Economics and finance seem like complicated topics, and so many people “leave it to the experts”.However, these topics are actually simple, and if people hear a clear explanation, they will be able to form an opinion about our current economy and the g…
Posts Tagged ‘Economics’
Economics Is Simple … The Fat Cats Just Want You to Think It’s Complicated So That You Won’t Demand Change
December 23rd, 2010 |
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Singapore’s economic growth to ease: Action Economics
November 26th, 2010 |
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Singapore’s exports-led economy likely to level off after strong growth so far in 2010, may continue expanding next year at more modest pace, says David Cohen of Action Economics after data show October manufacturing output +31% vs upwardly revised +26.8% September, +26.5% Dow Jones poll estimate.
October data got unexpected boost from volatile pharmaceuticals sector.
Guidelines for Learning Economics with Homework Help Online Posted By : botha
November 25th, 2010 |
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The main objective of homework help online economics is to make the students in understanding concepts of business, markets, trade, government policies, health, development, and the environment, where students can become good economists in the public and private sectors leading to careers in business, finance, international development, health, human resource management, marketing, management and research. Economics is the study of how men and society end up choosing with or without the use of m
How Microsoft Assesses Future of Cloud Economics
June 15th, 2010 |
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Cloud strategist Tim O’Brien explains that while the capex and opex costs of hardware and labor generally go down as a result of implementing private cloud-based services, the cost of power out of the wall is another issue entirely. – SANTA CLARA, Calif. By
virtue of the $49 billion it made on software sales and service in 2009,
Microsoft is clearly the world’s No. 1 provider in that business. But when it
comes to competing in the burgeoning cloud computing infrastructure sector, it’s
still an infant when compared with other …
Singapore manufacturing likely to stay on positive track: Action Economics
March 26th, 2010 |
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Expect Singapore’s on-year growth in manufacturing to remain strong for next few months due to base effect, Action Economics economist David Cohen says.
Cohen notes March 2009 was a low point for industrial production though by July, the base effect likely to start wearing off.
White Schools Bernanke on Basic Economics
March 5th, 2010 |
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William White – former head BIS economist, currently chair of the OECD’s Economic and Development Review Committee – is again schooling Ben Bernanke on economic fundamentals. In an article published in the December-January OECD Observer, White wrote…
Singapore’s 2010 GDP to grow by 5%, says Action Economics
January 4th, 2010 |
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The sequential contraction in Singapore’s 4Q09 GDP is a correction from robust growth in preceding quarters and doesn’t challenge the validity of expectations for return to growth for the island state in 2010, says Action Economics economist David Cohen.
Cohen forecasts Singapore’s economy to grow by 5% this year, at the high end of government’s current growth forecast of 3–5%.
Chairman of the Department of Economics at George Mason University: Politicians Are NOT Prostitutes … They Are Pimps
October 31st, 2009 |
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Many people have called politicians prostitutes. True, Obama has received more donations from Goldman Sachs and the rest of the financial industry than almost anyone else.And Summers and the rest of Obama’s economic team have made many millions – even …
Lordstown, economics and GM’s survival chances
August 19th, 2009 |
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There’s some good news for GM’s Lordstown, Ohio, facility with GM’s announcement of additional production for the next two quarters.
Co-incidentally, I came across something on the BBC’s website which neatly brings together some aspects of the talk of ‘economic recovery’ and puts it in a broader perspective by looking at issues surrounding GM’s Lordstown plant, with some human interest helpfully thrown in for once (real people do make cars and car parts, after all – they’re not just numbers in a spreedsheet).
If national economies are, technically speaking, off bottom and growing again (the statisticians at places like the IMF have been getting rather excited about that this week) that is a good thing, naturally. But the pain being endured in parts of the Western world’s economy – especially manufacturing - really is a bit more serious than a few tenths of a percentage point of GDP growth can sort out.
The carnage caused to company and household balance sheets hasn’t gone away - there are still some big question-marks over the sustainability of this inventory cycle-led upturn. Inflation and higher interest rates are among the possible party poopers next year (and in some automotive markets, there will be additional headwinds caused by scrappage incentives payback). And there are still structural changes to contend with above and beyond the impact of the recession. How’s GM looking versus Toyota? Strategically, there’s much to do.
And yes, GM does need its Cruze – which replace the Cobalt – to do very well. ‘Cash for Clunkers’ is helping to lift the US market now, like scrappage schemes elsewhere, but in five years’ time GM will be around in something like its current form only if it has managed to deliver the product in North America that people will actually buy.
