David G. Blanchflower is a prominent British-American labor economist who has been teaching and doing research at Dartmouth College since 1998 , was an external board member of the Bank of England from 2006 to 2009 where he was considered a dovish policy maker, and for years has been writing about the forces driving the U.K. government and economy from the Labor Party side of the political coin.
So as Andy Burnham gets appointed to be the U.K.’s prime minister I immediately turn to Danny to explain who he is, why he got the job, and what he must do to succeed as he replaces Keir Starmer, who had been expected to step down for several months. In case you don’t know how the British parliamentary system works, Danny briefly explains it for you. No matter how he made it to the top job, Burnham is running the show now.
Danny says Burnham is starting off well as “the most popular politician in Britain…obviously this is an interesting, interesting time with a new prime minister who's going to need a lot of help.”
”The first thing I would urge him to do is to, is to have caution and not make mistakes and actually make people understand that he is really trying to be much more populist and do something for the electors and do something that’s potentially going to win Labor an election down the road. So let’s just set this up.”
Danny stresses that the former PM Keir Starmer came into office, winning in a landslide vote “…and the first thing he does is he cuts the winter fuel allowance for old people…that was the biggest, dumbest thing… a political mistake…You made it harder for old poor people to survive the winter.” By contrast Burnham has already suggested a couple of “not hugely expensive things…” saying he’s going to try and lower…and be a person who cares about the cost of living,” including lowering the cost of heating and doing “things about the higher rate of income tax.”
”This says, I care about the poor, I’m going to do something about it,” Danny adds.
Burnham’s most important and unexpected step so far, taken his first day in office, is his appointment of John Healey as the U.K.’s new Chancellor of the Ex-chequer, the British equivalent of the U.S. Treasury Secretary. Healey had been head of the U.K. Defense Ministry under Starmer and stepped down citing a shortfall in the budget proposed for Britain's armed forces that he saw as insufficient given rising global security challenges.
Danny sees a plus here for Burnham. ”And in a sense, that’s his tack to the United States. He can say to…Donald Trump, my first step is to do what you want, to raise defense spending… So he’s making politically sensible moves.”
What does concern Danny about the new Chancellor is his lack of expertise in economics, finance, and business.
”It looks like <he> has had some background junior jobs in the Treasury. But this is somebody who's not a business person and comes to this job essentially as a manager. And he comes to it trying to push for this defense spending,” he adds. “I would argue he needs advice, he needs people to explain to him, here are your options, Chancellor.
Unfortunately for Healey, alongside a new prime minister and as a new chancellor who probably didn't know last week he was going to be chancellor, they haven't got many plans in place yet; Danny points out, Keir Starmer didn't either and this was a problem then too.
”And so,” he says Healey is “going to have to very quickly get lots of civil servants working on things, telling <him>…” what should he do. What if he were to put this wealth tax on, if he were to raise the highest rate of income tax from 45 to 50, what would it cost? What if?”
Hear Danny explain why he’s not denigrating the new prime minister and his new chacellor by insisting that they both will need constant briefing on the the consequences of doing things and what are the consequences of not doing them?
Spoiler alert: Danny advises Burnham to watch and not repeat others’ past mistakes as he guides his team forward. ”This is the Prime Minister’s choice. But if you choose somebody who doesn’t know anything about business or economics, then as a manager, he has to manage and appoint a whole set of people who advise him so he doesn’t do anything stupid.”
Welcome back! 00:01:09:24
Good to be back. It’s always such interesting case. I mean, you could you could have an interview every day about what happened since yesterday, which is what we’re going to do. Probably…
Any Party Affiliation? 00:01:34:21
No, I’ve never, I’ve never I’ve never actually been an improved party. I did, I did some years ago. Join an advisory committee to the prior leader, Jeremy Corbyn. And a number of economists did, with the idea that we had to kind of explain what economics was and try and, you know, try and give sensible advice. And basically, after six months, we all quit. No, we were not listened to. I was on a couple of TV shows actually live where someone said, well, one of the interviews actually said to me, oh, there’s been an announcement made about this is what we’re going to do. Did they ever say it to you? And I said, live on it. If they’d have said it to me and I told them not to do it and downhill from there.
