What next for the economy?
Assuming that governments around the world have done just enough to rescue the global banking system (and it really did have to be done, however much it might stick in our gullets having to leave in place most of the Executives who drove us into this disaster in the first place), that’s just the start of what’s going to be a protracted and extremely painful process as we try to avoid the worst of an economic recession/depression. And that’s where the debate now has to go.
I suspect I’ll be banging on about this quite a bit over the next few months, based on the following high-level thoughts:
1. Very large sums of taxpayers’ money will need to be found to keep unemployment in check, to overcome continuing liquidity problems, and to keep driving innovation at the time of economic meltdown.
2. Taxes will inevitably need to rise, in the not too distant future, and to rise disproportionately for the rich. The recent Lib Dem decisions on tax-cutting measures are therefore bonkers.
3. Oil consumption (and energy prices) may well fall even further because of the recession, but that will be only temporary. The long term trend is clear, the days of cheap oil are over.
4. Even two or three years of near-zero economic growth would do little to slow the build-up of CO2 and other greenhouse gases in the atmosphere. We’re still heading towards climate-induced catastrophe as the interim report from the Committee on Climate Change has mapped out, that means a cut of at least 80% in our emissions by 2050.
5. Put all those things together, and an OVERARCHING PRIORITY emerges: to start rebuilding the UK economy via massive ongoing investments in our low-carbon future.
6. The list of things to be done under this heading (already described by many as a “Green New Deal”) is all but limitless – in the UK as in every other nation.
7. The Prime Minister has already expressed apparent enthusiasm for the idea of a jobs-generating “green industrial revolution”. It’s been referred to in a number of speeches. He now needs to get the Treasury to put as much effort into working out what this looks like as it has into rescuing the banks.
8. This is much, much more than a silver lining in a very black cloud. As Nick Stern has said, it is the ONLY way of achieving the kind of low-carbon society we need whilst simultaneously securing increased prosperity.
And it will be interesting to see just how quickly we get some kind of consensus around that strategic approach.
Comments
A lot of Americans say the U.S. economy is now in a recession. We can expect a good number of layoffs as a result of these cutbacks, and consumer confidence will likely shrink further as more people begin to fear for their jobs. The U.S. bailout measures are good for everyone worldwide, if the cash advances being made work like they're intended to. However, some are insisting that the bailout is going to wreck the budget and make the deficit explode. Obama and others insist there will be cuts made that will make up for it. Regardless, let us hope that the short term loans we're making will help to bring back the U.S. economy.
Since Alastair Darling is in the position of having to chuck large sums of money around, how many new jobs could he create by throwing a couple of extra billion into the Government's Low Carbon Buildings Programme grant fund?
And how useful would it be to prop up sagging builders, sagging banks and hundreds of thousands of jobs by buying up all those uncompleted, unsold, unwanted new homes, as well as the 45,000 soon-to-be-repossessed? They could become a new generation of council houses, bought by the government at massive discounts and leaving the likes of Taylor Wimpey just enough profit to survive the lean years. We'd get a fresh stock of clean, new council houses that might be marginally more tolerable than some of what we've got.
If we ordered some more to be built for next year, we could even insist on environmental standards - and on that large scale it would become more economically viable for companies to invest in production.
For £10billion I reckon you could negotiate a hefty discount on list price (it's the ultimate in buying off-plan) and come away with 100,000 new homes. The government could even make a useful role for the banks: if councils have to buy and own their own council houses, the government could sell them on to the councils at easy terms with easy loans from the banks - they'd love some nice steady (safe) business and something to spend all their Special Liquidity on.
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