Small world. A knowledgeable friend wrote me this afternoon “I know everyone looks at Europe and britain is the only country doing well, which everyone attributes to more fluid labor laws, less socialism, more ‘like America’, and other things… But, one overlooked fact, they are the only country also doing a stimulus, the Olympics, which doesn’t show on any govt budget”. Atrios about 45 minutes later:
[The UK] Which, once Olympics related program activities fade, will be as screwed as much of Yurp.
Austerity is chicken soup for the serious person’s soul, but it’s gruel for the middle classes. Please, sir, I want some more.
mdblanche
Britain’s doing well? I thought they’d just double-dipped.
DougJ, Head of Infidelity
@mdblanche:
They’re doing better than the continent.
ThatLeftTurnInABQ
__
You have to be gruel to be kind.
cathyx
And they are not on the euro.
Butler
Didn’t Britain just announce a new recession? And aren’t the way more socialist Germans doing better?
ThatLeftTurnInABQ
I can’t wait to hear what Mitt Romney’s multiple contradictory positions will be on the subject of the Olympic Games acting as an economic stimulus. My guess is that all traces of govt involvement will go mysteriously missing.
catclub
@Butler: Agree with this.
The well informed friend does not seem so, in this case.
Brachiator
Britain doing well? I think you had better get another set of “knowledgeable friends.”
rlrr
Is Britain doing better than Germany? Sweden?
Scott de B.
I’ve been thinking morbidly about another possible “hidden stimulus” for Britain: Queen Elizabeth is 86 years old. If she dies in the next year or two, the reaction in Britain will make Princess Di’s funeral look like two drunks on a weekend bender. Presto, massive stimulus!
catclub
Iceland is doing better because they put bankers and politicians on trial.
Cause and effect, man.
Suffern ACE
@Butler: I agree. They are doing better than some. I think Poland and Germany are the ones holding their own. However I wonder if Poland has the Latvia issue. It looks like its doing well until someone notes how many of its people have left.
jl
@DougJ, Head of Infidelity:
Better than the non German Continent, or non-Euro Continent.
(not sure if Scandinavia is considered part of the Yurrp Contitnent, but them too, the non Euro Scandinavia is doing well).
And I think Britain can only be said to be doing better because in some since a double dip is a little better than a prolonged slump that never recovered enough to dip double.
As Krugman noted recently, the evile Sweden is dong so well compared the rest of Europe that winger pundits have been praising its innovative free market policies. Seriously, you can look it up on Krugman’s blog.
Edit: actually, there is a lot of innovative free market stuff going on in Sweden. Lots of private (and what we what I think we would call charter) schools starting up. Private supplement to gummint social security scheme. I am not sure how well these are doing from ordinary Swede’s perspective, but I do know that these private initiative polices were not conceived of as rip offs from the get go, so don’t worry, they would still be considered commie if implemented here in the US.
Nutella
Apparently a double-dip recession is “doing well” these days.
UK is doing better than Spain and Greece but that’s not saying much.
The London Olympics is billions over budget. Is that stimulus, or is that diverting what used to be spent on NHS and other social services to a big party in London?
MattF
@Butler: C’mon, folks, ‘Socialist’ in what sense? True, they don’t strangle potential union members in their cradles, but that’s about it. In fact, wages have stagnated in Germany for quite a while. Don’t apply the standards of the screwball American political spectrum to Yurp. Don’t forget, American exceptionalism, and all that.
Brachiator
By the way, the BBC Friday night comedy News Quiz is available for listen or download. It’s like Charlie Pierce, but with funny accents.
Also, too, the Olympics as stimulus? More often it’s been a white elephant. The top people in the Olympic committee make out like bandits, the host countries not so much.
Also, too, too, the Brits are going into serious hock over crap related to the Queen’s Diamond Jubilee. Maybe people will feel less exploited if Her Majesty calls that some stimulus, as well.
PaminBB
@Scott de B.:
Actually, she doesn’t even need to die. They are celebrating her Jubilee, which entails spending a lot of cash.
giltay
@Scott de B.: Her Mum lived to be 101. Unless she comes down with something nasty, she could reign another 10 years.
liberal
@MattF:
Good point. Socialism means government ownership or control of the means of production.
