Does austerity work? (MSc Public Policy lecture)

today we're going to talk about crisis and austerity so we're going to talk about crisis in general but mainly the 2008 crisis and what caused it and then the austerity policies that have followed in different forms in different European countries mainly but also North American countries and how these can resemble a lot of the kind of reforms that have been asked by the IMF and other international institutions in the global South for many decades now first of all what is a crisis would make something an economic crisis you have a recession right so that instead of having growth in the economy we have negative growth so GDP the gross domestic product goes down rather than up GDP being what is made in in the economy in in one year we have many crises or financial crises right so they come from the financial system that was certainly the case with the 1997 Asian crisis and it's it was the case in the Argentinian crisis in 2000 and it's something what's the case with the 2008 crisis well crisis all caused by can a boom and bust so this goes back to the first crisis capitalist crisis which was in tulips in the Netherlands in the 17th century which was basically there was a boom in the price of tulips so lots of people got into wanting to sell tulips and then the price is crushed and there was a big big crisis so something becomes very profitable so lots of people get into it to selling it and then that deflates the price so that of course is the bust there's nothing new there right that has been going on for a long time so you have this distinction between what happens in the financial system and then how that effects the real economy okay so this crisis in 2008 certainly started in the financial system it was it was banks that were in trouble but then through the bailouts and other means that transferred over to the real economy and that's when it results in unemployment and poverty and so on so those things didn't happen straight away in 2008 but they have happened in in the aftermath so then there is a question about whether crises are unavoidable in capitalism so up on 2008 there were certainly a lot of people that thought that the period of big large crisis was over right it wasn't a way that economists often look at crisis as they think about it linked to the impossible Trinity so lot of crisis historically have been caused by countries seeking to do all three at once so if you think of the period after the Second World War before this kind of changes in the in the 70s we had fixed exchange rates between countries lives of the dollar was pegged to gold and all other currencies around the world were pegged to the dollar we had independent monetary policy so central bank's well in countries could have their own independent monetary policy we did not have free movement of capital okay so we had capital controls in place there was more and more capital being moved as part of globalization that that we've talked about in previous weeks so as part of part of that we have more more movement of capital that states struggle to keep control of then that was a big cause of the crisis in there in the 70s alright so that then the the way out of that was to leave the fixed exchange rate right it basically broke the exchange rates so each country have their own kind history of all the crisis there then the what became the norm was to have free movement of capital and to have independent monetary policy but not to have fixed exchange rate rise to have floating exchange rates if you think about the what happens inside the European Union or rather inside the European monetary union so in the euro area we have come see fixed exchange rates anyway and we have free movement of capital but countries in the euro area do not have independent monetary policy and that has been a problem for countries like Greece Spain Italy Ireland that would have had they had the chance would have done that different in monetary policy than what the European Central Bank has done in the crisis so then if you think about what actually caused the global financial crisis in 2008 Susan stranger Bergen British political economist wrote a book in 1986 already where she warned about casino capitalism and what it was doing a very good film that explains the casino capitalism that took place in the lead-up to the 2008 crisis is the big short you should watch it so mortgage-backed securities which were the kind of course of the financial crisis or basically you get a bunch of mortgages right home ownership is increasing fast in the u.s. in Spain in in Britain in Spain you had eighty five percent of households were nearly homeowners in Britain seventy percent so all these mortgages that that people are taking out they are bundled up together so you have a whole bunch of good mortgages yeah good customers and then the longer the this boom goes on the more lending banks wants to do right so we it's important if you're going to have a rising housing market that you get that that you get more and more people joining the housing market right homeownership is something that is good to promote but what that means because at the same time as having a expanding housing market so more and more people households becoming homeowners you also have less job security right so you know you have the job security in general has been going down so what that means is that you get people who want to buy properties who and who the bank who the system kind of needs in order to expand the system needs them to buy properties right but they are they are becoming more more precarious okay so they're in more and more precarious situations so that means that in these products of mortgage-backed securities you also have some subprime mortgages right now this becomes a bundle that is traded on financial market and that's what they talk about but although the immediate lender that lends the money knows about these risks right and these customers obviously pay high premium because they are seen as bigger risks when this is traded on financial markets the