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David Blanchflower policy on Where next for the UK economy?

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 30, 2008

Bank of England policy maker David Blanchflower said U.K. interest rates need to fall soon and “significantly” to stave off the threat of deflation as the economy endures a recession throughout the next year. “Interest rates do need to come down significantly — and quickly,” Blanchflower said in a speech at the University of Kent in Canterbury, England, yesterday. “If rates are not cut aggressively we do face the prospect of a relatively deep and long-lasting recession.”

THE RECENT RISE IN CPI INFLATION AND WAGE GROWTH

In September CPI inflation rose to 5.2%, its highest level since the Bank of England was given independent monetary policy responsibility. In 2008 the Governor, Mervyn King has written two letters to the Chancellor explaining why CPI inflation has exceeded the 2% target by more than 1 percentage point.
The main factors pushing up on CPI inflation have been external influences. In particular, higher energy and food prices have pushed up on CPI inflation and directly account for around 80% of the rise since December 2007. And in the August Inflation Report projections CPI inflation was expected to fall back towards the 2% target over the course of 2009, as the impact of past rises in energy and food prices ‘washed out’ and spare capacity emerged as output growth weakened.

A less benign view is that if expectations of future CPI inflation rose, and became entrenched, a wage-price spiral might emerge. In the 1970s persistently high rates of inflation eventually required painful policy adjustments to constrain growth and bring inflation under control. One concern has been that a similar scenario might now emerge, given the peak in CPI inflation, and that policy might have to be tighter than it otherwise would have been in order to contain inflation expectations.

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Professor David Blanchflower
Monetary Policy Committee Member

David ‘Danny’ Blanchflower was appointed as an external member of the Monetary Policy Committee with effect from 1 June 2006. Danny is the Bruce V. Rauner Professor of Economics at Dartmouth College and a Research Associate at the National Bureau of Economic Research. In addition he is also a Research Fellow at the Centre for Economic Studies at the University of Munich and a Research Fellow at The Institute for the Study of Labor at the University of Bonn.

Danny is a labour economist who has published widely on wage determination; youth labour markets; entrepreneurship, trade unions and happiness. He has advised a number of international bodies including the ILO and the OECD, and was a member of a commission which examined the Swedish labor market. He has been a member of the editorial board of a number of journals. His book ‘The Wage Curve’ won Princeton University’s Richard A Lester Prize.

Danny obtained his BA in Economics from the University of Leicester (1973), his Masters in Economics from the University of Wales (1983) and his PhD in Economics from the University of London (Queen Mary and Westfield – 1985) as well as an honorary Masters degree from Dartmouth (1993) and an honorary Doctor of Letters from the University of Leicester (2007).

Qualifications

1973 B.A. Soc. Sci. (Economics), University of Leicester, UK.
1975 Postgraduate Certificate in Education – (PGCE). Pass with distinction in teaching; Dudley College of Education, University of Birmingham, UK
1981 M.Sc. (Econ), University of Wales, UK.
1985 Ph.D., University of London (Queen Mary College) UK.
1996 M.A. (Honorary), Dartmouth College.
1996 Honorary member of Phi Beta Kappa, Dartmouth chapter.
2007 Honorary Doctor of Letters (D.Litt) for ’services to economics’, University of Leicester, UK.
2009 Honorary Doctor of Science (D.Sc), Queen Mary, University of London, to be awarded in June 2009.

Previous positions

Farnborough College of Technology, Hampshire, UK, Lecturer, 1977-1979.
Institute for Employment Research, University of Warwick, UK, Research Officer, September 1984-July 1986.
Department of Economics, University of Surrey, UK Assistant Professor (Lecturer), August 1986-August 1989.

Current positions

Member Monetary Policy Committee, Bank of England, June 2006-June 2009,

http://www.bankofengland.co.uk/monetarypolicy/overview.htm

Department of Economics, Dartmouth College Associate Professor, July 1989-June 1993
Professor, July 1993 – present, www.dartmouth.edu~economic
Department Chair, July 1998 – June 2000
Associate Dean of the Faculty for the Social Sciences, July 2000-June 2001
Bruce V. Rauner Professor of Economics, 2001-
Research Associate, National Bureau of Economic Research, www.nber.org
Research Fellow, CESifo at the Centre for Economic Studies at the University of Munich in Germany, www.CESifo.de
Research Fellow, The Institute for the Study of Labor (IZA) at the University of Bonn in Germany, www.iza.org
Visiting Professor of Economics, Department of Economics, University of Stirling, September 2006-, www.economics.stir.ac.uk

Editorial positions

Member of Editorial Board of Industrial & Labor Relations Review, 1996-1999.
Member of Editorial Board of Small Business Economics, 2000-2005
Member of Editorial Board of Scottish Journal of Political Economy, 2000-2005

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