Obama versus Osborne

If you would like a bit more compare and contrast (in the wake of Perugia versus Bristol, try Barack Obama and George Osborne in the sphere of economics. The former just gave a State of the Union speech (video or text in which he made a forthright case for America to expand fiscal expenditure in order to invest in infrastructure, in new commercial technology and in education. He grounded the case in the context of a rising geopolitical challenge from China (following the recent visit of Thunderbirds cameo Hu Jintao) and a US unemployment rate of 10 percent. He indicated the requisite funds ought to come from (in relative international terms) a less absurd fiscal subsidy for US oil companies and reduced tax breaks for the distinctly rich (following 40 years of decisions in their favour). Perhaps most important, he said all of this in the country which already has the world’s most competitive large industrial companies.

Over to Blighty. George Osborne, our to-the-manor-born Chancellor of the Exchequer, this week greeted the news that the British economy shrank in the fourth quarter with a promise not to entertain any expansion of investment. Instead, George’s plan for economic rejuvenation and job creation is to suck a boiled sweet and see what happens. Britain has fearfully few world-beating corporations outside of finance and legal and accountancy services (which largely serve the finance sector), but George can’t see a case for investment to nurture more of them. New world-beating corporations will arise from the vapours, according to the 101 neoclassical economics that George was spoon-fed at school and university. He says the Q4 shrinking economy was the result of bad weather, and one assumes he thinks the unemployment rate is the result of indolence and immobility among the lower classes.

Still, methinks it won’t much matter that George understands little about the world. The British government does need to cut recurrent expenditure after the excesses of Blair’s champagne socialism. Meanwhile, my bet is that George’s failure to make strategic investments in infrastructure and technology will be remedied later this year when Britain follows in Obama’s wake and increases capital spending. Where America leads, we follow. When was the last time that Britain influenced US policy? Keynes?

Worth reading: Robert Reich makes some good points about the pieces of the puzzle that Obama did not address in his SOTU speech in the FT (subscription likely needed):  Reich, who was part of a government that as I remember did sfa, is a little too harsh: Obama did touch (lightly) on the income distribution question.

After writing this, I see that in the FT Martin Wolf seems to have reached the same conclusions about George.

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