The Recession: Causes and Cures

In The Recession: Causes and Cures, economist David Simpson analyzes the current recession and the government's responses to it. He finds that the widely-held conventional view of the economic cycle – which suggests recessions are caused by external shocks and can be remedied by a government-applied stimulus – is inadequate in the present circumstances, and is leading policymakers both to misunderstand the causes of the crisis, and to advocate the wrong cures. This report examines the real causes of the recession, and suggests policy options which could bring it more quickly to an end.

 

Regulatory Myopia

This response to Financial Services Authority Discussion Paper 09/2 argues that regulators, not under-regulation, are to blame for the financial crash. It points out that the banks are already minutely regulated, but that the regulators became so preoccupied with form-filling that they did not see that the whole financial system was at risk. What is needed is the kind of overall supervision that would have seen the potentially fatal risks that the banks were running and would have intervened to curb them. The authors suggest the Bank of England should take on this supervision role in future, and that far from being expanded, the powers of the Financial Services Authority (FSA), should be cut back to 'match its competence'.

Zero Base Policy

Britain is broken. Its finances are in ruins, its taxation is chaotic and punitive, its public services fail to reach adequate standards, and its public administration shows no coherence and commands no respect. In Zero Base Policy Madsen Pirie urges a new approach. Instead of tinkering at the edges by trying to improve existing policies, he urges a re-think to first principles, asking in each case what are the purposes and the objectives sought. The policies derived from such an approach make a clean break with the past, setting out how Britain can be put right. Ranging across all areas of public policy, Madsen Pirie presents the radical agenda which can transform the nation from broken Britain into a dynamic society and a successful economy, one which achieves the objectives its citizens yearn for. It should be bedtime reading for those who aspire to govern Britain in the future.

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Parliamentary Fatcats

According to this research by the ASI's Richard Teather and Dr Eamonn Butler, MPs' generous expenses, index-linked pensions and second-home allowances give them a multi-millionaire lifestyle that their constituents could scarcely dream of. It finds that the effective income of the average MP is £319,165 – nearly 18 times the pay of the average voter. The report also contains a 'fat-cat ranking' for each of our Westminster representatives.

G20: Less than meets the eye

This briefing by City analyst Miles Saltiel assesses the 2009 G20 Summit. It concludes that even for those with modest expectations, the G20 summit turned out to be a depressing affair. While there were some worthwhile achievements at the summit, the G20 communique is defined by its heroic hypocrisy, unreliable sums, weak promises, meaningless language and self-serving commitments.

 

What went wrong? An Agenda for the G20

In What Went Wrong? An Agenda for the G20, leading financial analyst Miles Saltiel, argues that many common explanations for the economic crisis are wrong, stemming from prejudice rather than evidence. He identifies five key culprits that the G20 should focus on instead: (1) loose monetary policy; (2) hubristic social engineering in housing policy; (3) the failure of the Basel protocols on core capital; (4) banks that were 'too big to fail'; and (5) the effects of oligopoly on auditors and ratings agencies.

 

The Financial Crisis: Is regulation cure or cause?

In this briefing paper the ASI's regulation fellow Tim Ambler examines the populist demands for financial stability and security though increased regulation. The question the paper poses is whether existing regulation mitigated the 2008 financial crisis, had no impact, or exacerbated it. Answering this question is the key to deciding how we respond to the crisis. The paper's main conclusion is that improving regulation will not provide more than modest help in future. The important thing is that the Bank of England, the FSA and the credit agencies do the jobs they are supposed to do more effectively.

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Why Alistair Darling should raise the personal allowance

This briefing, published in advance of the Chancellor's 2008 pre-budget report, calls for the personal income tax allowance to be raised from £6,035 to £12,000 for all UK taxpayers. This would take 7 million people out of paying income tax altogether, and ensure no one earning the minimum wage or less would pay income tax at all. It would be equivalent to giving the average worker an extra £1730 per year in gross pay, making them £100 per month better off. This policy could be implemented at a cost of £18.9bn to the Exchequer – a sum which should not require increased government borrowing.

The Amnesia of Reform

In their 1994 paper The Amnesia of Reform, Peter Young and Paul Reynolds review the progress of post-communist privatisation. It argues that "privatization in many post-communist countries is failing because it is being implemented with insufficient regard to its ultimate objective of creating a competitive market economy", and that more attention should be paid to deregulation.  

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Privatization - Reviving the Momentum

Privatization - Reviving the Momentum calls for a new wave of privatizations, which could net the exchequer in excess of £20bn. Given the worsening state of the economy and the increasing tightness of the public finances, the report notes that such an inflow of funds would be very welcome.  In addition to the revenues generated for the government, a new wave of privatizations would also deliver significant operational benefits. Previous privatizations have delivered a wide range of improvements, including increased investment, lower prices, greater choice and better service for customers – as well as underpinning billions of pounds worth of economic activity. The leading privatization candidates identified by the report include the Royal Mail, Channel 4, BBC Worldwide, Scottish Water, Northern Ireland Water, Glas Cymru, the National Air Traffic Control System, as well as government stakes in British Energy and the Nuclear industry.

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