The good news on short-term production schedules being raised is indeed good and we have had a shortage of that over the last ten months, so those who would like to see GM survive in the long-run should welcome it. But they should also not get too carried away.
US: GM ups NA production and expects 1,350 new hires
BBC News: Will the Chevrolet Cruze save GM?
Darling presses banks on lending
July 26th, 2009 |
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Chancellor says he is ‘extremely concerned’ about cost of borrowing remaining high while interest rates are low
Alistair Darling today called on banks to improve lending to businesses, saying he was “extremely concerned” about the cost of borrowing.
Bank bosses are to be summoned to explain why they are charging more for credit when interest rates are at historically low levels. The chancellor suggested they had failed to keep promises to improve lending facilities in return for taxpayer support.
He said banks had not been rescued as “some sort of charitable act … We did it because if you don’t have a banking system that creates credit for businesses then you will make recovery and prosperity after that much more difficult.”
Speaking on BBC1′s Andrew Marr Show, Darling acknowledged that banks needed to rebuild their balance sheets in the aftermath of the financial crisis. But he said: “At the same time, because of the particular circumstances we are in now, because of the fact we’ve got this recession, we also need them to lend money and that’s why we recapitalised them to do that.
“That means they’ve got to live up to the promises they’ve made. That’s why we will be going through with each individual bank asking them why is it, at a time when the cost of borrowing is coming down, it would appear that the cost to small business appears to have gone up? We’re playing our part; the banks have got to understand that the public will not understand it if they do not play their part to the full.”
Angela Knight, chief executive of the British Bankers’ Association, said banks were improving lending. “As far as the major banks are concerned they are lending, and increasing their lending,” she told BBC Radio 4′s The World This Weekend.
On interest rates, she said the base rate did not represent the real cost of money. “People say, ‘look, base rate is down to 0.5%, so why do you charge what you do for lending?’ The answer to that is that you can’t get the money at that rate. Base rate is not the money which a bank pays.”
Knight said the wholesale price of money was about twice that of the Bank of England rate. “But also, what there isn’t is capacity in the wholesale market because it’s credit crunch worldwide, so in fact the cost to the banks has gone up.”
Vince Cable, the Liberal Democrats’ spokesman on Treasury affairs, said: “It is amazing that the chancellor of the exchequer has only just woken up to the fact that this is a problem. We have been warning about the lending crisis, including in government-owned banks, for months.
“The problem isn’t just about the cost of borrowing, but the difficulties which many companies who are solvent, with a good credit history, have in obtaining bank credit without unreasonable demands for personal security and charges. It’s time the government stopped being a passive investor in the nationalised and semi-nationalised banks and ensured that they maintain lending to good British companies for the wider interest of the national economy.”
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This is how we let it happen, Ma’am …
July 25th, 2009 |
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A group of eminent economists has written to the Queen explaining why no one foresaw the timing, extent and severity of the recession.
The three-page missive, which blames “a failure of the collective imagination of many bright people”, was sent after the Queen asked, during a visit to the London School of Economics, why no one had predicted the credit crunch.
Signed by LSE professor Tim Besley, a member of the Bank of England monetary policy committee, and the eminent historian of government Peter Hennessy, the letter, a copy of which has been obtained by the Observer, tells of the “psychology of denial” that gripped the financial and political world in the run-up to the crisis.
The content was discussed at a seminar at the British Academy in June that was attended by economic heavyweights including Treasury permanent secretary Nick MacPherson, Goldman Sachs chief economist Jim O’Neill and Observer economics columnist William Keegan. The letter explains that as low interest rates made borrowing cheap, the “feelgood factor” masked how out-of-kilter the world economy had become beneath the surface, with some countries, such as the United States, running up enormous debts by borrowing from others, including China and the oil-rich Middle Eastern states, that were sitting on vast piles of cash.
Despite these yawning imbalances, they say, “financial wizards” managed to convince themselves and the world’s politicians that they had found clever ways to spread risk throughout financial markets – whereas “it is difficult to recall a greater example of wishful thinking combined with hubris”.
“Everyone seemed to be doing their own job properly on its own merit. And according to standard measures of success, they were often doing it well,” they say. “The failure was to see how collectively this added up to a series of interconnected imbalances over which no single authority had jurisdiction.”
That meant when the reckoning came it was extreme, starting in summer 2007 and culminating in the near-collapse of the entire world financial system after the bankruptcy of Lehman Brothers last autumn.