people who the investors trading in it do not know exactly what's in here right so then and then that then they trade on the risk of these being defaulted so basically you have this mortgage-backed securities then that becomes doing business on the risk when these are traded on financial markets but at the same time hiding the risk this is supported by risky risky risky lending to more and more precarious borrowers so if this is the problem that causes the crisis and if you think that you know that it's the Lending's irresponsible lending to two households that really should not be lowering that kind of money so if you think that these kinds of things are the problem that that has gone wrong then what we need to do is to regulate the financial markets so where there has been a lot of deregulation what we needed to do is to reregulate and that is you know largely what happened that was Obama's response to it that was the response of g20 was to increase that regulation much of that regulation has then been removed by Donald Trump administration in in the US but there are other sort of deeper reasons that you can see for why the crisis took place and one of the big ones that have have gained a lot of traction in recent years is that actually inequality was a very big course in itself of of the crisis and that's not least thanks to Thomas Piketty which wrote this book who wrote this book in the 21st century where he looks at a number of countries at a lot of in-depth data basically showing that inequalities have grown globally okay this is not a problem in the US or in just in the US or in Europe but it's true in China it's true in Japan it's true in a lot of big economies around the world okay so what he then says is that inequality in a capitalist system inequality is self-reinforcing okay why is it self-reinforcing because it makes more sense if you have a lot of money and you have a very unequal Society then if inequality means that there's a lot of poor people that don't really have much buying power much purchasing power then it doesn't make sense as much sense to make to invest your money in things in producing things that they could buy because they can't write because there is not that what's called demand there in the economy so it makes more sense for if you have a lot of spare cash lying around to invest it in rentier profit-seeking so rent rent seek in activities so land housing or speculative investments of of different kinds whatever they may be and what he also says is that capitalism naturally has tended towards rentier ism so we have this trend towards global inequalities that has always been part of capitalism with the one exception being in the post-world War two period so patottie comes to the conclusion that actually the only you know the only thing that I said that ever reversed this was war okay so that is his rather dire assessment of what would need to happen on the reading list this stop camera angle better stop stop hammer who also argues that inequality he very explicitly says that inequality cost the global financial crisis and he says that there are four ways in which that happens so first ruin on on the same kind of thinking that Piketty says is that it causes a inequality decreases the demand in the economy okay so there is less people able to buy stuff so there's less demand in the in the economy and the people what happens in inequality because it's not as many people that get rich as people that get poor but you have fewer people being rich and more people being poor right so the people who would spend money or who spend all the money they have or at or at the bottom and they have less so therefore there is less demand in the economy this kind of stagnant demand has led countries he says to become either debt led such as the US the UK Spain or export-led such as Sweden Germany China so countries have come to specialize in either and this kind of path dependency or being having their economies driven by debt or having their economies driven by export and in the deadly economies the spiraling household whole debt has gone out of control and you know partly to keep up with social consumption norms so you know what in this country is called kind of keeping up with the Joneses so that was happening leading up to the 2008 crisis you say but also at the same time is that happening you also have an abundance of money at the top and that incredible abundance of money then makes the people who have it more likely to engage in risky financial speculation and risky financial speculation obviously has makes for the kind of systemic risk that we that we just saw in the video clip so if if inequality is the problem well then it's not enough to regulate financial markets okay so if inequality is underlying problem that causes crisis then regulation is not going to address that you need a radical redistribution of of wealth then you have more Marxist critique of what happened which is that so yet the inequality has increased that's because of neoliberalism so David Harvey would say that you know you have crises are always recurring in capitalism they're built into the capitalist system most crisis historically have been of overproduction so that you know there's been too much too much production of certain good that has been in a boom but that this crisis now is rather because of over accumulation that has too much money being kept at the top rather than going into production a version this is the German wolf Wolfgang strike has written a couple of books in the last few years his main argument is basically the capitalism simply does not provide enough for enough people to sustain it democratically okay so in the we that it can't be sustained democratically because it's so it's so unequal and does not benefit enough people so that we will either see the end of capitalism or the end of democracy so he would use that as an argument see well this is why we have the rise of populism across so many countries right because there's not enough capitalism doesn't provide enough so if you go down that line then you become