Can the UK economy become dynamic again and does it matter if it doesn’t?

10 11 2009

nukesThe Government has finally announced a nuclear power station building programme. Typical of Labour’s record on infrastructural projects it is far too late, too little, underfunded and came in the form of a statement in the House of Commons with no opportunity for a debate or a vote to give it democratic legitimacy, no doubt opening the way for endless legal challenges from the anti-nuclear and nimby lobbies.

It appears to be the very least that the government could do in the face of the expected power supply shortages in the future and the commitments it has made to cut carbon emissions. What it is not is part of any concerted plan to reinject dynamism into the UK economy. We are still lacking any overall vision for how the UK is going to become economically vibrant again. Of course there are  people, some of whom I debated at the Battle of Ideas Conference recently(see here for audio record), who argue that economic growth is a dangerous or futile objective.

In my previous blog I argued that economic growth is a good thing for social, cultural and philosophical reasons as well as the more obvious economic ones. I was struck at the Conference last weekend by two reactions against this point of view from people who did not fall easily into the categories of anti-growth viewpoints I was attacking.

First there were people who agreed in general that global economic growth was necessary, but that this should be mainly in the developing countries. Their argument is that we in the west have pretty much got what we need and we do not require faster growth rates. Secondly there were those, including Martin Wolf, who argued that even if we wanted to it is not possible to reverse the relative or perhaps even absolute economic decline of the UK and countries like it.

The two viewpoints are complimentary in arguing that faster growth, more economic dynamism, is either unnecessary or even if it is then it is not possible. If these views are not challenged and an alternative economic route mapped out, then the UK is condemned to stagnate with no prospect of changing itself in any fundamental way.

The recession has shocked many people in the west and shaken their confidence in the market system and added to a sense that economic growth is problematic. There is an increasing sense that we have reached a ‘new normal’, a position where slow or flat economic growth is likely and perhaps even desirable. There is a danger that this lack of confidence becomes a self-fulfilling prophecy. 

With a General Election in the next six months it is time to put on the table what we think should be on the economic agenda. If you have any views about what the economic policies of the next government should be then please feel free to respond. In future blogs I will examine why a fatalistic approach to growth and dynamism in the west is wrong and how we can begin to tackle it.

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