Interesting days…The parliamentary process 00:02:20:06
You know, obviously this is an interesting, interesting time with a new prime minister who’s going to need a lot of help. Well, unlike in the US where the president is elected. That’s not true in the United Kingdom. And, basically, a prime minister is selected from a bunch of MPs, members of parliament, and people vote for their member of Parliament. And then the political parties have a number of ways of electing a leader. Sometimes it involves election from party members, which is actually how Liz Truss got elected and managed to survive for 49 days this way.
Burnam’s route 00:03:21:12
What’s happened here is that Andy Burnham was the mayor of was the mayor of Manchester. And a little while ago, a month or so ago, he stood for a to become a member of parliament from somebody who specifically resigned their job to allow him to stand. So he’s been a member of Parliament for a month. And then immediately the prime minister resigned and the members of Parliament got together and basically said, we will not have an election. We will, you know, we will. We will say, this is our Prime Minister. And on Monday, the new prime minister went to see the king. Kissed the hand or whatever it is they do these days. And he became prime minister and walked through the walk through the the door of Downing Street. And - I read this - the first thing he received was the nuclear codes.
Background/qualifications 00:04:48:10
Well, he was he was wasn’t MP before. He was a minister before. So he has credibility. Mayors in the UK have some political power and actually he was a very popular. There’s another mayor that people know about which is the mayor of London Sadiq Khan, and he was actually made a lord by Keir Starmer. And just so everyone understands, it’s quite possible that actually said he will become a minister, because you can actually, you can be a minister if you are a member of parliament or if you’re a member of the House of Lords.
UK restrictive appointive process 00:05:23:16
So you can’t just, you know, like in America, where you just appoint somebody from who, you know, Kathleen’s great, I’ll make her the Secretary of State for defense or something. But what happens is that the group that you can actually choose from is somewhat smaller. And what tends to happen is the Prime Minister, if he wants to, could make Kathleen a lady, a Lord would call a Lord or Lord s or something and then appoint them.
Being a large city Mayor s a substantial post 00:05:46:18
So mayors have some degree of political power, some degree of control and access to the media. And Manchester is a big city, and it’s like a governor in a way of a big state. It’s like being the governor of New York. It’s not like being the governor, perhaps, of Idaho. And so these are powerful people. And the great thing he is, is a populist, and he is really a very popular prime minister, unlike the president of the United States, unlike Keir Starmer, he’s the most popular politician in Britain. And that’s in a way what’s driven the appointment, partly because there’s a political thing going on between the Labor Party and other Reform Party and Nigel Farage and so on. So people see him as a populist, be sensible and see transforming and potentially down the road when the next election comes, he looks to be the person in the best place to meet.
Qualified and a cheery chap 00:06:36:13
So that’s where we start from a popular leader. People think, gosh, we’ve got rid of a lawyer, we’ve got rid of a lawyer from who went to the University of Sheffield, and we replaced him with a populist who went to Cambridge. So but anyway. But, but and Burnham appears to be, you know, a cheery chap you’d like to have a beer with, which was not.
So now what? What should he do? Job one: don’t make mistakes 00:07:29:10
Well, the first thing I would urge him to do is to, is to have caution and not make mistakes and actually make people understand that he is really trying to be much more populist and do something for the electors and do something that’s potentially going to win labor, an election down the road. So let’s just set this up.
Keir started out with a mistake 00:07:50:14
So Keir Starmer comes into office, wins a landslide. Although because of the British system it’s a small proportion of the vote. And the first thing that he does is he cuts the winter fuel allowance for old people. That was like you know that was the biggest, dumbest thing. And I’m and I immediately made a whole series of comments that I wrote columns about it and basically that that was your constituency. So what did you first of all, do? You made it harder for old poor people to survive the winter. So that was a political mistake. So what he’ <Burham> done today, he said a couple of things. Not hugely expensive things. First thing he said is I’m going to try and lower the I’m going to try and be a person who cares about the cost of living.
Burnham shows he cares 00:08:33:22
The first thing I’m going to try and do is lower the cost of heating. The other thing he’s talked about, the bit, is to try and do things about the higher rate of income tax and try and put perhaps a wealth tax on billionaires. Those are not big, big financial things, but they’re good in a sense. This says this says I care about the poor. I’m going to do something about it. My step is going to be I’m not going to step in and do anything very quickly. Although I have appointed someone who’s the chancellor, who was the defense secretary, who resigned over the fact that Starmer wasn’t paying enough for it. So he’s committed that money will be paid from the UK to increase the defense budget. And in a sense, that’s his tack to the United States. He can say to he can say that Donald Trump, my first step is to do what you want to raise defense spending. So he’s making politically sensible moves. But the economics we can talk about and my advice to him is hang on.