Professor
Has anyone noticed that those on TV screaming for austerity are in employment and possibly in a household with two incomes?
liberal
@Butler:
One problem though is that Germany is a big net exporter to the rest of Europe. When the economies that purchase your exports start to collapse, it doesn’t bode well for you.
jwb
Iceland is doing well, because they aren’t on the Euro—that’s part of the UK’s advantage as well. Holland is supposedly doing quite well, primarily because they haven’t had a functioning government to impose austerity, but I haven’t seen the data recently. Germany has been doing ok because they have so far been able to export the austerity to the Euro periphery while maintaining the social safety net at home. That chickens are coming home to roost real soon on that, however.
MikeJ
@Nutella:
You think the ConDems were gonna spend that money on public services?
jl
@Butler: I think the ‘way more socialist’ Germans are enjoying an export boom. Basically using their influence over ECB to make the recession easier on themselves.
The Germans have been less ‘socialist’ than conventional Keynesian. Germany has allowed itself the luxury of a counter cyclical fiscal policy, and much less austerity than other countries in the Eurozone.
Edit: not sure, but I think actually Germans have given themselves a nice and convenient, though modest, government fiscal expansion, that is, their government spending has been slowly growing throughout the recession.
Krugman and DeLong and their links have the numbers and graphs.
piratedan
@ThatLeftTurnInABQ: well… in the right measure, because it’s the very design…..
Walker
@Suffern ACE:
Poland is doing well because they are massively allergic to debt, and so had not overextended. It was a shock to my wife and I when we visited this summer, because the businesses Actually accepted credit cards. They had never done that before.
They also had a legitimate building boom which was not speculation, but renewal of falling down communist era buildings.
There was a lot of flight to other countries like Britain, but that has largley stopped. And we hear from my wide’s family in Poland that people are now evn returning to Poland.
Professor
Do not forget that the UK has control over her currency, the pound. Also don’t forget that the Bank of England pumped into the economy a massive amount of quantitative easing!
greenergood
UK is spiralling down the toilet bowl, just that much slower than Greece, Spain, etc. The difference between our rich and our poor is approaching third world level. And I’m going hiking/camping/disappearing for the Olympics – the barrage of red, white and blue is just going to be too much
mdblanche
@giltay: She’s just waiting for the kids to die.
jwb
@Walker: Of course Spain did not have debt prior to the collapse either. The problem was German banks creating a real estate bubble. It’s working off that bubble that is causing the problem there now. And, of course, the German banks don’t want to be caught holding the bill for the trouble they caused. German intransigence on the Euro is all about protecting their banking interests.
jl
@Professor: Which means that the UK might be a good case study of the effectiveness of fiscal policy when monetary policy works in the same direction.
And also, the foolishness of the government. The UK has its own currency, so much more flexibility in handling the recession than non German Eurozone countries.
But they went ahead and veered from counter cyclical to pro cyclical fiscal policy and slashed government spending.
Another Halocene Human
@Brachiator:
It’s not, though.
Much like the claim made on this website today that overspending on media buys was somehow stimulus. No, no it’s not.
Luxury spending is NOT stimulative. That is why rational economies tax the fsck out of unearned income and impose luxury taxes at will.
Another Halocene Human
@PaminBB:
broken window fallacy
money spent !== stimulus
Stimulus means that the value of your tax dollars was returned and then some. Roads and railroads do this, but education dollars even more so.
Returning less than 100%, “pennies on the dollar” (on the Pound in this case), is better thought of as pissing your tax money away.
Football stadiums are a typical example. At best they break even, so lots of ructions (and private profit) for nothing (nothing, that is, but the opportunity cost of spending on something worthwhile–as when Glendenning stole a football team from Ohio to be the Balt. Ravens by taking money out of the Balt. Public Schools), and at worst they so burden the government that they deliver a negative rate of return.