an anti capitalist basically okay so now we're going to talk about austerity which has been the major policy response in a lot of countries to the 2008 crisis and has dominated dominating policymaking in many countries in different ways as we will see so first of all I just like you to put on slide oh and tell me what is austerity what does it mean talk to each other if you want you don't have to remain silent let's talk each other and say what does what is austerity mean for countries for people what is it yeah so we've got a lot of good answers here to watch what austerity is so yeah it's about reducing the fiscal deficit right so the difference between the government expenditure and the income in any given year or time period so then decreasing you're cutting down on public spending right so it is that is what the way that that you try to reduce this fiscal deficit that you cut down on public spending policies aimed to reduce death by government okay so that's almost right it's not quite debt that we're cutting by austerity but is the debt it's aiming to cut the debt to GDP ratio we'll go into why why that is a misunderstanding of macroeconomics you can sir some people certainly say that it is and we'll go into that spending cuts or tax increases yeah that's true it can also be tax increases in some taxes have been increased class warfare certainly one reading of what austerities fundamentally flawed that is the dominating in macroeconomic certainly and political economy the dominating reading of what austerity is so austerity is a word means himself discipline three scarcity so what we're doing with scarce when when when we are through a period of in the political economy austerity means basically shrinking state expenditure with the stated aim of decreasing the debt to GDP ratio that's different from decreasing debt okay the debt nobody really realistically thinks that we can decrease the amount of pounds or dollars that the country owes okay so but the debt to GDP ratio is what what we're trying to decrease so that it's a percentage so before the crisis that other countries had GDP ratio debt to GDP ratios of about 50 percent and then they were kind of bumped up to about 90 percent and some of them have gone out higher than that since then so the case for austerity is generally led by conservative politicians who the troika for example of the European Commission the European Central Bank and the IMF although IMF has got a lot of people in there that are not too keen on austerity anymore this is the kind of political case for starett ii by one of the most colorful British politicians no suppose that I were funding an extravagant lifestyle on credit that my bank was allowing me to hire expensive sports car get a mortgage on a huge house and then it stopped lending me the money at that stage my quality of life would inevitably change I could go on as many anti cuts marches as I liked I could protest and demand growth not austerity I could call my bank manager a heartless Tory sociopath and it would still make no difference I would still owe what I owed because austerity is not a choice it's a reality a whole vocabulary here is wrong when we talk about an austere person we're describing a personality trait we're talking about someone who is stiff and Spartan and frugal but in the case of the United Kingdom austerity is not a choice it's a response to external circumstances and it's the inability to see this that creates what is perhaps the most irritating three word slogan in the whole of modern politics namely growth not austerity I mean honestly comrades if it were that easy don't you think we'd have all tried it by now unfortunately when as now we have a small majority or indeed a hung parliament you find that profollica sea becomes the order of the day folks become pricey pork barreling Affairs and each time that a cheque is written you invite 20 new demands if you can afford a billion pounds for Ulster you can afford hs2 if you can afford HS - you're gonna for a proper public sector pay rise and so on and so on and that I'm afraid is the situation that we face as long as this majority persists but none of it affects the fundamental economics the United Kingdom is still spending more than it owns to the tune of a billion pounds a week in that situation austerity is not a choice austerity is a fact of gravity so that then is kind of the case for austerity if you look at the key to - Daniel Hanna's case here is that just like a household would right the state must live within their means okay so we need to tighten our belt now very importantly no economist would say it like that okay but and we'll get back to why why that is so that is not the scholarly argument but you would hear you do hear politicians saying that okay then if you look at what has been used as the kind of scholarly arguments for starett ii there are two main ones and one is were based on a article that came out in 2010 that said that a high debt to GDP ratio in fact that is detrimental as a detrimental impact on growth so they studied a bunch of and grease and looked at the effect on on a high debt to GDP ratio and found that at the line of 90% then it becomes much harder to grow the economy okay so that states should try to stay under that 90 percent barrier and this was at a time when a lot of states debt to GDP ratios were around 90 percent or a bit over okay then you have the expansionary austerity school a group of Italian scholars that basically say that actually again by looking at what different countries have made looked at sort of Netherlands and Denmark example in the 80s and 90s showing that well that we can have fiscal adjustment so we can have austerity the cutting down on expenditure can be a good way of achieving growth but particularly when it's combined with tax cuts so somebody said early that austerity could be to increase taxes well they were they are arguing is that actually we need to cut expenditures at the same time as we cut taxes okay and then we can have this kind of expansionary austerity so we can have growth even though