Paper maps out growth model with hard-hitting policies
Hard-hitting practical policy suggestions make up a groundbreaking growth model of the British economy which has been created by a unique research centre at the University of Sheffield.
The first of a series of policy papers published by the Sheffield Political Economy Research Institute (SPERI) argues Britain is trapped in a crisis of, and for, growth and not debt and calls for key policy changes which could help turn the UK’s ailing economy around.
Colin Hay, Professor of Political Analysis and Co-Director of the Sheffield Political Economy Research Institute at the University of Sheffield, said: “It is a crisis of and for an excessively liberalised Anglo-American form of capitalism and the Anglo-liberal growth model to which it gave rise. This is a form of capitalism and a growth model that was inherently unstable and threatened the entire world economy – its excesses cannot be tolerated again.
“In basic terms we are calling for channelling the supply of credit from housing and consumption into longer term growth-generating strategic investment in new technologies, education and infrastructure.”
In the paper, titled The British Growth Crisis: a Crisis of and for Growth, Professor Hay picks out key policy implications which could result in a more sustainable model of growth for Britain including:
• The shaming of the banks into reducing the exorbitant interest rates they are charging consumers and home-owners as well as commercial borrowers on their debt for mortgagees, these are now typically 10 times the base rate.
• To politicise the cost of borrowing and call for Government and the Bank of England to assert downward pressure on the actual cost of borrowing and stop banks from effectively recapitalising themselves by charging commercial borrowers, mortgage holders and those servicing consumer debt a sizeable interest-rate premium which is suppressing demand and investment and prevents the investment required to make the transition to a new more sustainable model of growth.
• More public investment which could prove to be a highly cost-effective way of providing the public goods on which the transition to a new model of growth relies.
• Deficit reduction must be made conditional on growth
• It is imperative that steps are taken at an international and ideally global level to agree a coordinated strategy for managing debt and growth.
• British policy-makers to reconsider the relationship between investment banking and commercial banking which is allowing commercial banking to subsidise investment banking in a way that impairs the capacity to build a new growth model.
Professor Hay added: “My hope is that in this paper I have made a compelling case that we need first to get right what went wrong in order to put it right and to suggest at least some of what getting it right and putting it right might entail.
“That is a key part of the ongoing research agenda of SPERI – to develop the kind of political economy we need in Britain (and indeed beyond) if we are to build a sustainable recovery. We very much hope that these ideas and the analysis on which they draw will be taken up in Government policy.”
The paper draws on a substantial body of empirical research, starting with the recession in 2008 and the economic changes throughout that year in an international context, as well as a close analysis of the housing market, supply of credit, and welfare and public policy trajectories across Europe before, during and since the crisis.
To view the paper on line visit: http://speri.dept.shef.ac.uk/wp-content/uploads/2013/01/SPERI-Paper-No.-1-%E2%80%93-The-British-Growth-Crisis-FINAL.pdf
SPERI brings together leading international researchers in the social sciences, policy makers, journalists and opinion formers to reassess and develop proposals in response to the political and economic issues posed by the global financial crisis.
Political economy is the wider study of real-life explanations, insights and strategies, in response to challenges facing the world, like the British growth crisis, the future of the Eurozone, and the G20 leadership.
The University of Sheffield
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