Readers on the fallout from the collapse of Carillion. Letters from Mary Mellor, Ian Lovegrove, Prof Joe Sim, Peter Kunzlik, Dr Valerie Lipman and Ian McIlwee
Andrew Adonis is right to see Carillion as another Lehman (Report, 17 January). In the same way as letting Lehman fail undermined the whole banking sector, the failure of Carillion will infect the whole supply chain and threaten all companies that have the same flawed model of using high levels of debt to give the illusion of profitability. Like the banks, some form of state rescue will be needed. However, the state should not repeat the error of using public money to put Humpty Dumpty back on the wall.
As Aditya Chakrabortty says (It’s time to take on the zombies, 17 January), the nonsense of neoliberalism must be challenged. Stratospheric executive pay, prioritising shareholder value and stock market froth do not reflect market efficiency. Nor are states households that must be disciplined by austerity. As I argue in my book Debt or Democracy, public money is an independent force, as the bank rescue showed. The private sector needs a vibrant public economy able to use all its powers to sustain overall economic wellbeing (wellth). The private sector is only as strong as its weakest link. When that fails, the only grownup in the room is the public economy. In the face of market failure, states need to plug the gap with surplus expenditure, that is, deficit spending, funded by quantitative easing not borrowing. When the crisis is over, if necessary, this spending can be reclaimed through taxation.
Newcastle upon Tyne