Are We Heading For a Fall?

[chlamor]

Are we heading for a fall?
Retail sales crashing. Manufacturing output tumbling. House prices stalling. Debt levels rising.
By Philip Thornton, Economics Editor

18 May 2005

Gordon Brown has used his first major speech since Labour's election victory to insist that he would not let his record as Chancellor be wrecked by the global economic turmoil swirling around Britain. Last night he pledged to keep public spending under control, block excessive public-sector pay demands and push through reform of state services.

But his comments came amid mounting concern that after eight years of stability under Labour, the UK faces the prospect of a sharp economic slowdown.

Within days of Labour's election celebrations, the economy has started to look very sick. Last week saw a rash of shockingly bad figures pointing to a slump in retail sales and manufacturing output and stagnation in the housing market. Several high-street names warned that sales had fallen and profits would be hit. The Bank of England admitted it had been "surprised" by the speed of the high-street slowdown. Labour campaigned on its record of strong, stable growth and low inflation, but economists in the City are queuing up to cut their growth forecasts for this year. Eager to reassure a worried audience, Mr Brown told business leaders at a CBI dinner: "In these challenging times of high oil prices, current account imbalances and a slower rate of growth in , we will steer the economy on a stable course. Wage discipline will at all times be demanded in the public sector.

http://news.independent.co.uk/business/news/story.jsp?story=639339

[rpannier]

1. And I don't have a problem with his approach

as long as everyone is giving to get through the potential crisis. I'm not interested in being told I have to give while some schlep making 1,000,000 a year is getting a huge tax break.

[Teaser]

2. Do you live in Great Britain?

nt

[dArKeR]

3. Out with the old economics and in with the new

Most academic economics rely on concepts laid down at the beginning of the 20th century by the British economist Alfred Marshall, who said that "nature does not make leaps." Yet we economists find ourselves increasingly disturbed by the apparent inadequacy of the neo-Marshallian toolkit that we have built to explain our world.

The central bias of this toolkit is that we should trust the market to solve the problems we set it, and that we should not expect small -- or even large -- changes to have huge effects. A technological leap that raises the wages of the skilled and educated will induce others to become skilled and educated, restoring balance so that inequality does not grow too much.

So a country where labor productivity is low will become an attractive location for foreign direct investment, and the resulting increase in the capital-labor ratio will raise productivity. Wherever one looks, using Marshall's toolkit, one sees economic equilibrium pulling things back to normal, compensating for and attenuating the effects of shocks and disturbances.

http://www.taipeitimes.com/News/edit/archives/2005/05/20/2003255895