“In summary, Your Majesty,” they conclude, “the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”
Besley stressed that the experts had not been in “finger-wagging mode” and had agreed that the causes of the credit crunch were extremely complex. “There was a very complicated, interconnected set of issues, rather than one particular person or one particular institution.”
Other experts at the seminar last month included Paul Tucker, deputy governor of the Bank of England, Vernon Bogdanor, the constitutional expert from Oxford University, and HSBC’s chief economist, Stephen King.
A spokesman for Buckingham Palace said the Queen has displayed a particular interest in the causes of the recession, summoning Bank of England governor Mervyn King to a private audience earlier this year to explain what he was doing to tackle it.
Official figures published on Friday revealed that Britain’s economy has now been contracting for 15 months, and the recession is deeper than any since the 1930s, outside of wartime.
Robin Jackson, chief executive and secretary of the British Academy, said: “The global recession is a huge development, and it is reasonable to ask to what extent it could have been foreseen. What’s more, we can’t say ‘never again’ if we don’t fully understand what occurred. The academy forum was an opportunity to get an exceptional range of experts, participants and commentators in one room, sifting fact from fiction and shedding light on what had gone on. We hope Her Majesty – and indeed others – will find our letter informative.”
The academy plans to hold a second seminar later in the year to ask how best to prevent another such crisis occurring. Besley denied that economics as a profession had been discredited by the scale of the crisis, but admitted that unconventional ideas – about how herd psychology and bouts of irrationality can grip financial markets, for example – had sometimes received “less play” during the boom years.
He said the academy hopes to provide a forum for airing economic differences: “What we need is a forum where people can come together on a very open basis, to provide challenges and have a debate.”
Professor Luis Garicano, to whom the Queen directed her question when she visited the LSE in November last year, said: “She seemed very interested, and she asked me: ‘How come nobody could foresee it?’ I think the main answer is that people were doing what they were paid to do, and behaved according to their incentives, but in many cases they were being paid to do the wrong things from society’s perspective.”
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UK GDP falls faster than expected
July 25th, 2009 |
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• GDP down 0.8% in threee months to June
• City had expected a 0.3% decline, with some expecting growth
The chancellor’s forecasts for economic growth were blown out of the water official figures revealed Britain’s economy contracted by a record 5.6% over the last year as output fell for a fifth straight quarter.
Dashing hopes that the steepest decline in growth since the 1930s might be nearing an end, the Office for National Statistics said gross domestic product – the total value of goods and services in the economy – fell by 0.8% in the three months to June. The size of the drop surprised the City, which had expected only a 0.3% decline following recent signs of a pickup in the housing market and strong growth in high street spending.
But although the news caused the pound to fall 0.5% against the dollar to $1.64, the FTSE 100 saw its 10th straight day of gains, ending up 16.8 points, or 0.4%, at 4,577.
Economists believe GDP will almost certainly contract by more than the Treasury’s forecast of between –3.25% and –3.75% this year.
“It would be a miracle [if the government's target was met],” said Colin Ellis, European economist at Daiwa Securities SMBC. “Not on the scale of water into wine but not far off.”
The economy has already contracted by 3.16% this year and analysts are predicting a drop of 4.5% for 2009 as a whole.
Hetal Mehta, senior economic adviser to the Ernst & Young Item Club, said the economy would have to grow by 1% in the third quarter of the year and by 1.8% in the final three months to meet the government’s target of –3.75%.
The Liberal Democrat Treasury spokesman, Vince Cable, said: “These figures blow a hole in the chancellor’s GDP forecast for this year. The government’s failure to address the crisis in bank lending is only making the economic outlook worse. As a result, the deficit will balloon further, leading to bigger spending cuts or higher taxes.” The shadow chancellor, George Osborne, said: “These disappointing figures are much worse than expected and show that the recession is longer and deeper than the government had led us to believe. The sad news is this will mean the rise in unemployment is likely to be even steeper.”
Before yesterday’s data, some economists had even predicted the UK could post its first positive growth since early 2008, and the size of the decline prompted immediate speculation that the Bank of England would be forced into fresh emergency action to kickstart activity.
While the pace of decline in GDP slowed from the 2.4% seen in the first three months of 2009, the economy has suffered a cumulative contraction of 5.7% in the last five quarters.
The ONS said this was double the drop in the recession of the early 1990s and almost as big as the 6.4% retrenchment during the 1980-81 slump. The 5.6% drop in GDP in a year has not been matched since comparable records began in 1955.
