Patrick Minford's picture
Affiliation: 
Cardiff Business School
Credentials: 
Professor of economics

Voting history

A “new” UK industrial strategy ?

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Question 2: Do you agree that the UK needs a new regional policy?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Again it really depends what you mean. A policy of aggressively promoting 'regional' growth (and leaning against London and the SE) involves politicians making judgements about the economy's structure for which they have no basis. However there has always been a willingness to help struggling regions to get over supply shocks- e.g. the contraction of the coal and steel industries. This makes perfect sense for a nation with solidarity. Indeed it can be thought of as a prerequisite for a successful currency union.

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Question 1: Do you agree that the UK needs a new industrial policy?

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Answer:
Agree
Confidence level:
Not confident
Comment:
It really depends what is meant by this. Much of what the new committee has said is motherhood and apple pie. The government has to provide infrastructure and supports science through various initiatives with universities and so on. R&D contributes to growth, as does human capital creation and the creation of a pro-business climate through lowering barriers to entry and to entrepreneurship. The part of the policy that invites ridicule is the 'backing of winning sectors and industries'; but I doubt whether this will gain any traction. The last government wanted to stimulate manufacturing and 'rebalance the economy'. This got nowhere predictably. However the idea that the government should pursue policies that support the business climate and underpin private investment through things government can undeniably do is good. This government will be mainly concerned with getting the Brexit policies right; among them will be good 'industrial policies' of that sort.

The Future of Central Bank Independence

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Question 3: More generally, do you agree that it is desirable to maintain central bank independence? Again focus on the near future, say next 48 months.

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Answer:
Agree
Confidence level:
Confident
Comment:
See my answer to Q2.

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Question 2: Do you agree that the traditional argument that less central bank independence leads to higher inflation will (still) be relevant over the next 48 months in Western economies?

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Answer:
Agree
Confidence level:
Confident
Comment:
Independence still remains important because the independent central bank is an institution which is effective in organising commitment to low inflation. The main problem is that we have seen in the 2000s ineffective action in curbing a damaging credit boom, as in my answer above. We have also seen the excessive rise in bank regulation and incompetence in managing the evolving crisis. Inevitably governments will need to be involved in redefining central bank mandates- preferably towards less distorting regulation and towards more effective control of money and credit. In other words the challenge is to replace inflation targeting with more effective monetary rules that avoid the need for so much regulatory intervention. However this is 'mandate dependence' which already exists. Instrument independence continues to be necessary to ensure commitment to rules.

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Question 1: Do you agree that central bank independence in the Eurozone and the UK will decline over the next 48 months?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
The commentary described above in the background reveals wide disquiet with the behaviour of central banks in the context of the run-up to the financial crisis, its attempted resolution and its aftermath. In order, central banks allowed a sizeable credit boom to develop in the run-up; it failed to resolve the resulting contraction by providing sufficient liquidity to the banking system and the Lehman collapse resulted, triggering the acute crisis downturn; afterwards central banks coordinated around a massive regulatory backlash which prevented the recovery of credit and worsened the crisis recovery process badly. These actions have badly shaken confidence in central banks' competence. Within the euro-zone the problems are wider than the ECB, with Southern Europe still weak and with large-scale unemployment. But the ECB, as the only active prosecutor of stimulus, attracts the blame for failure. In the UK the Bank has also failed in these aspects. Its intervention in the Brexit debate was seen as politically inspired and at variance with its mandate. The QE programmes in the UK and the euro-zone are highly unpopular with savers; this has added a further element to the discontent. Nevertheless, both these institutions have now become enormously powerful bureaucracies, having accumulated responsibility for financial stability and controls (macro-pru). Governments in the EU and the UK have many other problems to cope with and are unlikely to tangle with these bureaucracies, when they would like their cooperation over economic growth. The euro-zone may of course contract in size with some countries leaving. But this will not dislodge the ECB in the smaller zone that would survive.

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