we are we are cutting expenditure we have an austerity now in reality we've had most European countries have had some form of austerity since 2010 so you have you can put them into categories you have Greece Spain Ireland Portugal and Italy that have had troika involvement okay so the IMF the European Central Bank and European Commission that has been called by Liam Stanley has been called disciplinary austerity okay when it is to some extent forced from outside now some of these countries have had actual authority measures enforced on them and some of them have had just involvement in the Alec Spain and Ireland mainly reforms to the financial market but that nonetheless the financial system but they've had this kind of external pressure that you can call disciplinary austerity then you have other countries like UK Netherlands France that have had what he called anticipatory or charity okay so that we're not talking about that it's forced from the outside but it's the British government itself that decided to have have austerity you in the u.s. in Canada you also had a significant austerity but the that particular term particularly us has not been used as much more more in Canada now then going on to the critique against austerity right and we you can see this at different levels one of them you can see it's an empirical critique which is lazy just looking at what is happening with austerity and saying it's not working okay so austerity has failed to deliver stable or significant growth right now you know particularly in Greece you know Greece is nowhere near anywhere recovered it's all the transformed countries much for the worse and you know with no clear sign of of that changing but rather that it's been a huge radical reform of the Greek state that's what austerity has been there then you look at this you did then scholars of dealt with these particular claims that were made on the previous slide right so for example the ninety percent debt to GDP limit was proved it was actually proven although it was doubted by many scholars when when that article first came out it was proven a few years later by a PhD student I think Cambridge who showed that actually it was based on miscalculations even the basis for that claim itself was basically wrong right and the authors have admitted as much as much sense so there is no kind of magic limit where debt to GDP becomes becomes particularly problematic nobody would say that it's good to have a high debt compared to GDP right nobody would say that that's something to strive towards but what most economists would say most macro economist is that no growth is a lot worst then then high debt okay so that what we need to focus on is growth so if you think of the the relationship between death and GDP has been the problem it's a lot easier to increase growth than to decrease debt right easier to increase GDP and to decrease debt and therefore it makes more sense to to focus on on that they also critique there's also a lot of critique against the concept of expansionary austerity and saying that is that that is based on poor research methods and that actually when you look at it you can't see any cases where you can really say that austerity has led to growth so we're in a situation where a lot of economists and work for the IMF and IMF themselves often expressed that there is has been too much austerity and that it's actually being counterproductive and that it has stifled growth still IMF s part of the troika and are also you know pursuing austerity policies in many parts of the world so you can't say that IMF as an institution is entirely against austerity but there's certainly a lot of people within it that that are and the kind of consensus in macroeconomic circles is that it's not working right so that's kind of looking at what's happening and saying it's not it's it's not working then you have a theoretical critique of austerity that tries to explain that you know it's not just that austerity isn't work in if that was 30 cannot work okay so those claims are kind of different one is just looking and saying it's not working the other saying well it's not working because it can't work and they largely are largely based on on Keynes and Kenton ISM when you have some of the sort of key authors here that have written about austerity so he says that comparing households to states is a fallacy of composition okay so the states and households do not have the same role in the economy okay households can't make money to start with the state can make money and in in a state everything that you know money goes around in a state right in a in a household once you've spent it you've spent it but in a GDP the same pound coin and it's counted several times right in any but so it's you can't really compare those two things so austerity is not working because it can't because it might misunderstands the role of the state as an engine in the economy which is what life says and that is because it doesn't understand the multiplier effect so in a national economy I'm the state I decide that teachers are gonna get a pay rise now because teachers don't make huge amount of money they tend to spend all the money that they have right so I'm paying you as a teacher money you then go out and spend that money so that's already that money has been spent twice right same money they spent twice and then that enables Patrick here to go and have some home improvement so he builds gets a builder in to build something in his house and that and gives another so that money goes around all the time and so on at some point the money leaves the economy right and it depends on the economy of the country how how strong the multiplier effect is okay so in obviously if you then go and buy something of Amazon with that money then probably it leaves the system or something right so at some point it finishes but there is a multiplier effect there that means that once one pound that the state spends becomes more than one pound in the economy so what what Keynes said and what Keynesian say is that the time for austerity is so to