Tuesday, January 14, 2014

Illiterate article by Aditya Chakrabortty

Economically illiterate article by Aditya Chakrabortty about North Sea oil and its revenues:

http://www.theguardian.com/commentisfree/2014/jan/13/north-sea-oil-money-uk-norwegians-fund

There can be no comparison between the United Kingdom economy and Norway during the 1970s and 1980s.

Possession of North Sea oil made the pound sterling a "petro currency" - effectively the United Kingdom could not go bankrupt and so sterling was an extremely safe investment.

Thus the value of the pound began to rise.

A rising pound made British manufactured exports more expensive and companies became uncompetitive.

Manufacturing companies closed or relocated overseas, and hundreds of thousands of workers became unemployed.

North Sea oil revenues were used to pay the unemployment benefit of the newly unemployed people - and at the time the benefits were relatively generous and not limited by timescale.

Thus possession of North Sea oil for the United Kingdom was economically neutral (Norway did not have such a large manufacturing base and so did not experience this process).

All this was proved by left-wing economist Lord Kagan years ago.

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