Business services and finances, a sector that has boomed for much of the last decade, accounted for more than a quarter of the GDP decline in the second quarter. Overall, services fell by 0.6% on the quarter and by 3.8% on the year.
Describing the figures as “shockingly bad” Vicky Redwood, UK economist at Capital Economics, said they “firmly dash any hopes that the UK had already pulled out of recession”. Getting the economy back on track “looks likely to be a long hard slog”, she said.
The TUC’s general secretary, Brendan Barber, said: “There are no green shoots here. Unemployment is growing and a recovery that brings hope to the jobless looks ever more distant.
“Immediate big spending cuts are the last thing we need. They could tip the economy into an ever deeper downturn and make the deficit worse when the tax take falls and spending on unemployment goes up.”
Meanwhile, US consumer confidence fell this month to its lowest level since April amid growing pessimism about the long-term economic outlook, especially about income and jobs.
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Fortune‘s Stanley Bing: Does Economics Have a Future?
July 23rd, 2009 |
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This week the Economist offered a spirited defense of the profession for which it is named.
Germany accuses China of espionage
July 22nd, 2009 |
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• Cyber sabotage and phone hacking rife, agent says
• Several Chinese workers caught stealing secrets
Germany is under attack from an increasing number of state-backed Chinese spying operations that are costing the German economy tens of billions of euros a year, a leading intelligence agent said.
Walter Opfermann, an espionage protection expert in the office for counter-intelligence for the state of Baden-Württemberg, said that China was using an array of “polished methods” from old-fashioned spies to phone-tapping, and increasingly the internet, to steal industrial secrets.
He said methods had become “extremely sophisticated” to the extent that China, which employs a million intelligence agents, was now capable of “sabotaging whole chunks of infrastructure” such as Germany’s power grid. “This poses a danger not just for Germany but for critical infrastructure worldwide,” he said.
Russia, he said, was also “top of the list” of states using internet spying techniques to garner vital German know-how which “helps save billions on their own economic research and development”. He said while Russia only had “hundreds of thousands of agents”, compared to China’s million, it had “years more experience”.
Opfermann estimated that German companies were losing around €50bn (£43bn) and 30,000 jobs to industrial espionage every year.
“China wants to be the world’s leading economic power by 2020,” Opfermann said. “For that they need a speedy and intensive transfer of high-level technological information which is available in developed industrial lands, if you can get your hands on it”.
The areas most under attack include car manufacturing, renewable energies, chemistry, communication, optics, x-ray technology, machinery, materials research and armaments. Information being gathered was not just related to research and development but also management techniques and marketing strategies.
Opfermann said internet espionage was the biggest growth field, citing the “thick fog of Trojan email attacks” taking place against thousands of firms on a regular basis and the methods employed to cover up where the emails had come from.
But he said “old-fashioned” methods were also rife, such as phone-tapping, stealing laptops during business trips or Chinese companies who regularly sent spies to infiltrate companies.
“I cannot name names but we’ve dealt with several cases of Chinese citizens on work experience in German companies, who stole highly sensitive information from them,” he said.
In one case, the police raided the house of a Chinese woman suspected of stealing company secrets from a German business where she was working, and discovered 170 CDs containing highly sensitive product details.
In a separate case a highly qualified Chinese mechanical engineer employed by a company in the Lake Constance region was discovered to have passed on information for a machine it was developing to the company’s Chinese competitor, who constructed an exact copy.
“As is often the case the man disappeared and went back to China – so often the attacker is way ahead of the game and it’s also hard to find out who they’ve been working for.”
Opfermann said although the problem was “huge and growing”, it was not being discussed, “because companies don’t want to admit their weaknesses and lose customers and they don’t want to ruin business opportunities with China. As a result we’re only seeing the tip of the iceberg.”
Two years ago the consultancy firm Corporate Trust estimated that around 20% of German companies – mainly small and middle-sized businesses – had been the victims of industrial espionage.The findings chime with fears across the industrial world about the threat of cyber crime and the corresponding increase in efforts being put in place to fight it.
In Britain last month the GCHQ, the government’s electronic spy centre, which estimates that the UK loses GBP 1bn a year to e-fraud, set up operations to deal with the growing threats. The Pentagon also announced it is to create a new “cyber command” and in May President Obama said he would establish a White House role to oversee cyber defence, saying the nation’s digital networks had to be recognised as a “strategic national asset”.
