the polls. Continue reading...
We want to hear about how the rising cost of food has affected people in the USWalk through any US grocery store and you're likely to experience some sticker shock. Food prices have soared 25% in recent years, outpacing inflation, so that now the average US household spends more than $1,000 a month on groceries alone. Even with news that inflation is finally starting to steady, food remains stubbornly expensive.We're interested in hearing how the rising cost of food has affected people in the US: the prices you've been most surprised by, how it's changing your shopping and eating habits, and whether you have any tips for keeping your grocery bill low. Continue reading...
The public doesn't understand how economic growth is measured, let alone enjoy much of it. So why is it central to this election?Great news this morning!" beamed Rishi Sunak on Wednesday. Not every release from the Office for National Statistics gets its own prime ministerial post on Instagram, but inflation falling to 2% was, the Tory leader claimed, a personal victory. When he moved into No 10, it was 11%, he reminded voters. But we took bold action, we stuck to a clear plan and that's why the economy has turned a corner."Not so fast, Mr Sunak. The prices of food and petrol remain about 25% higher than two years ago. More than one in five households say that they are strugglingto pay their bills or to make ends meet. The cost of living crisis was always much bigger than a number on the consumer price index: it was a catch-all term, taking in everything from a punitive welfare system and poorly paid and insecure work to rising expenses. Millions of households were in a cost of living crisis long before it made the front pages; long after the term falls out of fashion, they will still be in one. Continue reading...
The cost of gas, electricity and garden furniture has plunged ... but cocoa and vets' services cost a lot more Labour says pressure on family finances still acute as inflation falls to 2%The UK's annual inflation rate fell to 2% in May, in line with the forecasts of City economists.The Office for National Statistics compiles the overall reading using the consumer prices index but also logs prices for individual goods and services. Here we look at how the cost of many of those everyday items has changed over the past year. Continue reading...
Inflation returns to target for first time since July 2021; breakfast cereal, crisps, vegetables become cheaperPrices for recreational and cultural goods and services rose at an annual rate of 4.1% in the year to May, down from 4.6%, today's inflation figures showed.Prices of pets and related products, and books fell between April and May this year, compared with a monthly rise a year ago. Prices of package holidays and cultural services rose this year by less than a year ago. Continue reading...
Largest annual rise since records began in 1987 sees forecast of average 1,660 extra debt amid cost of living crisisUK households are expected to rack up extra unsecured debts of more than 1,600 this year, including on loans and credit cards, as the cost of living crisis continues to bite, according to a TUC analysis.The TUC said its analysis showed that unsecured household debt - including loans and credit cards but excluding mortgages and, for this exercise, student loans - was on course to increase by 9.4%, or 1,660, in real terms on average per household this year. Continue reading...
by Eleni Courea Political correspondent on (#6NMAC)
Exclusive: Changes early in expected new government intended to stop repeat of catastrophic Truss mini-budgetLabour has challenged the Conservatives to match its commitment to strengthen the economic watchdog within the first 100 days of government.Rachel Reeves, the shadow chancellor, has pledged to introduce legislation giving the Office for Budget Responsibility greater powers in Labour's first king's speech. Continue reading...
Institute for Fiscal Studies praised Conservatives' ambition but said by some measures gap had widenedProgress towards a series of levelling up goals set by the UK government has been glacial", and achieving them by the target date of 2030 will require a big increase in resources for struggling areas, a leading thinktank has said.The Institute for Fiscal Studies (IFS) said that, on many measures, regional inequality had widened and the UK had gone into reverse.The share of pupils in England meeting expected standards at the end of primary school dropped from 65% in 2018-19 to 60% in June 2023, against a target of 90% by 2030. In only 10 English local authorities - all in London - did at least 70% of 11-year-olds meet this target.The total number of further education and skills courses completed in England fell by 14% between 2018-19 and 2022-23. In the lowest skilled areas, the decline was almost 20%. The goal for 2030 is to have 200,000 more people successfully completing high-quality skills training annually, driven by 80,000 more people completing courses in the lowest skilled areas.A 21-percentage-point gap in the average employment rate between the best and worst-performing local authority areas in the UK - the widest it has been since at least 2005. The aim is to have rising pay, employment and productivity in every area of the UK, and a smaller gap between the top performing areas and others.The Conservatives' aim is for local transport connectivity across England to be significantly closer to the standards of London, but the gap between the use of public transport in London (39% of journeys) and in the rest of the country (7%) during 2022-23 was at its second-widest level since 2002-03, as passenger numbers failed to recover to pre-pandemic levels. Continue reading...
Rolling coverage of the latest economic and financial newsIceland's chairman, Richard Walker, says Kantar are correct that the cost of living squeeze isn't over - before squeezing in a plug for his supermarket:Back in January, Walker (a former Conservative supporter) announced he was backing Labour, saying Keir Starmer understood how the cost of living crisis has put an unbearable strain" on families. Continue reading...
Institute for Public Policy Research urges Labour and Conservatives to reverse planned cutsInvestment in the UK has trailed other G7 countries including the US and Germany since the mid-1990s, according to a report that urges Labour and the Conservatives to reverse planned cuts to investment or risk long-term damage to economic growth.The Institute for Public Policy Research (IPPR) thinktank found the UK was bottom of the G7 league for investment in 24 out of the last 30 years, using figures from the Organisation for Economic Co-operation and Development (OECD). Continue reading...
