The PM has put us on a ‘war footing’ for recovery. Lack of growth, it seems, is as serious a threat as invasion.
This state of emergency has been translated into a familiar attack on red tape and planning – as if these were the only impediments standing in the way of a cascade of corporate investment that is ready to burst upon us if only the bureaucrats would get out of the way. This starts to resemble ransom. The boom filled the coffers of the corporates, since it was their products being consumed in the credit-fueled spending splurge, but recovery won’t come until the conditions are made even more easy for profits to take a bigger share of income.
If cutting red tape won’t work, what will? Previous blogs have dealt with two of these – a Keynesian spending stimulus on infrastructure, and the monetary option of a helicopter drop. Though the difference between the two is almost meaningless at this stage of the game. I have been argued both are lacking.
My forecast is that we are edging closer to the pump priming of national infrastructure spend. More ways of inducing corporates to invest in infrastructure will be sought, but creative accounting ways of releasing public money as well. The right response to that is – what is infrastructure? Roads, rail, airports – or something more imaginative?
Whatever is chosen, the scale of any spend will be nowhere near sufficient. In the same way that austerity has – as Chris Giles pointed out in the FT – only knocked 0.7% off GDP, so small amounts of new spending will add little more. And it can be no more than a short-term solution – in a sustainable economy you either produce to meet your ongoing needs or you export to pay for them.
My recommendation is that we need to find new ways of paying for the services that we most need more of, in education, health, environment, culture – because they are the things people want, because of their lower environmental cost, because of social ills. These are the economic goods and services we need to produce more of on an ongoing basis. But how?