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Brown: Tories wouldn’t act on recession
July 22nd, 2009 |
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Prime minister contrasts government action – which will ‘shorten the recession and reduce its impact’ – with the policies of opposition parties
Gordon Brown’s press conference – as it happened
Gordon Brown today accused the Conservatives and the Liberal Democrats of planning to “let the recession take its course” as he insisted the government had put a programme in place to weather the economic downturn.
At his monthly press conference in No 10, the last before he leaves London for August, the prime minister claimed “the action we have taken has saved probably half a million jobs from being lost” as he insisted “the government’s action will shorten the recession and reduce its impact”.
He said the great dividing line in British politics was that he was taking action while “the opposition parties would let the recession take its course”. The opposition said no to increasing spending now to tackle the recession, while Labour said yes, Brown said.
His government would be “judged by results” and in recent weeks had put in place conditions for long-term economic success, reforming public services, and promoting the growth of a low-carbon economy, Brown said.
Measures had been introduced, among other things, to ensure tougher regulation of banks, a shake-up of social care and schools, a bill to clean up politics and steps to make Britain the world leader in low emissions vehicles.
“We made a deliberate decision that in a recession you maintain capital spending throughout and spending on infrastructure … The evidence is that that is seeing results.”
No government had faced the two big crises of the economic crisis and the expenses scandal in parliament, Brown said. It was inevitable that people were angry but the government was taking action which would be felt in the longer-term.
“When people see these results and the action has been taken … Then I think people will see very clearly the choice between the parties.”
Some ministers believe Brown needs to be more open about the need for tough decisions on spending in the future ahead of a general election.
But today he said the general election would not be a “referendum” on the government but a choice between parties, and he was confident about the choice voters would make. “It has been a difficult year because we have had to take tough decisions and tough choices.”
Brown said Operation Panther’s Claw in Afghanistan is making “good progress” despite the criticisms of senior military figures and the Foreign Office minister Lord Malloch-Brown – hastily retracted today – about the lack of helicopters in Helmand province.
“I am satisfied that Operation Panther’s Claw has the resources it needs to be successful,” Brown said. “For the operation we are doing at the moment we have the helicopters that we need.”
Brown said: “I think the fact that it is making progress at the moment and yielding results already shows that that is the case. I am confident that we will bring this operation to a successful outcome. It is very important to recognise what the commanders are saying on the ground, the increase we have already made in helicopters, and what we are going to do in future months.”
He quoted a commander in Afghanistan who said: “It is a sad fact that helicopters wouldn’t have saved the lives lost last week.”
Britain was the second largest contributor in Afghanistan, Brown said, rejecting claims that he had turned down the military’s request for more troops in March. The number of troops had increased from 8,100 to 9,150, he said.
On swine flu, Brown told reporters that “robust plans” were in place to fight the virus, and measures were being taken in a “calm and organised and ordered way”.
Brown defended the long parliamentary recess, which started today and is not due to end until 12 October, by saying MPs had a duty to listen to their constituents.
Asked how he was going to spend his break, Brown said: “I am looking forward to a holiday with my children, and it will be in this country and not abroad. I want to catch up on a lot of sport because it has been a great summer of sport and I have missed too much of it.”
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Budget deficit hits record June high
July 22nd, 2009 |
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Total government spending in June hit £49bn, up from £44.2bn a year earlier
Opposition parties were last night piling pressure on the government over Britain’s deteriorating public finances after falling tax revenues from recession-hit companies and consumers pushed the budget deficit to its highest for any June on record.
With tax and spending at the heart of the political fight between now and the general election, the Liberal Democrats and the Conservatives called on Alistair Darling to come clean about the options facing the country in the next parliament.
The Office for National Statistics (ONS) said public sector net borrowing – the gap between the exchequer’s tax take and its spending – stood at £13bn in June, slightly lower than City forecasts of £15.5bn, but the highest June deficit since records began in 1993. The £41.2bn borrowing in the three months to June was higher than for the entire year before the credit crunch started, and brought the total deficit over the last year up to £107bn.
The ONS said the corporation tax take from UK companies was down 14.1% in June from the same month last year, while VAT receipts fell 15.9% and income tax dropped 3.9%. While tax receipts have fallen, more and more people are claiming unemployment benefits. Government spending on social benefits has shot up 9.7% in the year to June.
The Lib Dem Treasury spokesman, Vince Cable, said the figures suggested that “even the chancellor’s eye-watering prediction of £175bn borrowing this year could be an understatement”.
