Andy Haldane

In today’s world of “polycrises”, we can hope for renewed macroeconomic moderation, or a spontaneous growth spurt…..hope is not a prudent policy strategy. It is time to reconfigure our safety nets, in finance and beyond, and reinvigorate capitalism in anticipation of the next big crisis. – Andy Haldane- Financial Times

Economists don’t talk simply but Andy Haldane’s message to us as we come back from the Easter’s break is simple enough – it’s time we stood on our own two feet.

Haldane, who used to be chief economist at the Bank of England is now in charge at the Royal Society of the Arts. He compares the interventions by Government to ease the impacts of COVID and the resulting cost of living crisis as lessons learned from similar shocks in the latter years of the 20th Century. But he says we are now paying the price as Government tries to quell rampant inflation and a legacy of expectation that we will be bailed out – whether as individuals or as businesses.

Without a prolonged period of macro-economic stability as we did in the Blair/Brown years and again in the period following the financial crisis, we will be in a “doom-loop” that sees us plunge into ever worsening crisis.

And the period of stability needs to be accompanied by a genuine growth spurt within our economy to get us back on our feet.

The scale of the  bail-out in developed countries is staggering . Haldane tell us that during the pandemic, quantitative easing in major central banks was expanded by over $10tn and fiscal policy by over $7tn.

Direct support to households and businesses, in the US, UK and eurozone alone, amounted to around 25 per cent, 20 per cent and 12 per cent of national gross domestic product, respectively.

During the cost of living crisis, support to households and companies across Europe averaged a further more than 3 per cent of national GDP. This support dwarfs the equity injections to banks in 2008/09.

Haldane paints a picture for us , as we return to work, of Britain in a state less able to meet further financial shocks and subdued by years of social insurance which has dampened our entrepreneurial zeal.

Andy Haldane is sounding today, rather like Tony Blair and Gordon Brown sounded in the 1990s. Are we going to continue in the doom-loop or can things only get better?