We have been told for several years that the big concern in the economy is the structural deficit. I never agreed. I was never even convinced we had one. But now we're supposedly seeing growth again, and my concern is the structural recovery.
Output is growing: I won't deny it if that's what the ONS says. But a boost in growth based on the household savings rate falling, business re-stocking after a period of such low confidence, house prices rising as a result of QE and more especially direct government funding for the sector which is going to and inevitably create and unsustainable boom and consumer credit increasing in the case of car loans is not a sustainable recovery. It is structural recovery, but the structure is all wrong.
What we need is recovery based on investment creating new jobs.
And we need recovery based on an increase in real earnings, and not on credit.
We need a recovery that sees more affordable housing, not less.
And a carbon based recovery based on car sales is the antithesis of the Green New Deal that we so badly need.
Most of all, we need to see government funding used for long term benefit, not bubble creation.
Only then will we have more work, better work (with fewer zero hour contracts), rising incomes, a more sustainable future, the infrastructure we need and the basis for a real long term improvement.
That's why we have the wrong sort of growth now. It's structurally wrong. And we need to get that structure right.
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The old, established metrics for measuring these things are no good to us now as they can be and are being gamed.
None of the problems have been sorted out . It’s still built on sand . I think there may be an element of this Govt viewing the economy as a stack of cards and being scared to touch anything . Mostly looks like B.A.U. – business-as-usual :-
Implementation of NEST pensions planned under previous Govt but supported by all major parties – the wrong solution thus delaying the conception of the right solution and depriving the right solution of money .
Continuation of :-
– the housing policy of the past 34 years
– unfettered immigration with it’s effect on driving lower wages lower
– ever closer union with the EU except with regards to opposing measures to reign in the City of London .
The good intentions to re-balance the economy away from “The jewel in the crown” have been swept under the carpet . Refusal to accept that the City of London is a waning star as it no longer makes any attempt to conceal money laundering .
Banks still too big to fail , still indulging in synthetic derivatives with no social usefulness and proprietary trading .
No rent control rules , no consumer protection (Wonga) , no transition to taxation of location .
Debt has not been forgiven or written down . Synthetic CDS have not been declared null and void .
I was angry with the previous Govt for what I saw as encouraging dependency and preferring to treat the symptoms rather than tackle the causes .
I was hopeful that this Govt was going to make a genuine effort to remove benefits traps to make work pay* , remove red-tape and other disincentives for small companies to take people on , reduce the welfare bill by reducing demand (eg plentiful affordable housing) but instead they are trying to do it by reducing supply .
* I don’t understand this obsession with everyone having to work and having to work as many hours as possible . There is more to life than work .
Councils selling marginal agricultural land at the bottom of the market , central Govt selling off NHS facilities to Bain. Thankfully selling off of pine forests was thwarted .
A lower household savings rate is precisely what Keynes proposed.
Typo in the original post?
I’m happy with a smaller household savings rate – in the right circumstance
Keynes did not advocate it being created by a consumer credit boom. Such things did not happen in his day
The concern is for the present – and I am quite sure Keynes would not have advocated an unsustainable credit boom as the way out of recession
And that’s the key point
Striebs; “* I don’t understand this obsession with everyone having to work and having to work as many hours as possible . There is more to life than work”
The neoliberal idea of society is we do the work and they cream off the profits via wealth extraction. The more of us are working and the more productive we are, the more profit there is to cream off. It’s hopelessly outmoded thinking of course but let’s face it, Cameron and Osborne are idiots who represent relics, anachronisms. I predict their attempts to drag us into the past will result in their ultimate undoing. Royalty and the fabled British Establishment will go down with them.
I don’t think this is going to feel much like a recovery for most of the population because real wages are still falling and social security benefits for most working age families are being cut by (on current projections) 2% per year in real terms. Osborne’s only hope really is that people will feel a lot better off, very quickly, because of the (temporary) house price boom induced by his crazy govt-backed mortgage scheme. It’s possible people might be that myopic but I hope not!
We’re all waiting for the right circumstances in the long run …..
Kyle
No – this is a short run issue
Richard
Richard, your middle paragraph, in fact virtually your whole post, is straight out of the book of Austrian economics – with its focus on savings, hard money and the correct capital structure being the hallmarks of a sustainable economic recovery. This is the sort of thing Hayek and Rothbard would have argued for, with Keynes vehemently disagreeing.
Respectfully, I disagree
This is the twenty first century, not the 1930s
When facts changed Keynes changed his mind
So can I
Output may have grown, but so has the budget deficit also apparently(http://bilbo.economicoutlook.net/blog/?p=24832 UK economy grows and so does its budget deficit). So much for Osborne’s attempts to eliminate debt. It’s a little like the little boy trying to take all the water out of the hole in the sand at the beach – impossible.