The State and Recession: solution or part of the problem?

Saturday 31 October, 10.30am until 12.00pm, Courtyard Gallery

The current crisis has been welcomed by some as heralding the end of ‘neoliberalism’: the free market, free trade agenda that supported light touch regulation, tax cuts, privatisation, foreign direct investment and fiscal discipline. In its place are calls for a return to progressive taxation, government spending and subsidies and ever-tighter regulation of banks: the state is back and, commanding nearly 50 per cent of the UK economy, it’s big.

Despite Hayek, Friedman and the rhetoric of neo-liberalism - rolling back the state, trickle-down, consumer choice and market efficiencies in the public sector - the state has actually never gone away. Public spending under Margaret Thatcher continued to grow and social protection expenditure in particular has nearly doubled in size in the last 20 years to some £170bn. Now, with UK public sector net debt standing at some 55% of GDP and tax revenues at only 38%, there is a huge annual deficit to fill on top of the massive public debt already incurred by Labour’s fiscal stimulus package.

Keynes once noted that “It is often said by wiseacres that we cannot spend more than we earn ... It would be much truer to say that we cannot earn more than we spend”. So are public sector cuts and swingeing tax rises really the only solution? There could be a case for state investment in support of productive growth: the same state that built Docklands and the financial sector could be building super-fast trains and leading the world in aerospace. Must the state serve to regulate against capitalist excess, greed and exploitation? Will the state lead us out of recession, the vanguard of a new fairer capitalism, or is it nothing more than yesterday’s solution to what are much deeper problems?

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Dr Vince Cable
deputy leader and shadow chancellor, Liberal Democrats; author, The Storm: the world economic crisis and what it means

Phil Mullan
economist and business manager; author, Creative Destruction: How to start an economic renaissance

Martin Wolf
associate editor and chief economics commentator, Financial Times; author, Fixing Global Finance

Angus Kennedy
convenor, The Academy; author, Being Cultured: in defence of discrimination

Produced by
Angus Kennedy convenor, The Academy; author, Being Cultured: in defence of discrimination
Stuart Simpson financial services professional; researcher and writer, emerging economies and quantitative finance
Recommended readings
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Hyman P. Minsky, McGraw-Hill Professional, 1 May 2008

The Myth of the Neo-Liberal State

Far from the market having a voracious capacity to extend its influence over all aspects of contemporary social and economic life in the UK; the state is directly engaged in propping up an un-dynamic private corporate sector and ensuring employment for many of those working within it.

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