He added: “With such a mismatch between government spending and receipts it is clear that in the longer term these levels of borrowing are not sustainable. If the chancellor expects to have any credibility, both with the markets and the public, he must be brutally honest about how he intends to deal with levels of borrowing. However, such a commitment to deal with the deficit cannot come from salami slicing key public services, but through an honest debate about what the state can and cannot afford to do.”
Philip Hammond, shadow chief secretary to the Treasury, said: “Gordon Brown’s debt crisis is getting worse by the month. With borrowing at record levels, why can’t he finally be straight with people and admit there will have to be public spending cuts?
“In just the last month alone, Gordon Brown has increased every person’s share of the national debt by £213 each.”
A Treasury spokesperson said: “Our plans to halve the deficit within five years are based on cautious assumptions about share prices, unemployment and the loss of output from the shock to the economy built into the budget forecasts. The latest monthly figures for public sector borrowing are in line with our forecast.”
Public sector net debt as a proportion of GDP now stands at 56.6% – the highest since records began in 1974.
David Kern, chief economist at the British Chambers of Commerce, said: “It would be wrong to tighten policy while the recession continues, but maintaining Britain’s international credibility requires a robust plan for restoring our public finances over the medium-term. This must focus on curtailing public spending across the board, while avoiding damaging measures that would harm wealthcreating businesses.”
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Michael Hirsh: Milton Friedman And The Fed Bailout
July 17th, 2009 |
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Anna Schwartz is 93 and has been working at the same place since 1941. She’s that rarity in economics, or indeed any field: a living legend from another era who hasn’t lost a step mentally and who grasps everything that’s going on around her i…
Dennis Whittle: The Evolution of Economics
July 17th, 2009 |
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One economist leading the effort to define that new paradigm is Andrew Lo, of the Massachusetts Institute of Technology, who sees merit in both…
Rebalancing our shaky economy
With unemployment rising and manufacturing declining, the economy needs more state help for a speedy recovery
Today’s unemployment figures show that, although banks’ share prices may be recovering, the labour market continues to deteriorate. Unemployment is set to continue to rise through the rest of the year and probably for the first half of next year too. The full human cost of the recession is still to be felt as the number of people out of work climbs towards 3 million.
The message coming out of the recession is clear: we need to build a broader-based economy, less reliant on consumer debt and more focused on investment and innovation. What is less clear is where the new jobs will come from. In the last economic cycle nearly three-quarters of all new jobs were created in the public sector, finance, construction and retail. Jobs will not be created in the same sectors in the next economic cycle. Other sectors will have to pick up the slack if we are to return to full employment.
While the need for the economy to rebalance is clear, the scale of the challenge that lies ahead is greater than people realise. After the last recession it took eight years to return to the previous level of peak employment – it could take even longer this time round. Employment in manufacturing – often presented as a potential source of jobs in the future recovery – has been falling at an annual rate of 3.7% over the last seven years, so just halting this decline would be a major change of trend.
The UK will therefore be reliant on a big turnaround in manufacturing and on services that aren’t in finance, retailing or the public sector for jobs growth in the next few years. The challenge of creating these jobs and achieving more balanced employment may be large, but it is not insurmountable. The UK has strengths on which to build – high-tech manufacturing, pharmaceuticals, services for export, business services, publishing, media and creative industries, for example. It could also stand to gain from increasing demand for green technologies as a result of attempts to address climate change and for care services as a result of our ageing population. The weaker pound, growing markets in emerging economies and concerted economic stimulus at home and abroad will all help.
But a rebalanced economy will not develop by chance. Some strategic government support for industry is also needed. As the financial crisis unfolded, Lord Mandelson trumpeted an “activist” approach to industry in an attempt to create an economy “with less financial engineering and more real engineering”. This was a move in the right direction but has not gone far enough.
We believe there is a more structural role for the state to correct market failures. The role government should play in the economy doesn’t stop when the recession is over. That is why we are calling for the government to match its rhetoric with the creation of institutions and policies that will “fix” an activist approach into the wider economy – including the creation of an infrastructure bank, government-backed university-business links, a national ideas bank and greater control for city-regions over their local economies.
A debate is beginning about how the UK economy will grow and what role the government should play in the process. The government should seize the opportunity to put in place the institutions and policies required to build a more sustainable employment base and ensure a speedy recovery to full employment. There are reasons to be optimistic and tell a positive story about the possibilities for growth and job creation in the UK – but that optimism depends on a supportive, strategic government.