Do our leaders have their eye on the ball or are they not even in the ball park?
For years now I have listened to first Tony Blair and then Gordon Brown proudly announcing to parliament that they have abolished the Boom and Bust cycle of Economics, which they claim was intrinsically part of Tory policy. In that case, New Labour must have also re written the laws of Capitalist Economics as Booms and Busts are as much part of a Capitalist Economy as Winter and Summer are part of the seasons on earth.
I have also listened with incredulity at Gordon Brown taking all the credit for Britain’s boom of recent years. What he failed to mention was that that boom was largely due to massive consumer spending fuelled by house prices rising at the fastest rate ever and a massive rise in individual debt. The boom was not based on fundamentals for example: an increase in the productivity or skill level of the workforce; discovery of a natural resource; manufacturing excellence or an increase in exports or tourism. In fact the manufacturing base of the UK has declined significantly. The only growth sector of note in the British economy is the service sector, mainly the banking sector which is almost entirely based in London, thus concentrating wealth in the South East. This is perhaps the reason why a Tory leaning think tank propose that people in the North move South. To sum up my point: the boom was built on the back of a house price bubble which was unsustainable; a house built on quicksand. Surely the government had to realise that at some point this bubble would burst leading to mass defaults and a banking crisis; surely they would have planned for it.
The story in the US was very similar. The growth of the subprime market in the US was alarming and surely the powers that be could have foreseen that come the inevitable downturn in the economy; there would be mass defaults and banks would not cope: I refer to the recent take over of Freddie Mac and Fannie Mae.
My point is that this entire situation we are in economically was entirely foreseeable to anyone with a small amount of intelligence and common sense and yet it has taken the great and the good at Westminster and Washington by surprise it seems to me.
Adding to the downturn in the Economy is the fuel price rise. Again, an entirely foreseeable situation. Russia is the largest oil producer along with Saudi Arabia, but Russia’s oil fields are mature. The American congress voted against drilling for more oil in America. The North Sea Oil deposits are also now mature. There is political instability in many oil producing countries i.e. Iraq and Colombia. Global oil stocks appear to be in decline and there is not yet the infrastructure to exploit the oil deposits postulated to exist in some African states like Angola. The major driver of the massive rise in oil prices is the demand by China and India. China and India with a combined population of 2.4 billion increasingly mobile and skilled people have been experiencing dynamic growth and industrialisation which has led to an unprecedented demand for oil in Asia. Bearing in mind the populations of India and China are known and their industrialisation could well have been predicted if not actually observed many years ago, surely the powers that be should have anticipated that oil prices would soar as demand increased exponentially and supply declined. Again it seems to have taken them by surprise.
So now we seem faced with a bleak future: the fake boom is history and with no end in sight to rising oil prices (which affect every aspect of our lives) it is hard to see where we will all end up. Bio fuels as an alternative to fuel are already causing food shortages by taking up valuable acreage for food crops; they do not appear the way forward. Nuclear energy would take years to fill the gap and quite frankly I do not trust either our nor other governments to properly maintain nuclear stations; dispose of nuclear waste or adequately protect the public against the risk posed by nuclear power stations. Do you?
My conclusion is that the people that run our economies are at best short sighted and at worst negligent. Economically we have been running on empty for some time now and yet they have failed to address the issues. A mixture of short termism caused by the electoral cycle and pure incompetence when dealing with major issues seems the problem.
This problem is out of control and I have no faith in our leadership’s ability to resolve it. The evidence is there: they really do not know what they are doing.
