problems require new solutions. Economic policy today in Japan, the UK and the
US is failing to produce a recovery. This is not, as is often claimed, because
old solutions are being only half-heartedly employed, but because the existence
of the new key problem is being ignored. The ex-ante savings’ surplus in
the business sector has become structural. The implicit though seldom stated
assumption of most Keynesians is that such surpluses are cyclical and will
disappear as the animal spirits of entrepreneurs return.
typical example of this assumption is found in a recent article by Jonathan
Portes and John Van Reenen
which claims that “...the textbook prescription – followed successfully by the
1992-1997 government – (is) that the deficit cutting should follow, not
precede, sustained recovery.” But the assumption that sustained recovery will duly
arrive in reasonable time depends on the current savings’ surplus of the
corporate sector being a cyclical problem. However, as the evidence clearly
shows, corporate behaviour in the UK and US has changed so that the cash
surplus of the business sector has become a structural phenomenon. Attempts to
offset the surplus in the business sector by fiscal means alone would therefore
require large semi-permanent deficits and thus provide no prospect of national
debt ratios being brought under control within a...
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The Sales Managers' Indexescovering all major Asian, African and Latin American emerging markets, plus North America.
World Price IndexPPP exchange rates for the worlds top 10 economies.
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