Healey needs advisors 00:10:23:11
Surprise. Huge surprise. I mean, for our listeners around the world, particularly in the United States, think about the Treasury secretary. So who do you normally appoint as the Treasury Secretary? Well, you had Tim Geithner, you had Larry Summers, you had people who are experienced in the markets. That’s traditionally what you would do in the United States. So what you have here is the prior chancellor, Rachel Reeves, worked at the Bank of England, had experience been in the House of Commons a long time being on all sorts of economics committees. What you have here is a politician who’s not an economist, has not had experience in the business world, has not done lots of economics. It looks like a pretty has had some background junior jobs in the Treasury. But this is somebody who’s not a business person and comes to this job essentially as a manager. And he comes to it trying to push for this defense spending. So the first thing you would argue, I would argue he needs is he needs advice. He needs he needs people to explain to him. Here are your options, Chancellor. Here’s a number of options that you can do. Here’s a number of things you could do. This is what they will cost. But if you do this. These are the consequences. Unfortunately for him, with a new prime minister and a new chancellor who probably didn’t know last week he was going to be chancellor, they haven’t got many plans in place as Keir Starmer didn’t. And so he’s going to have to very quickly get lots of civil servants working on things, telling me, Chancellor, what should I do if I was to if I was to put this wealth tax, if I was to raise the highest rate of income tax from 45 to 50, what would it cost me?
Needs a lot of advice; do small things first 00:12:00:14
What would it do? What are the consequences? So he’s going to need lots and lots of advice, explaining to him what the technical things about the economy are. And he’s going to need to talk to business folks who say, if you do this, this is what the consequences will be. And he doesn’t know any of that. And so that’s a really bad position to start from. The best advice then, is why I said, hang on, is that you should you can do some small thing, but you should do not not do anything large yet because you could put your foot right in it.
A lefty mayor of Manchester… 00:12:46:03
Well, I think I mean, if he resigned from Keir Starmer because Keir Starmer refused to raise spending on defense. So the very fact that he was appointed is a big signal. And presumably I mean this is a big deal for Burnham. I mean, Trump said something like, oh, he’s a lefty mayor of Manchester, which was not a great first.
He’s got to try… and maybe not act so lefty? 00:13:08:03
That’s what I think he said the other day. So it’s got to try. He’s got to try and build a relationship with the United States. He’s got to try and show he’s not some lefty, useless mayor. And the first thing he’s done is to say, Trump. I’ve appointed somebody who wanted to do the defense things that you wanted.
Ask how am I going to do it? 00:13:22:24
So politically you can see this is a big deal. The first piece of advice that if he walked into the office, which I assume he did today, you walk into the Treasury and I would have pulled the cheap, the permanent Secretary of the Treasury. And I would say, okay, how am I going to pay for that defensive? What am I going to do? Give me the options of how I’m going to pay for it? And that’s he’s not going to get an answer by Thursday. He’s not. So it works. These things take an awfully long time. And then there’s issues about, you know, how much money do I have. Do I have to cut somewhere. How does this help them. How does we used to talk about how does this help the man on the clapping omnibus, which is like the ordinary person and it’s like, well, you opened the door, you walked in and you went, oh, good Lord, that’s where we are.
Avoid doing stupid stuff- markets will help you 00:14:54:24
Well, I’ve written various things, and I and I’ve said that the great thing is that markets stopped politicians doing stupid stuff. Unfortunately, I wrote many times about that prior to Liz Truss coming into office, and people explained to her that if you did stupid stuff, the bond markets, the foreign exchange markets, the stock markets would all collapse.