cut state spending is it's the boom when things are going well not the bust because when we have a crisis when we need growth that's what we need is to for the for the state to spend more money and to take on more debt then they will say that so we can think of a lot of when we talked about inequality be being a problem that is what a lot of Kansans say so that the inequality was a large thing that caused the crisis so austerity worsens inequalities right it's deepens inequalities and therefore it's basically just exactly exactly the wrong thing austerity it's big in Europe it's getting big here everyone in the Prime Minister has been talking about it but what is it it's the common sense on how to pay for the massive increase in public that caused by the financial crisis mostly through the slashing of government services first you take on that then you pay it off sounds simple right unfortunately it's never that simple because I standard it confuses virtue with Vice let me explain why now that supposedly the worst of the crisis is over there's debt everywhere credit cards mortgages government debt this is the part you know but we need to remember how we got here two years ago the world's financial system exploded the crisis blew a 2 trillion dollar home in financial space-time and collectively the rich governments of the world spent lent or guaranteed between 5 and 50 percent of their country's annual products saving the banks given this you might think that a period of austerity is a good idea but to see why it's not you have to think about the world there's a series of balance sheets I know stay with me whether you're a person a household a firm or a state you have assets and liabilities a balance sheet before the crisis in 2008 everyone took on a lot of debt but then it made sense for many of us to take on that for example the bottom 40% of the US income distribution hasn't had a real wage increase since 1979 really that's true corporates especially banks did the same but ended it to make money rather than to pay the bills it's called leverage which is pretty much that seen from a different perspective levering up it's a little like going double or nothing in blackjack if you've taken on debt from a mortgage you hope your house will increase in volume if you think there's a high chance the value will increase you might go off take on a bigger mortgage well like blackjack there's always the risk of losing so the bats created mountains of debt the levered up 2030 times it was likely pushed in all the blackjack ships but each chip was just an IOU so when all went wrong governments felt they hard to step in and build them up because they'd become too big to fail this is where the balance sheet problem comes in and why the common sense of austerity is not so simple if you levered up in debt and your assets lose value your house or your housing derivatives portfolio if you're a bank your balance sheet as a whole is now underwater when this happens whether you're a corporate treasurer or a single mom if you've got cash coming and you'll want to pay down the debt to bring your balance sheet above water rather than spend money which means no one is spending and that's when the government comes in if the whole private sector is deleveraging paying back debt then government automatically levers up to compensate tax revenue Falls so the deficit increases unemployment benefits kick in and public consumption takes the place of private consumption now make no mistake the problem is that there is too much of across the board and we need to clean those public and those private balance sheets but all these pieces are connected if the public sector cleans its balance sheet at the same time as the private sector then the whole economy craters it's called a fallacy of composition what's good for anyone household or firm or even state is a disaster that we all try it at once so why then have most governments of the world decided to do exactly this and all at the same time well remember that two trillion dollar hole in space-time the answer is that someone has to pay for it and no one especially the banks wants to so governments have to either increase taxes difficult or slash services easier especially when the policy has the common centering of virtue about it austerity the pain after the party becomes the kicker the hangover of austerity is not going to be felt the same across the income distribution earlier this year of the forum for the governments of the world's most economically developed states the group of 20 called for growth friendly fiscal consolidation waits like a unicorn with a bag of magic salt is a nice idea but it's pretty much bull precisely because this consolidation doesn't had everyone in the same way remember those folks in the bottom 40% of the income distribution that didn't really benefit from the financial boom all they got was debt and the illusion of prosperity they are the ones that actually use government services those services that are about to be sold virtuously consolidated those are the top end of the income distribution those who made the mess in the first place don't so where does this common-sense virtue of a stutter they leave us it leaves us in a cycle where those are the bottom end of the income distribution pay for those at the top with the same stagnant and skewed incomes that now buy less in a more unequal and unstable economy there's a town for this class politics and it usually ends badly this common sense of aesthetic of reducing public debt all at once through slashing services involves a question of equity who pays and who doesn't those who made this mess won't while those who already paid for it through the bailouts will pay again through austerity this is why I started is not common sense it's a nonsense and a dangerous one of that you okay so the fact that if everybody cuts spending at once then the growth is not going to come from anywhere right and you have lost through austerities that you we have when government are trying to cut down on their debt to GDP ratio that ends up with households