Brachiator
@jl:
The UK couldn’t rein in the financial misdeeds emanating from the City of London branches of Goldman Sachs and other banks. They threw money down a rathole in shoring up the Royal Bank of Scotland and could not get executives to claw back their massive bonuses.
And Iceland still blames UK bankers for devastating its economy. The UK has also been deeply involved in the Spanish housing bubble (lots of UK retirees and expats in Spain). And Cameron doesn’t quite look like he has a handle on things.
It’s hard to see the UK as a model of fiscal policy. Maybe you were being ironic and I missed the snark.
Violet
Friends and family in the UK are having a hard time economically. Some of them are in relatively secure jobs, but quite a few of them have seen their incomes diminish. At least they’ve got the NHS so if they get sick they won’t lose their homes.
Calouste
Wikipedia numbers based on the IMF Economic Outlook published last month:
The UK is beaten on all of GDP growth, GDP per capita, Public debt%, Deficit%, Inflation and Unemployment by: Germany, The Netherlands, Sweden and Denmark, on almost all of them by Belgium, Austria and Finland, and France is roughly even.
Can we just put this down to the usual “They speak English in the UK so we can somewhat understand what is going on which really makes them the only ones worth talking about?” cf. comparing the US health care/insurance system to other countries, where you’d think that the UK and Canada are the only other two countries in the world where they have that.
jl
@Brachiator: I was talking about domestic fiscal policy in response to recession after the financial panic. Seems to me you are talking about a wider range of things that occurred before, during and after the panic.
Butler
@MattF: I wasn’t using it as a insult. They have strong unions, universal health care, higher taxes (that they actually pay), stricter banking regulations, etc and all these things have helped them to weather the storm much better than the UK or anyone else.
Brachiator
@DougJ, Head of Infidelity:
Come on. You can’t compare the UK to all of Europe.
Brachiator
@jl:
Fair enough. There is no clear consensus that Cameron’s response to the recession has shown any particular competence.
Suffern ACE
@Calouste: Except Finland. Finland is the only country in Europe with an primary and secondary education system and all discussion of how to reform American schools must start with Finland.
Redshift
@Calouste: We were allowed to talk about Switzerland, too, because it has a system based on private insurance (as long as we didn’t mention that it’s highly regulated and the private companies aren’t allowed to make a profit on basic insurance, of course.)
jl
@Brachiator: Cameron is a disaster, and I if suggested or implied anything else, there has been a severe failure to communicate.
Maybe it was my comment that UK would be a good case study of fiscal policy? What I meant was, a self validating case study in what not do do.
Sort of like how switching from bailing to knocking a hole in the bottom of the hull is a case study in how NOT to save your boat from swamping.
Redshift
@Another Halocene Human:
I’m pretty sure that’s just wrong. Producing infrastructure of lasting value is better stimulus (especially when interest rates are incredibly low), but it’s not required for it to be stimulus. The point of stimulus isn’t to produce a profit for the government, it’s to produce demand in the economy. The classic (though absurd in the real world) example is paying half the people to dig holes and the other half to fill them in. It doesn’t produce anything, but it puts money in the pockets of people who spend it on goods and services that they wouldn’t if they were unemployed, generates the demand that is lacking when the economy is depressed.
I think the problem with applying the broken windows parable is that in a depressed economy, workers by definition don’t have sufficient other demand on their skills, so you’re not just shifting the work, and since the economy is sluggish due to a large shortfall of demand, there’s an opportunity cost in not putting borrowed government money into the economy and an inherent interest in doing so.
I’m not an economist, so I could be wrong, but as far as I know, the definition of stimulus is spending that makes up for the shortfall in demand, not spending that produces something durable or profitable.
Brachiator
@jl:
OK. Got ya. Thanks for the clarification.
pseudonymous in nc
@Calouste:
And not even Australia, which has a sane healthcare system and way of funding university education, because they all dress like Crocodile Dundee and walk upside-down. Or something.
BigIslander
Uh, isn’t the UK in a double-dip recession right now?
Brachiator
This is going to be fun.
I also am looking forward to the conservative pundits going nuts when a real sozhul ist comes to America.