A Liz Truss story: once upon a time…Liz Vs the Lettuce 00:15:19:23
Said, oh, about unfunded tax cuts, unfunded tax cuts and be really absolutely no, no consultation with the business sector. Let me tell you a little story. It turns out that the British pension sector was not consulted about changes that Truss was about to make to pension, basically the pension sector. By noon on Monday, the British pension sector was bankrupt and the Bank of England had to intervene. Truss’s tried to argue that it was the Bank of England’s fault, but a number of us, including me and many others, wrote and said I mean, I remember writing on day number one, when you come into office, all the things that you’ve said and planned to do, you are going to have to go from Mrs. Stupid to Mrs. Sensible in an hour. And if you don’t, the markets are going to collapse. And unfortunately she remained as Mrs. Stupid. And then the Lettice website came into place and the question was on the Daily Star, one of the most watched websites in the world. Was the lettuce going to outlast Liz Truss? I’ve talked about this before, and the lettuce won the opposite of mine.
PM needs a dialog with The City and Economists 00:16:31:10
That’s mindful for a British prime minister. You need to be mindful of what the what the markets are going to say and do, and you need to sort of talk to talk to business folks, the people in the city. The City of London economists and others, if we’re going to try and run this economy, improve growth, try and improve living standards, how are we going to do that in a way that doesn’t spook the markets?
Pay attention to markets 00:16:53:01
And, you know, there’s a there’s a very recent history to that. I mean, in the in the US, we know some of that story. I mean, what is it, Taco Trump always chickens out. And the reason Trump always chickens out is exactly the story, which is that the bond markets or the exchange markets move. Carville said, you know, Kathleen James Carville famously said it’s about the economy, stupid. But he also said, in the next life, I want to come back as the bond markets because they have all the power. And so that’s exactly the story I would be saying to them, you need to be mindful of the markets, you need to do things, and if you’re going to boost spending or you’re going to borrow more, then you have to think about what are you going to do with it?
Borrowing for a good purpose will get punished 00:17:30:19
Are you what are you going to use that money for. And let’s talk about the UK would issue infrastructure bonds or some such thing. Well that’s fine but you need to they need to be aware that if you do that that the markets will not get spooked. So if you borrow to invest that’s a big deal. But what you invest in, you say I’m going to invest in the infrastructure or where which project you’re going to start with, are you going to go to Hartlepool?
You have a budget and you can move things around 00:18:13:22
Obvious thing is that you can move things around. You have a budget and the things that you’re spending on now that you would rather shift. I mean, in some ways, I mean, what he’s talked about is actually pretty interesting. He’s talked about he comes from Manchester. People know where Manchester is. It’s up near where they played the golf last week. That’s in Liverpool. It’s up, up north. And he’s talked about trying to move things out of London, tried to think about trying to improve the infrastructure and so on in the North. I mean British productivity is much higher in London, but you could literally say we’re going to move some resources out of London and move them to the north, move them to other places.
And do things for people- 00:18:49:03
So that’s an example where you might do that. But the idea I think is that, you know, there are emphases you can push. You could start to say, well, I’m going to emphasize more that I’ve got to do things for people who are hurting. Right? You don’t cut the with the fuel allowance for poor, poor old 85 year old pensioners.
Be seen as doing good/Do the right things 00:19:06:22
So I think it’s an emphasis on things. It’s trying to change, have an impact on inequality and it’s borrowing to invest. It’s borrowing to invest. It’s not borrowing for a party, which is what Truss was trying to do with a coherent strategic plan. And you say, okay, I’m going to invest in the infrastructure. But you have the civil service will come and say, here we are, 47 projects. The one that offers the rate at the highest rate of return is this one. And Chancellor, this is the one that you should do. So I think it’s about a coherent strategy to improve investment, to improve growth, and to try and improve the wellbeing of the population that essentially has elected him and will it will elect him in the future. So it’s a coherent structure and strategy with more emphasis, I think, on people at the low end and some more emphasis on equalizing the growth away from London. And he has and he’s been
A pressing need for advice…but that is true even in the US 00:20:24:14
Well, I think that’s the inevitable thing. I mean, it’s not. This is not a it is an honorable estate. I mean, think of Kevin Warsh. You wouldn’t. I mean, I know that’s going to Kevin Warsh. You certainly wouldn’t argue that Kevin was not qualified. You may or may not decide that he wanted to appoint him, but it’s his expertise is clear. And what has he done in this world of uncertainty? What has he done? He’s appointed a whole series of committees, including the old governor of the Bank of England and others, to advise him about what do you do about forward guidance? What do you do about, you know, the stock of assets? What do you do about quantitative tightening in this uncertain world? How do you respond to this set of oil shocks? What should you do? So I think the answer is even if you appointed, even if you had the most qualified economist or the qualified market person, you put Jamie Dimon in there, you would still have to have a set of people trying to explain to you in these worlds, what should you do?
