Brexit and its “devastating” impact on supply chains, especially for food, sets the UK apart from "every other country", a leading economist has declared.
Writing exclusively in The Herald today, former Bank of England Monetary Policy Committee member Danny Blanchflower also highlights his view that this effect cannot be fixed by rises in interest rates.
READ MORE: Danny Blanchflower's column in full
And the labour market economist, who is in Scotland this week for the University of Glasgow's Adam Smith tercentenary celebrations, voices his belief that MPC members who have been voting to continue pushing UK base rates higher are living in “Gagaland”.
READ MORE: Ian McConnell: The inconvenient truths of Brexit for ‘think big’ Johnson
Mr Blanchflower, who is Bruce V. Rauner ’78 professor of economics at Dartmouth College in the US and a visiting professor at the University of Glasgow, highlights "12 successive rate increases and asset sales by the MPC, which appear to know not what they do".
He says: "Sadly, these rate rises have hardly had any impact at all on inflation - which was caused by supply chain issues after the pandemic, the Ukraine war and Brexit. Brexit and its devastating impact on supply chains, especially for food, is what sets the UK apart from every other country. This can't be fixed by rate rises.”
READ MORE: Denial after denial from brass-necked Tory arch-Brexiter
The economist adds: “Unsurprisingly, in their own survey, confidence in the Bank of England is at record lows. Then Chancellor [Jeremy] Hunt said it would be just fine to create a recession? Really? I don't think so. We know that inflation hurts but purging it comes at a cost which turns out to be worse.”
READ MORE: Ian McConnell: Boris the Menace image evoked as sad Tory Brexit takes comic turn
Mr Blanchflower notes that MPC members Swati Dhingra and Silvana Tenreyro voted against a rise in UK base rates at the May meeting. The other seven MPC members voted to increase rates by a quarter-point to 4.5%.
He says: “Two dissenting members of the MPC, Swati Dhingra and Silvana Tenreyro, who care about ordinary people, know what is going on. At the last meeting they voted against a rate rise arguing that they expected inflation to plummet soon plus all the rate rises hadn’t actually had time to work yet…The rest [of the MPC] are in Gagaland.”
Citing recent comments from former US Secretary of the Treasury, Mr Blanchflower adds: “Larry Summers in a BBC Radio 4 interview this week got it spot on. Brexit, he noted, is an ‘historic economic error’ that damaged the UK economy and drove up inflation. The problem for the MPC is that 12 rate rises have lowered the CPI [inflation rate] by around a percentage point – rate rises can't compensate for inability to import cheap food and materials. The treatment isn't working but it seems more of the same is planned - why?”
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