The UK economy… what UK economy?
http://devilskitchen.me.uk/2008/07/where-will-money-come-from.html
http://iaindale.blogspot.com/2008/07/gordons-imperfect-economic-storm.html
I must apologise in advance for any trauma caused by either of the above links, but rest assured that I’m in no fitter state after reading about what’s going on in the background of Labour finance and the incompetent cabal who determine how it’s run. I had promised myself not to read so many of the more depressing articles about the economic situation in the UK, but I was reenthused when I read the profoundly dim-witted article on the BBC entitled “Five reasons to be cheerful amid the gloom” – if you want to see what they’re on about and, like me, question their sanity, go to http://news.bbc.co.uk/1/hi/magazine/7513563.stm
Suffice it to say that anyone who now claims that 1) making the Bank of England independent was an all-round good idea; and 2) the UK economy can and does survive under a political policy of splendid isolation actually needs serious medical attention. I can’t reproduce The Devil’s Kitchen’s spectacular analysis nearly as well as he can, but in essence, the new decision on the part of the government to rewrite its own borrowing rules (quite apart from undermining its integrity) renders the attempts by the Bank to combat the causes of the current inflationary spiral increasingly futile. The causes are reasonably easy to enumerate (which is a start, at least): a rising cost of living through trend increases in oil and food prices, which may lead to demands for increased wages and thus further inflation; the demise of the housing bubble eating away at people’s incomes, particularly those with sizeable mortgages; falling confidence in the banking sector after Northern Rock; and falling confidence of the banks in both their overseas cousins and our very own fiscal and monetary institutions.
Not a pretty sight, by any means. What the UK economy needs is (obviously) for prices to stabilise, after which the flurry of panic in the financial sector will calm down as consumer expectations stop going haywire. This is infinitely easier said than done – unfortunately the biggest worry, oil, is completely outside of our control, while the average house price in recent years has been miles above even optimistic versions of a sustainable level. So as long the iron grip of OPEC continues to choke crude oil supply, and the housing market nosedives towards long-term equilibrium, those are variables we can only accept and observe.
Where food prices are concerned, on the other hand, there is something we can do, and it’s called Growing Up. I notice, to start with, that the usual deluded idealists of the Guardian or Indepdent ilk who chastise the reading public on a near-daily basis for not spending a fortune on Fairtrade goods from former colonies are keeping a wonderfully low profile now that food costs are soaring, along with those ignorant enough to believe that anything organic is infintely preferable to anything genetically modified, rather than just being more expensive. That’s mainly because, in times of economic hardship, consumers subconsciously revert to a much more animalistic, economically model-able attitude of seeking low-cost, high-yield goods, and all the petty moralising goes straight out of the window. It sounds cruel and very un-PC, but I don’t actually see any problem with that – the dilemma the West faces is of how to balance its notional ‘responsibility’ to supporting the economic viability of poorer nations against the immediate (and sociopolitically more pressing) needs of its own citizens. And while it’s controversial to say so, until someone comes up with a better answer, and until we’re back out of our economic black hole, the welfare of the West’s citizens must come first.
I don’t know if it’s because I’m a student on a budget, or just that I’m an omnivore, but this is an attitude I find very easy to sustain even when we’re not in obvious times of hardship. And travelling around different corners of the Western world (EU, Russia, N.America, to put it broadly) drives it home time and time again how much lower the cost of living is compared to the UK. Not just food and oil, but public transport, entertainment, clothing, all the basic mass consumption goods are qualitatively equivalent or superior yet less expensive than anything on the UK market. If I knew why that was, I’d probably already be working for the Bank of England, but I somehow suspect it’s partly down to a more sensible attitude to general consumption. So if you want my $0.02, I suggest that ‘watching what we eat’, in a beautifully ironic way, is a good place for the UK to start fighting its way back to a healthy economy.
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