In the run up to the Big Day I thought I’d present my top five Christmas wishes. In reverse order here’s number 2.
Wish #2: I wish to be wrong about the prospects for the economy.
These days being always right or, more accurately, never admitting to being wrong is a crucial attribute for success. But I like to be contrary. So in the runner-up slot in my list of Christmas wishes I hope to be proved massively, incontrovertibly and unarguably wrong. Incorrect. In error. Mistaken. Unsound. Er … wrong about the economy.
I think 2011 will be a terrible year for the UK economy. I do not see much, if any, prospect of an increase in demand for goods or services either here or in existing or new markets abroad. It looks to me that the global financial systems are only marginally less vulnerable now than they were just before the financial crash.
I should make it clear that I’m not an economist. I like to think though that I’m a reasonably well-informed bloke. So my economic hunch is just as likely to be right (or wrong) as anyone else’s. What I do have is direct personal experience of what deficit reduction means in practice for the people affected by it.
The possibility of my redundancy earlier in the year was enough to force a change in our spending habits. A small amount of RPS demand and economic activity flowing from it lost to the economy to be sure. But imagine that multiplied up by every family feeling that unease.
The certainty of my redundancy – as you may have seen Mrs RPS discuss – has led to more reductions in our demand as we do what is sensible for us as a family. We stop spending. Actual redundancy will produce a further reduction in demand by us. So that’s less in the way of goods and services the rest of the economy will be required to produce for us. Again, imagine the multiplier.
Eminent people tell us not to be worried by the sharp reduction in spending that the government wants to achieve. Like any sensibly run family budget we’re told that the national economy has to respect its limits and pay down the credit card bill. Maybe I’m an economic ignoramus but when someone can point me to a family that has an army, navy and air force or its own hospitals or road network will be when I begin to believe that what holds true for a family budget holds equally true for nation states.
Everything I know from our family experience. Everything I know from my experience of the real world and its inhabitants. In short everything that I have ever learnt tells me that the chances of the economy leaping into life solely because it has been freed of the need to borrow £80 billion or so a year are slim.
Politicians have ramped up the rhetoric to justify deficit reduction targets of eye-watering ambition. The trouble with rhetoric like that is that it can work too well. People still left with a public sector job and people who have endured lean years in the private sector just to hold on to their jobs have heard the rhetoric. They believe it. And they will act on it.
Prudent paying down of personal debt is admirable for individuals but it is a nightmare for the prospects of businesses who want to sell those same individuals goods and services.
Now, I want a new job soon. In fact I have to have a new job soon. I want a flourishing economy and labour market into which I can sell my labour. So that’s why I hope to heaven I’m wrong and the Christmas Fairy grants my Christmas Wish of personal error … fingers crossed for an economic miracle in 2011.