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Guardian letter in response to Chancellor George Osborne’s Mansion House Speech

Guardian letter in response to Chancellor George Osborne’s Mansion House Speech

On 13 June the Guardian published a letter from 79 leading economists condemning the Chancellor’s plans to legislate for a permanent budget surplus. The letter below was coordinated by Class, and has gathered a range of prominent signatories from across academia and economics. 

The Chancellor’s plans announced in his Mansion House speech for “permanent budget surpluses” are nothing more than an attempt to outmanoeuvre his opponents. They have no basis in economics.

Osborne’s proposals are not fit for the complexity of a modern 21st century economy, and as such, they risk a liquidity crisis that could also trigger banking problems, a fall in GDP, a crash, or all three.

Economies rely on the principle of sectoral balancing, which states that sectors of the economy borrow and lend from each other, and their surpluses and debts must arithmetically balance out in monetary terms, because every debit has a corresponding credit. In other words, if one sector of the economy lends to another, it must be in debt by the same amount as the borrower is in credit. The economy is always in balance as a result, if just not at the right place.

The government’s budget position is not independent of the rest of the economy, and if it chooses to try to inflexibly run surpluses, and therefore no longer borrow, the knock-on effect to the rest of the economy will be significant. Households, consumers and businesses may have to borrow more overall, and the risk of a personal debt crisis to rival 2008 could be very real indeed.

These plans tie the government’s hands, meaning it won’t be able to respond appropriately to constantly evolving economic circumstances, good or bad. As such the plan is actually to take away one of the central purposes of modern government, which is to deliver a stable economy in which all can prosper.

It is irresponsible for the Chancellor to take such risky experiments with the economy in order to score political points, and this policy demands an urgent rethink.

Signatories include:

Dr Ha-Joon Chang, University of Cambridge
Thomas Piketty, Paris School of Economics
David Blanchflower, Bruce V. Rauner Professor of Economics at Dartmouth College and ex-Monetary Policy Committee
Prof Mariana Mazzucato, R.M. Phillips Professor in the Economics of Innovation, University of Sussex
Prof Simon Wren-Lewis, University of Oxford
Prof Victoria Chick, University College London
Jared Bernstein, Former Chief Economist and Economic Adviser to Vice President Joe Biden
Prof Ozlem Onaran, Department of International Business and Economics, University of Greenwich
Prof Engelbert Stockhammer, Professor of Economics, University of Kingston
Howard Reed, Director, Landman Economics
Richard Murphy, Tax Research UK
Stewart Lansley, Visiting fellow, Bristol University Townsend Centre for International Poverty Research
Prof Andrew Cumbers, Professor of Political Economy, Adam Smith Business School, University of Glasgow
Prof Malcolm Sawyer, Emeritus Professor of Economics, Leeds University Business School
Prof George Irvin, Professorial Research Fellow, SOAS, University of London
Prof John Weeks, Emeritus Professor, SOAS, University of London
Prof Prem Sikka, Professor of Accounting, University of Essex
Prof Christine Cooper, Accounting and Finance, Strathclyde Business School
Prof Diane Elson, Emeritus Professor, University of Essex and Chair of UK Women’s Budget Group
Professor Jonathan Michie, University of Oxford
Prof Robert McMaster, Professor of Political Economy, Adam Smith Business School, University of Glasgow
Dr Jo Michell, Senior Lecturer in Economics, University of the West of England, Bristol
Prof Sheila Dow, Emeritus Professor of Economics, University of Stirling
Prof John Grahl, Professor of European Integration, University of Middlesex
Prof Jan Toporowski, Professor of Economics, SOAS, University of London
Prof Philip Arestis, University of Cambridge
Prof Giuseppe Fontana, Professor of Monetary Economics, Leeds University Business School
Prof David Spencer, Professor of Economics and Political Economy, Leeds University Business School
Prof Alfredo Saad Filho, Professor of Political Economy, SOAS, University of London
Prof Mary Mellor, Professor Emeritus, Northumbria University
Dr Craig Berry, Deputy Director, Sheffield Political Economy Research Institute (speri)
Prof David Newbery, Emeritus professor of Economics, Cambridge University
Prof Hugh Willmott, CASS Business School
Prof Steve Keen, Professor of Economics, Kingston University
Dr Henning  Meyer, Research Associate of the Public Policy Group, London School of Economics
Prof John Van Reenen, Professor of Economics, London School of Economics
Prof Ismail Ertürk, Senior Lecturer in Banking, University of Manchester
Prof Susan Himmelweit, Emeritus Professor of Economics, Open University
Prof Valpy FitzGerald, Emeritus Professor of International Development Finance, University of Oxford
Prof Simon Mohun, Emeritus Professor of Political Economy, Queen Mary, University of London
Stewart Wallis, Executive Director, New Economics Foundation
Prof Klaus Nielsen, Professor of Institutional Economics, Birkbeck, University of London
Prof Pritam Singh, Professor of Economics, Oxford Brookes University
Dr Andrew Mearman, Associate Professor in Economics, UWE Bristol
Prof Matthew Watson, Professor of Political Economy, University of Warwick
Prof Grazia Ietto-Gillies, Emeritus Professor of Applied Economics, London South Bank University
Dr Mary V. Wrenn, Joan Robinson Research Fellow in Heterodox Economics, Girton College, University of Cambridge
Geoffrey Hodgson, Research Professor, University of Hertfordshire
Dr Daniela Gabor, Associate Professor, UWE Bristol
Prof Bruce Cronin, Director of the Centre for Business Network Analysis, University of Greenwich
Dr Annina Kaltenbrunner, Lecturer in the Economics of Globalisation & The International Economy, Leeds University Business School
Prof Gary Dymski, Professor of Applied Economics, Leeds University Business School
Michael Burke, Economist
Dr Russell Smith, Senior Lecturer in Economics, Cardiff School of Management
Prof Philip B. Whyman, Professor of Economics at the University of Central Lancashire
Prof Tony Thirlwall, Professor of Applied Economics, University of Kent
Michael Kitson, Cambridge Judge Business School University of Cambridge
Dr Abigail McKnight, Senior Research Fellow, Centre for Analysis of Social Exclusion, London School of Economics
Dr Ken Coutts, Assistant Director of Research, Faculty of Economics, University of Cambridge
Prof Robert H. Wade, London School of Economics
Dr Kalim Siddiqui, Department of Strategy, Marketing and Economics, University of Huddersfield
Prof Stuart Holland, University of Coimbra
Dr Alberto Paloni, Adam Smith Business School, University of Glasgow
Ewa Karwowski, Lecturer in Economics, Kingston University
Professor Marcus Miller, University of Warwick
Dr Gary Slater, Leeds University Business School
Professor David Bailey, Aston Business School
Dr David Harvie, Senior Lecturer in Finance and Political Economy, University of Leicester
Barbara Harriss-White, Emeritus Professor and Senior Research Fellow, Area Studies, Oxford University
Dr Bruce Philp, Head of Department, Strategy, Marketing and Economics, Birmingham City Business School
Roberto Veneziani, School of Economics and Finance, Queen Mary University of London
Dr Julian Wells, Principal Lecturer in Economics, Kingston University London
Dr Neil Lancastle, Department of Accounting and Finance, De Montfort University
Mimoza Shabani, Lecturer in Financial Economics, University of East London
Dr Ashley L. Carreras, Principal Lecturer in Economics and Decision Analysis Faculty of Business and Law, De Montfort University
Prof Michael Lipton, Research Professor of Economics, Sussex University
Dr Graham Gudgin, Research Associate, Centre for Business Research, University of Cambridge and Senior Economic Advisor, Oxford Economics
Prof Geraint Johnes, Professor of Economics, Lancaster University Management School
Andrew Simms, Fellow of New Economics Foundation