And extra fun for the family values crowd. Holland and his companion are not married.
Stuck in the Funhouse
@Redshift:
Thank you!!
Brachiator
@pseudonymous in nc:
Or even New Zealand, which some people think is a suburb or Australia (except where the hobbits come from).
Calouste
@Brachiator:
Cameron is against a financial transaction tax because the City (UK version of Wall Street) is the only thing that keeps the UK economy afloat. And it is where all his buddies are.
Walker
@jwb:
Poland is not on the Euro.
Ben Wolf
@Redshift:
Keynes defined recessions as caused by an excessive rate of saving. When everyone is spending less than they are earning this decreases incomes and creates unemployment. The purpose of stimulus is therefore to replace the difference in national income minus the savings rate with sufficent public sector spending to achieve full employment. Note that even in a healthy capitalist economy the private sector’s preference is to net save, so absent government sector deficits there is always an insufficient number of dollars in circulation to provide a job to everyone who wants one.
Mathias
By what metrics is Britain doing well? Britain is in the midst of a double-dip recession and is heading in the wrong direction. Germany is doing much better than Britain right now.
Brachiator
@Ben Wolf:
This cannot be right. The current problem is exacerbated by declining wages, unemployment and low savings, with individuals and businesses losing more ground as loan payments absorb a large share of income.
Ben Wolf
@Brachiator: Since the financial crash the savings rate has greatly increased as the private sector seeks to deleverage from the consumer debt bubble which burst four years ago. As people redirect their income to repaying debts (defined as saving) this by definition decreases incomes (your spending is my income). Low wages do not by themselves create recession, but they do reduce economic growth and create some level of unemployment. China for example has relatively low wages but has grown rapidly over the last two decades. Of course if wages persistently fail to keep pace with inflation then at some point it is likely an economy will tip into recession as people reduce their spending in response.
Ben Wolf
@Brachiator: Hit the post button before I included the link:
http://research.stlouisfed.org/fred2/data/PSAVERT.txt
If you scroll to the bottom you’ll see how the personal savings rate increased significantly after the crash.
SRW1
“A knowledgeable friend wrote me this afternoon “I know everyone looks at Europe and britain is the only country doing well, which everyone attributes to more fluid labor laws, less socialism, …”
The country with the strongest recent GDP growth in the Euro zone was the socialist hell hole of Finland (+1.3%), though the size of the Finnish economy is too small to have much of an impact on the performance of the Euro zone overall. The fact that the Euro zone, other than the UK, avoided a double dip was mainly due to the ‘statist’ German economy (+0.5%).
Your ‘knowledgeable’ friend has just been downgraded by two notches.
Djur
@liberal:
Ack! No! Socialism means worker ownership or control of the means of production. The government is an obvious means by which this can be effected, but there are other options (such as syndicalism). And not all government control of production is socialism — the government must be under the control of the working class.
Fascist governments frequently nationalize some industries, but since they do not operate those industries on behalf of the working class, this is not socialism.
It’s important because when you let “socialism” get blurred into “government control” you open the door to the Jonah Goldbergs of the world to claim that Hitler’s Nazis were socialist.
SRW1
@Brachiator:
Fun fact: Hollande has four children with Segolene Royal, the Socialist candidate Sarkozy beat in the 2007 French presidential election.
Suffern ACE
@Ben Wolf: Yeah. If I’m reading the Flow of Funds report, households have about 700 bn more in deposits and 750 bn less in mortgage debt and about 500 bn overall since 2007. Thats a net of about 1.2 trillion, if my maths are correct. Businesses even more. If the value of the housing would stop the decline, we’d notice that more.
Djur
@SRW1: Germany is maybe a bit more statist than the UK (their byzantine laws are legendary), but I’m not sure they’re meaningfully more socialist. And they’re currently both under conservative, austerian governments.
Cacti
A double-dip recession is “doing well”?
We truly are in an age of lowered expectations
AA+ Bonds
Okay so I guess the thread has already established the relationship between ‘knowledgeable’ and the statement
AA+ Bonds
I had a good chuckle at statements like ‘the non German continent’ so net gain