The Economic Chess Game

Battle lines drawn between economists in advance of election
Red side argue against reducing deficit too quickly while blues back immediate spending cuts
Kathryn Hopkins
Friday 19 February 2010 22.23 GMT

The battle lines have been drawn. On the red side, the economists are supporting the chancellor, Alistair Darling, by arguing that reducing the deficit too quickly could seriously harm any chance of economic recovery. The blue side, however, is backing shadow chancellor George Osborne‘s stance that spending should be cut immediately after the general election.

Leading the red side is Professor David Blanchflower, the former member of the Bank of England’s monetary policy committee who was a lone voice calling for rate cuts before the slump. Since leaving the committee in May, he has been openly critical of the Bank for failing to see the crisis coming and he recently used his New Statesman column to call for the MPC to be disbanded. He says Osborne “seems hell-bent on creating the Osborne Dip” over his plans to cut public spending within 50 days of any election.

Lord Skidelsky, a biographer of JM Keynes, is also on the red side. He has produced three highly acclaimed volumes on the life of Keynes. His latest, The Return of the Master, uses Keynes’s theories to help understand the current financial crisis.

Joseph Stiglitz, the Nobel Prize winning American economist, has in the past advised President Barack Obama on economic policy and has most recently been helping the Greek government on how best to respond to its severe financial crisis.

Lord Peston, whose son Robert broke many of the big stories during the crisis in his role as the BBC’s business editor, is another economist backing the chancellor’s plans.

In the blue corner is Tim Besley, who was constantly at loggerheads with Blanchflower during their time on the MPC. During his term as an independent member of the Bank of England’s MPC, Besley continually voted for rate hikes while Blanchflower voted for cuts.

“I don’t want this to be seen as us siding with anyone,” Besley said of the letter “the blues” sent to the Sunday Times last week. “But it does ­suggest that the Conservatives are where majority opinion lies.”

Other signatories to the letter organised by Besley include the Harvard economist (Grandmaster) Ken Rogoff and another former MPC member, Charles Goodhart. Rogoff, a former chess champion, was involved in a public spat with Stiglitz some years ago after the latter criticised the International Monetary Fund, where the former worked at the time.

Source: http://www.guardian.co.uk