Tuesday, September 14, 2010

So What's New?

Didn't we go round these loops before?

After Tyler's disgraceful summer of idling, BOM is finally returning to the air.

So what's new?

Well, there's been much leaking and speculation re the forthcoming public spending review. The public sector unions are threatening a General Strike against job cuts, the police warn that cuts will mean the breakdown of law and order, the Navy and RAF reckon some as yet unidentified foe will roll over us unless we keep their boys' toys nukes and fast jets, and the arts establishment say subsidy cuts will usher in the abyss of a new dark age.

Indeed, according to our friends at the £3.5bn pa tax-funded BBC, we are teetering on the brink of Thatcherite destruction. The Italian hotel telly brought daily BBC World headlines that this or that economic stat was about to turn out much worse than expected (only to report later - much further down the bulletin -that said number had come in freakishly, inexplicably, better than expected).

So just as a sanity check, let's review the Economist's latest summary of consensus world growth projections (click on image to enlarge):

In case you can't read the numbers, for the UK the consensus GDP growth forecast is 1.5% for this year and 1.9% next. Sure, it's not a runaway boom, and sure, it might turn out to be lower than consensus. But a yawning abyss it ain't.

Tyler's specialpleadingometer is registering well into the red zone. The BBC may see the public sector union leaders as champions of civilisation, but those of us who remember the 70s, are thanking God for Thatcher's historic victories over King Arthur and Red Robbo. Today, it's only in cosseted public sector backwaters like the BBC that union barons still hold sway. Union membership across the economy as a whole has halved since the 80s.

The key point here remains just as it was when we left for the hols: public spending has to be cut in order to keep interest rates and taxes down so that the market economy can lift us out of the hole left by Commissar Brown. There really is no sustainable alternative.

But what about unemployment?

Hmm, yes.

The horrible truth is there is something very unfortunate about our economy. Those at the top - the bankers, the lawyers, the consultants etc - can do very well in the big wide world. They have something to sell that commands a nice premium price. But those at the bottom have nothing valuable to sell at all. Their poor skills command no premium, and their poor attitude means the low-skill jobs are all taken by Romanian migrants.

It's a serious problem to which there are really only two possible solutions.

The first is to tax our successful workers to support those left behind. The trouble is that's not very appealing if you're one of the successful workers already shelling out zillions in tax and wondering if you should relocate to Hong Kong.

The alternative is to somehow get the unsuccessful to work. And that means making it attractive for someone to employ them  - ie cutting employment taxes, cutting welfare for those of working age, and abolishing the minimum wage.

You know, I have the strangest feeling we might have covered this ground before.

Despite our prolonged break, it already feels like there's nothing new at all.

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