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

Voting history

Greece’s elections and the future of the Eurozone

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Question 1: Do you agree that a Syriza victory on 25 January would lead to a significant or sustained escalation in spreads for other peripheral Eurozone countries?

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Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
The social problems created by the euro-zone crisis are as intense in these other countries. Grexit would increase the attractiveness of exit by others.

Devolving Income Tax Powers within the UK

Question 2: Do you agree that that there is a clear economic case for establishing "English votes for English laws" with the same tax and spending powers as the Scottish Parliament?

Answer:
Strongly Disagree
Confidence level:
Very confident
Comment:
My answer to this follows from my previous answer where I argued that the devolution of taxing powers to Scotland and Wales should be strictly limited. The problem lies in the lack of an intelligent and vibrant local democracy in what is a small nation with a representative Parliament. Political activity at the local level is limited to a small minority of the population; the local debate is weak and the talent pool small. Local politics is dominated by welfarist pressure groups. Thus devolving power to regions will lead to poor results. As for creating an English Parliament this is a non-starter in a unitarian state like the UK. Even with devo-max the role of the UK Treasury will dominate the devolved areas. Central state policy concerns everyone in the UK and devo-max makes little practical difference to this. However what devo-max does is increase the power of pressure groups for public spending because opinion is not well organised to oppose it at the devolved level, owing to the lack of good local politics. Hence more devolution equals more public spending and redistribution, paid for ultimately by the successful businesses and areas of the UK.

Question 1: Do you agree that the economic benefits of devolving full income tax powers to the Scottish Parliament and Welsh Assembly outweigh the possible costs?

Answer:
Strongly Disagree
Confidence level:
Very confident
Comment:
I look at this issue from the perspective of the political preferences of the dominant political parties in Scotland and Wales. Both of these favour higher social spending and redistribution. Hence if tax powers were devolved it is likely that taxes will be raised in both places in order to fund higher spending. This will drive capital, business and employment out of Scotland and Wales. Yet the UK is committed under the Barnett formula to equalising the outcomes of public services across the UK. As these two parts of the UK impoverish themselves, English citizens will be under pressure to raise transfers. In effect therefore net incomes (even including public spending as an offset to the higher taxes) will be reduced across the UK- not just in Scotland and.Wales but also in England. There is a parallel to be found in the taking away from local authorities of the business rate; this was being used as a (politically) cheap way of funding local services. Yet it drove business away from these jurisdictions, putting more pressure on central government for funding via the Barnett formula.

Secular Stagnation

Question 2: Do you think that current structural and fiscal policies should place a considerably greater emphasis on pushing the natural rate into positive territory?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Again, I think the definition involved is confused and so cannot really give a clear answer. If the UK and the US and related advanced economies (not to speak of the emergent economies) have no particular 'stagnation' problem, whereas Japan and the euro-zone do for the reasons given, then there is in principle a good real return to be had on capital in the former set of countries and a low or even negative one to be had in Japan and the euro-zone. the answer to this problem is for capital to flow from these countries to the others until the real rate rises in them to the world level. I would agree that in these latter two countries there would be room for stimulative policies under suitable 'reform'- which in Japan would mean 'third arrow' policies and in the ruo-zone would mean the abandonment of the whole current 'euro orthodoxy'. But my firm assessment is that neithr poltical development is at all likely.

Question 1: Do you agree- making your own definition of secular stagnation clear if you disagree with that offered here- that it is more likely than not that the advanced Western economies have entered into a period of secular stagnation?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
The definition is confused. It is either stating that there is a 'demand problem' (such as a failure of the monetary and credit system) or that there is a 'productivity/supply problem' (such as distortions in the labour market, lack of competitive entry into industry, regulative obstacles). On the facts of growth it is clear that in all western economies the 'trend level' has dropped; understanding why remains elusive but it looks like some key industries (especially banking but also matreial-intensive ones) have been hit hard by a long-lasting shock(s). As for recovery to, and growth at, a new lower trend level the UK and the US, as well as many other advanced economies outside the euro-zone and Japan, seem to be on a similar track to the past. the post-crisis recovery may have taken longe but it is now proceeding. So for these economies 'secular stagnation' does not fit- even if as always there are particular supply-side weaknesses Japan and the euro-zone are another matter. In Japan it has been found impossible to have 'structural transformation' to a service-based economy; lack of competition and regulative excess is endemic and there is political stalemate. The Abe two arrows on demand are powerful but the thrid arrow- on supply has fallen to the ground. Thus Japan counts as secularly stgnant for 'suppy reasons'. The euro-zone is also secularly stagnant. Here there are twin reasons. On the demand side the euro straitjacket plus the new bank regulative structure have caused problems for bank credit and general confidence. On the supply side hoped-for 'reforms' (such as in Italy) are slow to appear because with demand so weak and unemployment so high there is huge political opposition from losers. Looking back, it is clear that creating the euro was a strategic mistake from which the euro-zone may not recover.

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