Good managers still need advisors 00:21:18:15
What are the consequences of doing things and what are the consequences of not doing things? So I think it’s an honorable estate, but given that you have no business experience, you’re not an economist, you’ve not got a training in economics, and you’ve come in and you with the defense minister last week and you haven’t done any preparation for it, you haven’t sort of been briefed on anything. You better take advice. I’m not denigrated him at all. This is the Prime Minister’s choice. But if you choose somebody who doesn’t know anything about business or economics, then as a manager, he has to manage and appoint a whole set of people who advise him so he doesn’t do anything stupid.
Everything takes time to have an effect 00:22:21:16
Well, the answer is that that has to be how it is because there are time. There are, there are there. It takes a while for policies to have to be implemented and for them to have an effect. I mean, I was sitting at the Bank of England, always used to have in my head when the information came in. I used to think of this this way. I make a decision a month ago and now I’m going to make a decision today. Has anything happened in the interim to change my view of what’s going to happen in 18 months? Because it’s going to take 18 months for anything. If you change interest rate, it doesn’t really have an effect or an observed effect for 18 months.
A lot of uncertainty- hard to forecast 00:22:55:11
So everything takes a while and everything has lags attached to it. The difficulty that the Chancellor has, let’s suppose the same point was made any year of the last 25. This is probably the most uncertain time. And so one of the big things that’s happened is that the Bank of England, many ways, thankfully, has sort of given up on forecasting because it’s so difficult to forecast in this world where Trump changes his mind on a daily basis.
Policy has become scenario land 00:23:23:07
And so what the Bank of England has been doing is making instead of saying we’ll have a forecast they’re starting to talk about. Here’s three scenarios. Let’s say this and make it simple. Well, Chancellor says, well what’s coming. And the official says, well it depends. Let’s think about the scenario. If all prices go back to $50 a barrel, what if they stay at 90 or 100? Well, what happens if they go to 130, right. All of those things are possible. So your response would be, well, if it’s in each case we have to think about the possibilities. And that’s where the Bank of England has gone. And that’s sort of in part by bank’s impact. And partly because Warsh did a review as well. So this is a tough world that they’re entering into. And that’s why you need this advice. What would what what happens if. Well think about in Canada you were making forecast last week. And yesterday the president said we’re going to impose 50% tariffs. Well, okay. That made the Bank of Canada’s forecasting pretty difficult. Well what if tomorrow Trump changes it to 12 or raises it to 68.
An advisory panel 00:24:28:13
So that’s the world that we’re in. And I think that that basically the Chancellor of the Exchequer needs lots of help. He needs an advisory panel of people. He needs to hire as many of the economists and business folks as he can get, Jim O’Neill being an obvious example, but he needs lots of them.
Unpredictability: US set some 50% tariffs on Canada 00:24:58:19
Well, think of it yesterday impose 50% tariffs on the on Canada. But that has an effect. I mean maybe the market thinks it won’t be implemented whatever. But that’s what do we do. How do we allow for these you know the vicissitudes.
Fiscal policy has several moving parts 00:26:42:19
So distribution is a big issue. But what’s happened in the past, obviously during some, particularly in the last 15 years or so since the Great Recession, unclear that fiscal policy and monetary policy were working together. So what happened in Britain was that monetary policy interest rates were set at zero because the Chancellor of the Exchequer decided to impose austerity.
UK fiscal policy has been tight so monetary policy had to be loose 00:27:02:17
So fiscal policy is really, really tight. And because of that, monetary policy has to be really loose. And so the new Chancellor has to say to himself, so what am I going to do here? What’s what is this? What is the line between fiscal policy and monetary policy? How am I going to deal with that? And what’s the big deal is every year the Chancellor gets to set the remit.
Should BOE role shift? 00:27:21:09
So the first thing you need to do is a start to take advice from people about what should be in the remit, to what extent should, should policies of the Bank, should the Bank of England, what area remit should they look over and what should happen about the assets that they are holding, the nearly trillion dollars of assets. So that’s a really big deal. What’s the remit of the bank? What, what, what should it do. And that’s set every year. And the big deal is, you know, it’s going to be a reappointment a new appointment of the of the governor, maybe a new and a reappointment. What I don’t know, next September, four of the members of the MPC get to leave.
