The UK's Epic Fail Under David Cameron

A blog about business and economics.
Oct. 31 2012 2:38 PM

The UK's Epic Fail Under David Cameron

1351708693733

Here via Tim Fernholz is a great look at comparative crisis-ology in the US and UK from Alan Taylor and Moritz Schularick. They separate out "normal" recessions and "financial crisis" recessions and offer statistical simulations of the expected path of recovery. The United States is doing pretty good relative to the bleak projection and the UK is doing terribly.

Why?

Advertisement

One factor is that the British economy was more specialized in financial services than the American economy, so the British have a bigger structural adjustment to make.

The other is that North Sea oil production hasn't been doing well as a coincidental matter.

Third, David Cameron wanted as an ideological matter to conduct a structural transformation of the British economy toward producing fewer public services and more private goods and services. As a matter of economic stabilization policy, "the boom not the bust is the time for austerity at the treasury" and that's particularly true here. If the economy's booming, then resources released by the state sector will be rapidly reemployed in private undertakings. But amidst a weak economy it just adds a new problem into the mix.

Fourth, the Cameron/Clegg government seems to have been really sincere in its desire to pursue deficit reduction and thus paired its spending cuts with things like a substantial increase in sales taxes (VAT). If it were true that "confidence" in the government's desire to limit borrowing was an important driver of private sector investment, this would have been a great idea. But it isn't, so in fact it was a terrible idea.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

Why Are Lighter-Skinned Latinos and Asians More Likely to Vote Republican?

A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

The XX Factor
Sept. 22 2014 12:29 PM A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

Subprime Loans Are Back

And believe it or not, that’s a good thing.

It Is Very Stupid to Compare Hope Solo to Ray Rice

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

How Ted Cruz and Scott Brown Misunderstand What It Means to Be an American Citizen

Divestment Is Fine but Mostly Symbolic. There’s a Better Way for Universities to Fight Climate Change.

  News & Politics
Politics
Sept. 22 2014 6:30 PM What Does It Mean to Be an American? Ted Cruz and Scott Brown think it’s about ideology. It’s really about culture.
  Business
Moneybox
Sept. 22 2014 5:38 PM Apple Won't Shut Down Beats Music After All (But Will Probably Rename It)
  Life
Dear Prudence
Sept. 23 2014 6:00 AM Naked and Afraid Prudie offers advice on whether a young boy should sleep in the same room with his nude grandfather.
  Double X
The XX Factor
Sept. 22 2014 7:43 PM Emma Watson Threatened With Nude Photo Leak for Speaking Out About Women's Equality
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
  Arts
Books
Sept. 23 2014 7:14 AM Fighting the Sophomore Slump, Five Novels at a Time Announcing the Slate/Whiting Second Novel List.
  Technology
Future Tense
Sept. 22 2014 6:27 PM Should We All Be Learning How to Type in Virtual Reality?
  Health & Science
Bad Astronomy
Sept. 23 2014 7:00 AM I Stand with Emma Watson
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.