Kate Barker's presentation from NICVA's Centre for Economic Empowerment masterclass on government's economic levers

1. Understanding Government's Economic Levers Kate Barker NICVA CEE September 16 2011

2. Topics Macro policy tools: fiscal monetary Micro policy tools: labour market competition tax structure skills infrastructure Which administrative level deploys?

3. Limits of economic knowledge “But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time – perhaps for a long time.” (Keynes, 1930)

4. Post WWII macro policy approaches 1950s/60s: fiscal activism 1970s: oil crises/monetarism 1980s: fiscal austerity/Washington consensus 1990s: inflation targeting/micro reform 2000s: financial liberalisation/globalisation 2010s: age of austerity/financial repression

7. Brussels, Westminster, Belfast Fiscal policy : Westminster Brussels Monetary policy:Westminster Taxation: Westminster Brussels (some VAT, investment-distorting taxation) Competition policy: Brussels (market power/state aid) Westminster (domestic market/consumer detriment)

8. Brussels, Westminster, Belfast Labour market: Brussels (social contract, WTD) Westminster (most employment legislation, minimum wage, NICs) Belfast (training credits?) Skills:Belfast (schools, universities) Transport/infrastructure/planning: Belfast Regional policy: Brussels (Selective Financial Assistance) Belfast (Invest NI)

9. Has policy worked? GDP per capita – annual growth rate Source: International Monetary Fund (IMF)

10. Unemployment – a success story? Pct Source: Office for National Statistics

11. CPI inflation – a less happy story? Percent Switch to CPI target MPC formed Source: ONS

12. Globalisation speeds up Exports and Imports as % of GDP Source: IMF

13. Regional convergence? Gross value-added per head: UK average =100 Source: Office of National Statistics

14. What don’t we understand? Effects of globalisation Impacts of fiscal policy What really matters for growth How financial markets behave Future of technology Environmental costs/benefits How people behave