"Negative growth" means contraction. The UK economy shrank by 0.5% in the 3rd quarter of the year. Who has become worse off and in what way? Some people have lost their jobs, their homes, or their life savings. Things seem set to get worse.

Very soon there will be a couple of million involuntarily idle people. There will also be a rash of derelict sites as vacant commercial buildings are demolished to avoid the business rate. There is a connection between the two.

Whilst Britain's flexible labour market has been much vaunted, there has no attempt to make Britain's land market flexible. On the contrary. Increased demand creates a shortage and prices go up, but if demand is decreased, eg due to recession, the price of land does not fall to market-clearing levels. Soon, therefore, we shall see a rash of derelict sites and boarded-up buildings. They will stay derelict for long enough to allow the buddleias to grow into big shrubs. Owners tend to prefer to  wait for the upturn than accept the going rent or price.

The usual explanation for recession is "lack of demand", but human demand for goods and services is unlimited. If people are willing to work, the potential supply is present. But work can only be carried out on land. Every street trader knows that the right pitch is essential. But if land is locked out of use, then labour is locked out of employment. It is that simple. Idle land means idle men, as was pointed out in the 1910 election poster.

Added to this is another consideration. For every £ a worker receives in take-home, an employer must pay a further amount of about 85p to the government, nominally PAYE income tax, and employer's and employee's NI. In effect, these act as a heavy payroll tax, and explain the paradox of how Britain became a high labour cost/low pay economy. This needs to change. The taxation of labour has to stop.

And to get vacant, hoarded land into use requires a further tax reform, the introduction of an annual ad valorem tax on the rental value of land, to discourage owners from holding onto it whilst locking labour out of work.

The implication is that we do not have to endure prolonged recession and unemployment. It is a policy choice.

See here for a detailed explanation.

Now that the immediate problems with the banks look as if they have been solved, is everything going to be all right? None of the commentators seem to agree, so we shall not venture to make predictions. The continuing wild fluctuations on the stock market suggest that nobody has a clear idea about how things will go. What is being done does not sound right but we could be wrong.  We can only wait and see. We are adamant, however, in our assertion that the banking problems are an effect.

Paul Krugman, New York Times columnist and University of Princeton professor, has been awarded this year's Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. His speciality is spatial economics, and one might have thought that he would be strong on Ricardo's Law of Rent and possibly even an advocate of land value taxation. But whilst, unusually amongst economists, he puts an emphasis on the influence of geography on economics - which is why he has been awarded his prize - he has come at the subject from what appears to be a Keynesian direction and seems not to have picked up on the concepts presented by this campaign and similar bodies. You can read about his ideas here and follow his blog here - you may feel inclined to engage with him by responding with comments.

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