Time to raise public spending, Darling?
As the prospect of a recession looms in Britain, this may seem an odd time to talk about how the country should be preparing for the next global up-turn. However, the reality is that if the UK fails to make long-term considerations paramount in how it deals with this down-turn, the next up-turn could prove to be even more damaging than the effects of the credit crunch.
The simple truth is that there is no cast-iron reason why the next upward trend of the economic cycles has to include Britain. Nations have managed to sit-out boom times before – indeed, France and Germany seemed to manage it quite well last time round – and without the right choices being made, this could be Britain’ turn. Contrary to some expectations, there is no sign that the late 90s-early 00s boom will prove to be the last hurrah of globalisation. Rather it was the catalyst for the next stage of the globalising of the world economy: the breaking of US economic hegemony and the growth in the power of the BRIC nations (Brazil, Russia, India and China). Behind the dust cloud created by slowing or non-existent growth in the old economic powers of the US and Europe, these emerging powers appear to be largely weathering the storm – the IMF is, for example, continuing to predict 10% growth in the Chinese economy in 2008-09.
This means that when the older economies emerge from the slow-down, as they eventually will, they will have a lot of catch-up to play. This will be particularly hard to achieve given that some of the causes and symptoms of this recession, particularly high energy prices, are here to stay. But the countries that will find (more…)