taking on more debt right so in most of these countries household debt has increased what dramatically sense in in austerity it also from a Keynesian perspective makes a lot more sense if we're going to pump in money to the economy it makes a lot more sense to pump in money at the bottom of the income ladder right why because the multiplier effect and the multiplier effect is a lot stronger if you give money to people who are going to spend it then if you give money to people who are not going to spend it okay so that means that that basically if we want to get the economy going we want to do it in a way that decreases inequality by pumping that money in at the bottom and that's quite different from what has happened look at that so then there's a political critique against austerity right so this is kind of a theoretical economic critique you have a political critique that mark life goes into as well but it says that you know the crisis was caused by wall street right so it was caused by Wall Street by mortgage-backed securities but it by the trade in in these securities but the subprime crisis so it was caused by wall street so it's simply wrong to make those worst off in society pay the price for it right it's just morally wrong then what Wolfgang Strait would argue that it's divisive right of course is causing this level of poverty and inequality is divisive and it causes social unrest which explains the political crisis in in many countries and that you know it's morally wrong to cause this much dispossession okay so today was reset one-third British children live in poverty okay one-third of children in Britain live in poverty those come out today so you know you have the increase of child poverty so that that kind of this possession is just wrong then and and that comes onto that the cost of austerity is unequal right so it hits the already disadvantaged groups harder and I'll come into that and talk about concept of urban austerity in a second then you have thinking about a lot of a lot of scholars think of austerity us fundamentally neoliberal right so that Jamie Peck calls it's sort of an intensification of neoliberal restructuring strata strategies so in all the things that were already kind of happening having been intensified Philip Murawski came up with a famous book in a few years ago now that is never let a serious crisis go to waste so he draw some thinking by Milton Friedman that talks about you know how we can use crisis to make the previously impossible things politically possible and that austerity represents that so that austerity is actually something that a lot of people have wanted to involves cut that a lot of politicians or political forces have wanted to do for a long time anyway and the crisis enable that through austerity so in that sense they would ask you know it's austerity actually meant to solve the crisis which you know it isn't to doing or is it rather used in order to kind of restructure the state we ain't change the way that this state works and in that sense it's austerity meant to create growth which you know it isn't or is it meant to protect the profits the crisis happened because the states bailed out the banks right so that's how the GDP debt to GDP ratio when increased by so so much in in such a short space of time was because the banks were bailed out right so the profits of the financial sectors were kind of were protected so is that what water austerity is aimed towards and article by Green and lavery so growing on this that you know if we want to to produce growth we should pump in money at the bottom of the income ladder well what's happened the pumping that has happened through quantitative easing has gone straight into the financial sector right and who from the financial sector will they show that in this country it's about the five top 5% of UK households benefit when the financial industry growth gross right and they show that the shares of the of the banks and the financial sector grew after each round of quantitative easing in in this country then Jamie Peck developed an idea of austerity urbanism where basically says that it's in cities where austerity is felt more than anywhere else so it's here we have the housing slump rates the the crashing housing prices and evictions that that follow from that we also have that in areas in cities where people are more reliant on public services okay he also says that cities are home to many preferred political targets so we can think of the undeserving poor if 30 has been politically enabled different in different countries okay so in Spain for example it was just like saying we want to do this we just have to have to do these cuts because we are forced to by outside forces right but in Britain when austerity was brought in it was there was a lot of talk about sort of benefits sheets and that people were living off benefits and it didn't have to work and so on so a lot of basically talking about undeserving poor and they tend to be more concentrated in cities and so are the minorities and marginalized population so for Peck cities or where austerity bites he also says then that it's city governments that deliver austerity okay so a lot of the spending cuts comes down to local governments to do and that's so it's in that sense austerities downloaded to to cities we have again in this country in in the UK we have also the idea of localism being driven by the coalition government and in the Conservative government that that for Jamie Peck becomes a way of sort of passing the buck down okay so we talk about it in terms of local democracy but with much less money to do anything so it becomes a kind of pretext and the effect is that it deepens equality between inequality between cities some cities are large they have different consorts of income different kinds of access to credit and different kind of leverage to cope better with with the crisis on their own rather they have different abilities to cope with less money from from the state whereas other cities have fallen behind and that's very visible in the u.s. we have you