Just a few bits about the economy from today’s news.
- In today’s Times, the chief economist of HSBC points out that productivity in manufacturing industry fell by 5% in the third quarter of 2012. There are explanations for this (it is much easier to reduce unit costs when output is rising than when it is stagnant or falling) but one wonders what the right wing press would have said if the public sector had experienced such a fall in efficiency. Privatise ‘em all, I guess.
- The UK economy is not increasing in wealth at all – in fact we are poorer now than we were in 2008. Output fell in the last quarter, and real household incomes are falling. Everyone knows this, but do they know that this outcome is predicted by economic theory, and just about every respectable economist.
- The IMF says that the government’s austerity policies are not working, and suggests some easing. The Deputy Prime Minister now feels that cutting capital spending was damaging. Even Boris Johnson, the Tory Mayor of London, thinks the presentation of austerity has been overblown.
- The main argument being given for the perverse policy of reducing public spending just when private spending was falling is that it keeps interest rates low by retaining the confidence of international lenders. But the interest rate on the bonds of the French government, who are disapproved of by these same international gnomes, is falling. There is a heap of savings about, and nowhere to put it.
- Eurozone countries with major unemployment problems were encouraged in the recent past to leave the Euro, re-adopt their own currencies, and increase exports on the basis of devaluation (even by me). But devaluation means lowering the value of your own currency in relation to other currencies. By definition, not everyone can do it. If I devalue, you can’t. This is now being stated at the Davos
So not only does the evidence show the government is wrong, even its friends are saying it is wrong. In fact, even its members are saying it got it wrong.