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Is it time to give up?
HAMISH_MCTAVISH
Posts: 28,592 Forumite
On the idea of "rebalancing" the economy?
http://blogs.reuters.com/anatole-kaletsky/2013/07/05/who-will-get-credit-for-britains-economic-turnaround/Britain’s economic history suggests that the conventional wisdom about the benefits of rebalancing from services to manufacturing may simply be wrong.
In the five years of attempted rebalancing since the financial crisis started in 2008, Britain’s economic performance has been abysmal.
GDP has lagged behind every G7 country apart from Italy. GDP per capita, the broadest measure of living standards and productivity, has done even worse, falling by 6.7 percent from its 2008 peak, with no evidence of recovery since 2010.
The industrial production record has been just as bad. Despite the official efforts to promote manufacturing and the big devaluation of the pound after 2008, industrial production has been even weaker in Britain than in France — down by 13.6 percent since its peak in May 2007, compared with 13.5 percent in France.
But taking a longer view, to the period before the fashion for rebalancing, a very different picture emerges of Britain’s economic performance.
While Britain has been one of the weakest economies in the world since the crisis, during the 20-year period from 1993 to 2012 Britain has actually been the strongest economy in the G7, even allowing for the dismal performance of the past five years. Britain’s GDP per capita increased by 50.1 percent in the 20 years since 1993, well ahead of the 40 percent increase in the next best country (Canada) and far better than the gains of 32 percent in the U.S., 29 percent in Germany or 22 percent in France.
It seems, therefore, that simply to forget about rebalancing and to restore the service and consumer-led economy of the pre-Lehman period might not be such a bad idea.
The economic structure of the 1993-2007 period, with its reliance on financial and business services, on media and entertainment, on research and elite education, and even on property speculation — may be better suited to Britain’s comparative advantages than King’s pipe dream of a German-style economy focused on metal-bashing and exports.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
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Comments
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there hasn't been any rebalancing;
not least because it's outside government powers to do such a thing.0 -
there hasn't been any rebalancing;
not least because it's outside government powers to do such a thing.
Government cannot force rebalancing.
They can however create conditions and implement policies which incentivise rebalancing.
Although these seem not to have worked.
Perhaps because rebalancing is the wrong thing to do?“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Government cannot force rebalancing.
They can however create conditions and implement policies which incentivise rebalancing.
Although these seem not to have worked.
Perhaps because rebalancing is the wrong thing to do?
what sort of conditions did they try to create (excluding empty words) and what sort of incentives have been provided?0 -
what sort of conditions did they try to create
Pursuing monetary policies which weaken the pound to increase competitiveness of exports would be the most obvious example.
Which doesn't seem to have worked as well as would be expected.
Although I suppose there's no way of knowing how much worse it would have been had they not.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
I haven't seen any evidence of any attempt to rebalance. Politicians say it a lot on TV because people think that means bankers are getting bashed.0
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HAMISH_MCTAVISH wrote: »Pursuing monetary policies which weaken the pound to increase competitiveness of exports would be the most obvious example.
Which doesn't seem to have worked as well as would be expected.
Although I suppose there's no way of knowing how much worse it would have been had they not.
a lower exchange rate favours all exports equally so I'm not really sure whether that really contributes towards rebalancing the economy0 -
UK companies exporting services to other countries = no better or worse to companies exporting manufactured goods to other countries.
temporary illusions of prosperity achieved by households borrowing more & more in order to take out ever bigger mortgages = sure to end in tears. how can an economy possibly be based on "property speculation", a pyramid scheme in all but name.FACT.0 -
The economic structure of the 1993-2007 period, with its reliance on financial and business services, on media and entertainment, on research and elite education, and even on property speculation — may be better suited to Britain’s comparative advantages
That all just worked outs so well didn't it.Load up the debt, give free rein to gamble without fear be that be the financial sector or individuals.
We can't just pump up our own economy, with many false profits, whilst continuing to import at the rate we are be that energy, food, physical goods, travel etc.
Just what would be used next time round to bail out the disaster."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »The economic structure of the 1993-2007 period, with its reliance on financial and business services, on media and entertainment, on research and elite education, and even on property speculation — may be better suited to Britain’s comparative advantages
That all just worked outs so well didn't it.Load up the debt, give free rein to gamble without fear be that be the financial sector or individuals.
We can't just pump up our own economy, with many false profits, whilst continuing to import at the rate we are be that energy, food, physical goods, travel etc.
Just what would be used next time round to bail out the disaster.
it didn't work out very well for many many countries
so I'm not sure it had anything to do with the 'balance' except for the asset bubble0 -
While Britain has been one of the weakest economies in the world since the crisis, during the 20-year period from 1993 to 2012 Britain has actually been the strongest economy in the G7, even allowing for the dismal performance of the past five years. Britain’s GDP per capita increased by 50.1 percent in the 20 years since 1993, well ahead of the 40 percent increase in the next best country (Canada) and far better than the gains of 32 percent in the U.S., 29 percent in Germany or 22 percent in France.
It seems, therefore, that simply to forget about rebalancing and to restore the service and consumer-led economy of the pre-Lehman period might not be such a bad idea.
He does have a point with that bit....“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0
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