It is getting closer to Christmas but the news keeps getting grimmer.
Japan’s GDP for the first quarter has been revised downwards to a fall of 0.5% compared with an initial estimate of a 0.1% drop. Overall the country’s GDP is down 0.5% on its level a year ago.
Meanwhile, the bad news on the British economy is piling up quicker than you can say “credit crunch”. Manufacturing output fell by 1.4% in October according to a report from Capital Economics. That is the eighth consecutive fall, making a drop of 5% since its February peak.
Everyday also seems to bring a new explanation of the crisis from a pundit. One of the latest is Joseph Stiglitz, another Nobel laureate (see yesterday’s post), who argues in the January 2009 issue of Vanity Fair (arguably a strange place for economics articles) that neo-liberalism is to blame: “The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal.”
It is hard to square Stiglitz’s argument with the reality of extensive state intervention in the economy both in America and elsewhere. Whatever the rhetoric was about the free market it was always a long way from reality. Theory and practice certainly did not coincide in this case.