Who to appoint? 00:27:58:23
And so you need you need to start to think, I mean, I would appoint the group of people and I’d say, right, what should the remit of the Bank of England be? What should the role of the Bank of England be? What’s the relationship between the Bank and the Treasury, and what should we do about appointing four people? Who should we be appointing? What would we want them to do? And they’re going to lose two big hawks on the committee. What’s our view about what we would like? Because if you have a remit, imagine you move away from the remit of focusing on 2% inflation. Suppose just making it up, you decide to move it to three.
Do you want hawks to run the place? 00:28:31:09
Well then you might not want to have the Hawks in place. You might want to have rather different people. So those are all big decisions that are going to have to be thought about. And what’s the role of fiscal policy compared to monetary policy? And how far do you want the Bank of England to step out of its, of its slot?
Gain of function monetary policy? 00:28:46:05
Do you want it to say things about climate change and net zero and unemployment? And, and I mean, another example is the UK has got a huge problem with youth unemployment. There’s a million young people. We’re called NEETs. NEETs. Just so Americans understand that people are not in education, employment or training. So they’re not working. They’re not in college. There’s something else. They’re not necessarily unemployed. They’re disabled. Many of them have got disability. So the issue is, I mean, I’d work a lot on this. The issue is should you give I’m not saying you should, but one possibility is you give a remit to the Bank of England to try and do something about the youth unemployment rate.
Things take time-plan for that 00:30:07:10
Look at the data. Look at the data first of all. And secondly don’t respond. I’ll give you two things. Look at the data. What I mean by this, that I think the answer is that. And I’ve listened to so many discussions and central bankers don’t be driven by what happened on the day. You always have to think there are time. So people say things, oh, the inflation rate has gone up to four. What do I do about it? Well, that’s nothing you can do about it, because whatever you do is going to take two years to have an effect. You should always be thinking, what’s the effects going to be in 18? I call it the forecast horizon. What think about what’s going to happen ahead of time.
Central banks are dealing with shocks and getting it wrong 00:30:43:09
So imagine a month ago I’d expected this shock to come and you say, oh, it’s jumped from 3% to football. I expected that a month ago. It’s not relevant. What’s relevant is what’s going to happen 18 months down the road. When, when, when the when the policy has been implemented. So the example why this matters. And one big mistake was made after 2020. If this if this shock is a once off shock then the central bank ignores it. It ignores it because it’s a once off shock. It raises inflation. Today, in 12 months time it drops out and inflation drops back. So the big question is look at the data. Think about what’s the what is the horizon in 18 months look like. And the mistake that people made the bank, the fed and the Bank of England made in 2021 was they thought that the inflation shock would drop out and it didn’t. That’s the mistake they made. So the question is again, you don’t want to make the mistake in the other direction. You don’t want to say, oh, it’s persistent. It’s going to remain forever. And then it drops out. That’s the other mistake you can make. So it’s always about what’s the horizon going to look like and is a shock going to have a permanent and lasting effect. And that’s basically the biggest errors that central bankers have made…
Scenarios make sense when you can’t forecast- 00:32:06:23
No, I really don’t know. I mean I don’t know. And that’s why the bank being correctly in my view, made up these sets of scenarios. I mean you could say the for the center. We don’t know. We really don’t know. And that’s the big issue. We have to deal with. The Fed doesn’t know it. Warsh is trying to think about it too. We do not know if this is a persistent shock. It really is a function of does this permanently change? Does this permanent change all prices? The suspicion is that this is a permanent and long lasting effect.
Rate hikes are likely- 00:32:35:01
And that’s why central banks probably down the road have to raise rates, not cut them.
David Blanchflower
David Graham Blanchflower, CBE (born 2 March 1952), sometimes called Danny Blanchflower,[2][3][4][5] is a British-American labour economist and academic. He is currently a tenured economics professor at Dartmouth College, Hanover, New Hampshire. He is also a research associate at the National Bureau of Economic Research, part-time professor at the University of Glasgow and a Bloomberg TV contributing editor. He was an external member of the Bank of England‘s interest rate-setting Monetary Policy Committee (MPC) from June 2006 to June 2009.
