Ten reasons to get on with it...
THE greater the uncertainties – and my word, we have got those in spades at the moment – the more we should focus on what we do know, and act accordingly. British politics are all over the place, but what is happening to our economy, and indeed the world economy, is much clearer. So here are my top ten things that we can be reasonably sure about.
One, there is some sort of global slowdown. There is a drip-feed of information coming through that confirms this, with some countries further down the track than others. We don’t know the exact timing, or the severity, or the countries that will be hit hardest. But we do know things are slowing.
Two, we know the UK economy is pretty resilient. Given all the stuff that has been thrown at it, it is astounding that it is still putting on jobs and – though the spring quarter was negative – is probably still growing.
Three, the central banks will continue to hold down interest rates and flood the world with money. Expect more easing from the European Central Bank next week, with its soon-to-retire president, Mario Draghi, wanting to go out on an upbeat note. Expect an interest rate cut from the US Federal Reserve the week after. This ultra-easy money policy won’t go on forever, and it is not very effective at boosting the world economy. But it will carry on for a while yet.
Four, despite that, inflation will remain low for a couple of years, maybe longer. The latest Bank of England survey shows that Britons are getting increasingly worried about inflation rising, and on a long view that makes sense. But in the immediate future it looks less and less likely.
Five, austerity is over. It is over in the UK, for we had that spending review last week, with Sajid Javid promising the biggest rise in public spending since the financial crisis in 2008-9. Whatever happens to our politics, the spending button will stay pressed down.
Six, other countries will carry on with easier fiscal policies too. The US started this with the Trump tax cuts, but just about everywhere the mood is the same. In Europe, even Germany, which has a legal requirement to balance the budget, is thinking of loosening policy, either by spending more or cutting taxes. So this is not just a UK phenomenon. Austerity is dead everywhere.
Seven, global business looks jolly robust when you consider what is being thrown at it. US companies have been busy reorganising their supply chains in response to the tariffs imposed on Chinese imports, and analysts forecast they will increase profits by more than 10 per cent next year. There are dark spots: German car exports are in trouble, helping pull down the whole economy. UK retailers are struggling, witness the relegation of Marks & Spencer from the FTSE100 index and the travails of John Lewis and its sister chain Waitrose. But overall, global business looks in better shape to cope with a slowdown than, for example, global banking was in 2008.
Eight, technology races on and will continue to do so. So all the present trends it has generated, such as the shift to online retailing, the string of new online services, the decline of the use of cash, and so on, will continue apace. Our lives will continue to be changed, and on balance improved, by this revolution.
Nine, the great shift of power in the world – away from the old developed world and towards the emerging nations – also races on. If you spent your holidays in an emerging country you will have caught how parochial our preoccupations appear to others. More than half the growth in the world is generated by emerging economies. The fastest-growing continent is Africa. The EU will be down to 18 per cent of the world economy when the UK leaves.
Finally, ten, we can be sure that whatever the outcome of the current political impasse, for the rest of us the basic rules apply. If we want to have prosperous lives, we put aside savings for emergencies, we try to buy a home, we sort out a pension. Compared with the strikes and inflation of the 1970s, the unemployment of the 1980s, and the crash of 2008/9, this is mild stuff. We should just get on with it.
May I end with a plea? If we get on with it, then we have a right to ask the same of the politicians: behave like adults, stop prancing about and get on with it.
Our politicians need to behave like adults – and stop prancing about