Since the publication of this letter the signatories below have offered their support:

Professor Geoff Harcourt, Professor Emeritus, University of Adelaide
Prof Dr Trevor Evans, Professor for Monetary Theory, Monetary Policy and International Currency Relations, Berlin School of Economics and Law
Prof Andrea Terzi, Professor of economics, Franklin University Switzerland
Prof George Krimpas, Emeritus Professor of Political Economy at the University of Athens
Prof Joerg Bibow, Professor of Economics, Skidmore College
Prof Sergio Rossi, Professor of Macroeconomics and Monetary Economics, University of Fribourg
Stephanie Kelton, Associate Professor at the University Of Missouri, Kansas City and Chief Economist on the U.S. Senate Budget Committee
Professor Mark Setterfield, Maloney Family Distinguished Professor of Economics in the Department of Economics, Trinity College, Hartford
Professor Chris Martin, Professor of Economics, Bath University
Dr Jeff Powell, Senior Lecturer, Economics, University of Greenwich
Prof Andrew Tylecote, Emeritus Professor of the Economics and Management of Technological Change, University of Sheffield
Jonathan Perraton, Senior Lecturer in Economics, Department of Economics, University of Sheffield
Prof Louis-Philippe Rochon, Associate Professor of economics, Laurentian University and co-editor Review of Keynesian Economics, Laurentian university
Dr Wolfram Elsner, Professor of Economics, University if Bremen, Business Studies and Economics
Prof Eric Tymoigne, Associate Professor of Economics, Lewis & Clark Ollege
Prof Felipe Almeida, Professor of Economics, Federal University of Paraná, Brazil
Prof Cyrus Bina, Distinguished Research Professor of Economics, University of Minnesota
Prof Iara Vego de Lima, Professor of Economics, University of Paraná, Brazil


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