The UK can't continue with policies that have produced a productivity slump and record amounts of insecure workIn the manifestos of both the Conservative and the Labour parties, there is a commitment to implementing the NHS long-term workforce plan to ensure that the country will be able to populate the health service with UK-trained doctors and nurses. However, neither of the parties are suggesting that they will fund the 30bn it would cost to employ the tens of thousands of staff they say they will train. Instead, voters are expected to believe that the confidence fairy will turn up when the next government arrives - and businesses will invest, leading to economic growth.It is magical thinking to believe that, without actually doing anything, private spending in Britain will be stimulated to such an extent that it will more than compensate for the anticipated public sector cutsthat depress it. Continue reading...
Authority has debts of 1.8bn after years of local government funding cuts and has failed to find an auditorWarrington council's inability to find an auditor to sign off its accounts has led the credit rating agency Moody's to withdraw its monitoring of the authority, amid mounting concern about the broader crisis in local government funding.In a statement, Warrington borough council said Moody's Investors Service was no longer providing it with a credit rating, a crucial metric used by potential lenders to assess a borrower's creditworthiness. Continue reading...
For 45 years, Britain has been blighted by Conservative ideologies that promised a path to prosperity, but achieved nothing of the sortThe Tory party in three weeks' time promises to be in a more ruinous, even life-threatening position than Labour was in the aftermath of the 2019 general election. Labour at least had a route to recovery after an epic defeat - to blend mainstream and centre-left opinion around a pragmatic programme for government, to eliminate all traces of antisemitism and to marginalise its toxic extremists. The question was whether its leadership, membership and trade union backers would have the capacity and want power sufficiently to pull it off. They have.Today's Tories and their blindly ideological press - which has had such an important role in reducing the party to the political carrion on which Nigel Farage's Reform now preys - has no such shared grasp of the task ahead. There is no longer a strong centre right existing as a coherent formation that could anchor such a recovery, or skilled politicians who might lead it. Instead, over this parliament the party has disintegrated into a babble of rightwing cults ranging from Trussite libertarians to National Conservatives" stressing the traditional virtues of family, faith and national community. The response to the desperate condition in which millions now live and the wider crises of stagnant productivity and investment, intensified by Brexit, is to blame immigration, working-class fecklessness and high taxes - even if those are moderate by European standards. Continue reading...
An improving economy was supposed to boost Sunak's campaign. But growth is flatlining, and there is little hope of an interest rate cut this weekConservative party members could be forgiven for believing that the economy had become their friend after the Liz Truss mini-budget debacle faded from view.Heading into 2024, there was an expectation of a return to growth. And the first three months of data showed that a bounceback from last year's recession was in train and that household disposable incomes were on the rise. Continue reading...
Keir Starmer and Rachel Reeves will need skill and stealth to make progress amid financial and institutional adversity How to reverse austerity? Scrap some of the tax-relief schemes worth 204bnEveryone wants the Labour leadership to be more honest with the electorate about how it will pay for policies designed to drive growth, tackle the climate crisis and improve living standards.Without a jolt to the economy from tens of billions of pounds of extra spending, they argue, growth will remain sloth-like, only inching ahead, and the Labour project will be doomed. Continue reading...
Concerns set out over supply of materials with military applications, and impact of subsidies on global marketChina's role in providing assistance to Russia in its war against Ukraine, and its harmful overcapacity" in the production of cheap goods, have been targeted by G7 leaders despite misgivings from Germany.On the second day of the annual summit, being held in Puglia under the Italian chair, the US drove home a 36-page communique that condemned Chinese subsidies for products such as solar panels and electric cars which it said were leading to global spillovers, market distortions and harmful overcapacity ... undermining our workers, industries, and economic resilience and security". Continue reading...
Senior economists have complained to BBC about Laura Kuenssberg comparing Whitehall spending to taking out a credit cardPoliticians have often struggled to explain how governments borrow money to fund their spending. The implications of higher or lower borrowing are also difficult to assess when the figures run into hundreds of billions of pounds.The temptation is to simplify the arguments by comparing the nation's finances to a household budget or a credit card. The shadow chancellor, Rachel Reeves, has talked about the Conservatives maxing out the credit card", and Keir Starmer and Rishi Sunak have also used the analogy. Continue reading...
by Lauren Aratani and Callum Jones in New York on (#6NFGA)
Instead of cutting rates, central bank keeps them between 5.25% and 5.5%, where they have been for nearly a yearThe Federal Reserve held interest rates at a two-decade high on Wednesday, as it awaits more signs of inflation cooling.Officials at the US central bank expect to cut rates just once this year, according to projections released on Wednesday after their latest two-day meeting. Continue reading...
Standards of living lag behind G7 countries US, France and Germany, as 50th summit approachesA failure to invest in the UK's main regional cities has held back economic growth and meant standards of living lag behind the US, France and Germany, according to a report before the 50th G7 summit in southern Italy this week.The Centre for Cities thinktank said the major difference between the UK and its main rivals was the low level of productivity in cities such as Manchester, Birmingham, Glasgow, Sheffield and Nottingham. Continue reading...