No such thing as ‘business as usual’ after the recession

13 07 2009

A4RV6XKCAPJ8QUICAODS7G9CAIJ0SH9CAIS17XWCA94EVAWCA883A8BCAAWO43PCACETBCZCA43UX79CAPYACCWCA13AZ5NCAFG0QZOCABS0UF6CA42JYAJCA4NPJXWCAACY2YSCAEDRHC2CAX66BIWCAQQIXPPIn a post last week I argued that the talk of green shoots in the economy was nonsense. The hopes of a return to ‘business as usual’ are slim for reasons explained there.  A report in today’s Financial Times bears out the more likely scenario of a period of stagnation. The general hope is that the regime of low interest rates brought in after the banking crisis will encourage more economic activity. There is little sign of this happening yet. Yet this seems to be the total strategy of our political class.

In the same Financial Times report an analyst had the following to suggest about the future;

Financial services and the City of London will take the lead. There will be takeover bids, management buy-outs and innovative investment products,One of the biggest areas of financial engineering will be how to get around the 50p tax rate.

How grim does that sound? The phrase ‘innovative investment products’ sums up everything that is weak and wrong about western economies. Rather than focussing on productive investment in new industries the search is on for new and better ways of making money out of financial instruments. It is all about reflating the financialisation bubble by finding new asset classes which can be leveraged.

Yet this ‘business as usual’ approach is all our political leaders have to offer. The real problem now lies not so much in the economic sphere, but in politics. Last week’s G8 summit had little to say and nothing to do about the recession. We appear to have entered a period of policy drift towards the economy, at least in the west. Stagnation in the economy and stagnation in politics has at least a silver lining. It should open a space to debate new and better ways of thinking about our economy and how it can be improved.

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