Gordon Brown is right to lambast the architects of fiscal austerity for killing off the recovery brought about by the prompt and coordinated efforts of the G20 governments to prevent a rerun of the Great Depression (World is ‘sleepwalking to a new financial crisis’, says Brown, 13 September). But why did the progressive left in Britain fail to repel the fiscal conservative backlash? One contributory factor was Brown’s ill-judged decision to step down as leader of the Labour party when he resigned as prime minister after the 2010 election.
This unforced error precipitated a Labour leadership election that left the incoming coalition government unchallenged at a critical time and was compounded when Brown’s successor, Ed Miliband, appointed Alan Johnson as shadow chancellor, instead of the better qualified Ed Balls. By the time that mistake had been corrected, it was too late: the public had accepted the case for fiscal austerity.
David Purdy
Stirling
• The real alarm call from Gordon Brown is not that we are sleepwalking into another financial disaster – which is true – but that those trying to sort out the next crash will not have available to them his brilliant solution of dumping the bill on working people. They are still paying for 2008 and he knows it (Annual pay still £760 lower than before the crash, says IFS, 13 September).
David Beake
Budock Water, Cornwall
• Larry Elliott identifies debt as a potential catalyst of the next financial crisis (Analysis, 12 September). Bearing in mind the double-entry bookkeeping system on which all banks and national economies depend, this excessive debt means there is also excessive money in national and international economies. As Rogoff and Reinhart (among others) have shown how much financial information is readily available today, economists should be able to develop a model that can demonstrate the point at which both the excess of debt and the excess of money become a threat to international financial stability. The exercise would, of course, identify the concentrations of excess money. This implies that those with extreme wealth would then be exposed as the principal cause of financial instability.
As the extremely wealthy fund the institutions where economists are taught and where many of them subsequently work, it is not surprising that economists have little to say about excess wealth.
Martin London
Henllan, Denbighshire
• Karen Bradley’s situation (Blunder baffles both sides in Belfast, 8 September) reminds me of an old joke. Who is the odd one out from the following? The chancellors of the exchequer George Osborne, Alistair Darling, Gordon Brown, Norman Lamont, John Major, Nigel Lawson, or Terry Wogan. The answer is of course Terry Wogan, but why? He’s the only one with a banking qualification. Early in his life he worked as a bank teller.
Bernard Watson
London
• Are the problems of European cooperation involved in Brexit so great they warrant the British government’s obsessive attention at a time when economists are pondering the enduring structural faults of world markets in respect of the Lehman crash? On budget day in 2010 (I discover from a cutting found on the floor), Larry Elliott of the Guardian was pointing out that Alistair Darling could end the UK’s destabilising property bubbles with a land tax as proposed in the 1909 radical “people’s budget” of David Lloyd George.
As the Lehman collapse spread from a series of sub-prime American property bubbles the same year, it may be that Larry Elliott, and Lloyd George (and Adam Smith!) were prescient in favouring a land tax in order to prevent governments bribing voters with high property prices. Governments deliberately encouraging house price inflation should stand alongside the new-wrought economic sins that Justin Welby condemns if not least for their malignant effects.
DBC Reed
Northampton
• Robert Skidelsky (Ten years on, we need to get ready for another crash, 12 September) offers a timely, wise and eloquent restatement of the case for a return to a social democratic Keynesian approach to macro-economic policy, correctly observing that austerity is self-defeating, and risk poorly understood by both mainstream economists and by the financial sector generally, especially the banks that created the conditions for a spectacular financial crash in 2008, and are almost certain to repeat it in the near future, given the absence of effective regulation.
At the time not a single mainstream economist of any repute was willing to stand up and be held to account for the appalling failure of their laissez-faire neoliberal theories, a fact that seems to have gone unnoticed. Skidelsky has therefore provided a salutary reminder that the rightwing economic ideologues providing advice to the present and previous governments have neither the explanations nor the solutions to complex economic problems that cut right across society.
Keynes, who was essentially a pragmatic economist who practised what he preached (he made a large fortune for Kings College Cambridge through applying his knowledge of mathematical risk and probability to stock market investments during his time as bursar), would have been horrified but not surprised by the reckless behaviour of bankers – after all, he had witnessed it at first hand in the 1920s and it led ultimately to his magnum opus The General Theory of Employment Interest and Money, the closest that any economist has ever come to explaining how the economy really works.
It is a great shame that his wisdom has been dismissed as irrelevant by today’s unwise politicians and their poorly educated economic advisers at the Treasury. However, all is not quite lost – John McDonnell says he will sack them all should he become chancellor! Fingers crossed for that!
Adrian Berridge
Clacton-on-Sea, Essex
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