know cities like Detroit going bankrupt whilst other cities like in Oh Los Angeles with different kind of economy doing you know alright not suffering as much from that kind of thing and you have the same thing in Britain with some cities being much worse off and Bristol actually you know doing fine in in many ways but obviously come in comparison but obviously if you look at inequality within Bristol that has has increased dramatically but Bristol is is better positioned than some other other cities in in the country but certainly that it also it drives in deepest inequalities within cities right because a kind of state support is its cut while finance and other assets grow so housing prices have been increasing right so the people that are plugged into the housing market I've kind of on in total been been doing all right whereas the people who are not Hammond so in Britain you've had a lodge largely growing inequalities between homeowners and non homeowners and one study by Cunningham and Savage in London show that it's people that work in Business and Finance unlegal have been winners and other sectors lose lost out and they show that the looking at where these people live in different parts of now we're gonna have a little quiz so telephones out please and go into Kahoot docked IT and you should be able to enter this code all right I'm gonna start now so which banks downfall became a symbol over the 2007 2008 crisis yes most of you got it right was the Lehman Brothers which country has the lowest homeownership rate in the EU tricky question right okay we think of Germany as a rich country we think of homeowners as rich but Germans has the lowest rate of homeownership in the EU they are an export-led economy if you have a high rate of homeownership that's more depth in the economy and so you have much more consumer debt and that's not the way that Germany wants to go down so they are yeah about 40% homeownership rate in Germany the highest home ownership in the EU is Romania Sweden UK it's got about had 70 about 70% but that has been going down since the crisis is probably closer to 60 now something but yeah Germany have the lowest homeownership rate and there is that is connected to the way that the economy works is part of it jack where's jack hold on Jack ROG keep it up how much do Chinese households save as a percentage of disposable income these are the stock images offered by the app so all right a lot basically Chinese households say beloved 35 percent of disposable income it goes in savings how much the British household save as a percentage of disposable income it's actually less than 0% is - North point nine percent of disposable income saved by the average British households that obviously is unequal right I mean the people at the top obviously save a lot more where the people on the bottom go a lot more - so right we can see that it's built on a different kind of economy right this is a death led economy in Britain whereas the Chinese economy is a very much export-led okay Simon well done but Dan just hit on the streak for right which g7 country has a highest debt to GDP ratio tricky one obviously Japan by one mile sucks 250 percent to GDP or something like that its sky-high it's been going up and up and up since the Asian crisis and in 1997 italy's is also very high in the us's and you all of all of these countries have high I'm no expert on the Japanese economy but I think that it's an it's an export-led economy if we would look at for example the amount of household savings that Japan has to it would they would also save a lot households not as much as as the Chinese but no it's it is more of an export-led economy so but yeah it's basically but at the same time the industry has been in trouble since no you know the crisis in 97 and has never recovered so they are basically staying in within high high debt to GDP situation so more than double the rate of the UK what percentage of Greek youths are unemployed all right most of you right there 43% still so hence a lot of talk about a lost generation or just in Greece but in a load of a load of southern Europe with very high unemployment so it was much higher at the heart of the crisis but partly because a lot of young Greeks have moved to other parts of the of Europe it is now it is now lower but still 43% Symonds still in lead which country has the lowest unemployment rate right not many of you got that what UK has very low unemployment right rate you wouldn't think it but UK has a lot of underemployment right so people are not working as much as they want people or do you have a lot of in work poverty in the UK which you won't have in Sweden but but in terms of actually registered unemployed people UK or lower is lower than all of these countries it's narrow the leaders narrowed but who is so much here is the managing director of the IMF it is indeed christine lagarde at the recent international summit there was a good picture of all the world leaders and was Teresa main christine lagarde where I think the and Angela Merkel were the only women in there so yeah Christine Lagarde has been for a few years now but who wrote austerity the history of a dangerous idea have you paid attention basically so yet multiplies that is only the most cited book and famous book about austerity he was the guy who was talking earlier who willing up a safe leader Jas but who is not part of the troika yes it's the World Bank so to troika is European Central Bank International Monetary Fund and European Commission the World Bank is not so json' it I'll get your prize often world chocolate or something like that well done right that is all for today I'm more than happy to take questions outside or thank you

Channel: School for Policy Studies, Uni of Bristol

Views: 1,549

Rating: 4.8461537 out of 5

Keywords: austerity, financial crisis, economics, mark blythe, capitalism, inequality, Keynes, neoliberalism, Keynisian, public policy, school for policy studies, university of bristol, 2008 crisis, troika

Id: VFqR2lY07Pk

Length: 53min 15sec (3195 seconds)

Published: Thu Feb 14 2019