British-born, Blanchflower is now both a British and an American citizen, having moved to the United States in 1989. He was appointed Commander of the Order of the British Empire (CBE) in the 2009 Birthday Honours.[6]
Education
Blanchflower attended Varndean Grammar School for Boys in Brighton and Cantonian High School in Cardiff. He went on to earn a B.A. in Social Sciences (Economics) at the University of Leicester in 1973 and a Postgraduate Certificate in Education at the University of Birmingham in 1975. He received an MSc (Economics) at the University of Wales in 1981 and his PhD in 1985 at Queen Mary, University of London.
Work in economics
Blanchflower served as a Research Officer at the Institute for Employment Research at University of Warwick from 1984 to 1986, when he became a lecturer at the Department of Economics at the University of Surrey, a post he held until 1989 when he moved to the United States.
He has been a member of the editorial board of Small Business Economics, Scottish Journal of Political Economy, and Industrial and Labor Relations Review.
He has also been a research associate at the Centre for Economic Performance at the London School of Economics and at the Canadian International Labour Network.[7]
The Wage Curve
Blanchflower’s The Wage Curve (with Andrew Oswald), with eight years of data from 4 million people in 16 countries, argued that the wage curve, which plots wages against unemployment, is negatively sloping, reversing generations of macroeconomic theory. “The Phillips Curve is wrong, it’s as fundamental as that,” said Blanchflower.[8] The Guardian praised the findings as “one of the most devastating findings of contemporary economics”.[9] The implications, that wages are highest when unemployment is lowest and that increased unemployment drives down wages, have been suggested periodically in economics since the publication of Karl Marx‘s Wage-Labour and Capital.
Happiness
Much of Blanchflower’s work has focused on the economics of happiness.[10] He has posited a correlation between age and happiness, declining through the 20s, 30s, and 40s before increasing in retirement.[11] He has been labelled a “happiness guru” for his ability to quantify the increase in happiness for individuals who are married or have sex frequently, work which has applications in divorce law and pharmaceutical advertising.[12]
He has been interviewed several times on NPR[13][14] and New Hampshire Public Radio[15] about his work in this area.
Monetary Policy Committee
Blanchflower joined the Bank of England‘s Monetary Policy Committee in June 2006, replacing Stephen Nickell.[16] Before his appointment, Michael Fallon questioned his non-residency at the parliamentary Select committee on Treasury.[17] Blanchflower attended a number of meetings by conference call.[18] During his tenure, he voted in the minority in eighteen of thirty six meetings. He voted to maintain the interest rate in his first nine meetings, but to reduce interest rates in March 2007 and in every meeting from October 2007 through March 2009.[19]
Six other members of the MPC have served during Blanchflower’s time on the MPC. Blanchflower continually voted for rate cuts.[19] At the September 2008 MPC meeting, Blanchflower distanced himself further from consensus by voting for a 0.5% ‘cut’ against the other eight members’ ‘hold’.[20]
In the Autumn of 2008, the worldwide economic situation began to deteriorate dramatically, most clearly evidenced by dramatic falls in the values of shares worldwide. On 8 October 2008, the BOE took part in a set of simultaneously announced cuts in the policy rate of a number of major Central Banks. The MPC eventually came around to Blanchflower’s view and subsequently lowered rates to levels never before seen in the Bank of England’s existence and moved to do unprecedented levels of quantitative easing.
In March 2009, it was announced that Blanchflower would be replaced by David Miles at the end of his term, 31 May 2009.[1]
The “economics of walking about”
He also emphasised the importance of what he called the “economics of walking about”; that is, the use of empirical data such as social surveys.[21][22]
Current work
David Blanchflower is the Bruce V Rauner professor of economics at Dartmouth College, New Hampshire, part-time professor at the University of Stirling, a research associate at the National Bureau of Economic Research, and a contributing editor for Bloomberg TV.[23] On 27 September 2015, it was announced that he had been appointed to the British Labour Party’s Economic Advisory Committee, convened by the then Shadow Chancellor John McDonnell and reporting to the then Labour Party Leader Jeremy Corbyn,[24] for whom he is undertaking an independent review of the Bank of England, although he has stated that he is not a Corbyn supporter and has never spoken to him.[25] Blanchflower quit the panel and said he would also wind up his review of the role of the Bank of England on 28 June 2016 following the mass resignations of the Shadow Cabinet, joining them in calling for Corbyn to step down.
