Today's announcement by the Bank of England Governor Mervyn King that there will be no growth in the UK economy this year appears to be optimistic. In all likelihood, we will see the year ending with a smaller economy than at the outset. Moreover, the economic deterioration will be compounded by another likely steep increase in population, placing increased strain upon our housing stock, infrastructure and social services. The Government and the Opposition are failing the country badly, for both offer us the prospect only of continuing economic decline conjoined with falling living conditions, increasing social fragmentation and polarisation.
For successive years, the Bank of England has predicted that we run not the risk of inflation, but of deflation, and once again today we see King predicting that inflation will fall below the 2% target by the end of 2012. We have heard this said many times previously, only to see inflation roar away well in excess of this level. Although the general crisis within the global economy appears to militate against a surge in inflation in the near term, other geopolitical events, particularly the crisis in the Middle East, could threaten to increase global oil prices which would have a significant impact on our rate of inflation. The thorny issue of Iran’s nuclear programme and hawkish rhetoric concerning a potential pre-emptive strike by Israel could lead to the disruption of shipping through the Gulf of Hormuz causing a surge in the oil price. Moreover, it also remains to be seen how Iran’s desire to entangle itself in Syria’s intensifying civil war will manifest itself, and whether this might precipitate a wider clash within the Middle East involving Israel and possibly a number of NATO states. Either scenario would be likely to lead to a surge in oil prices, irrespective of the state of the global market.
For successive years, the Bank of England has predicted that we run not the risk of inflation, but of deflation, and once again today we see King predicting that inflation will fall below the 2% target by the end of 2012. We have heard this said many times previously, only to see inflation roar away well in excess of this level. Although the general crisis within the global economy appears to militate against a surge in inflation in the near term, other geopolitical events, particularly the crisis in the Middle East, could threaten to increase global oil prices which would have a significant impact on our rate of inflation. The thorny issue of Iran’s nuclear programme and hawkish rhetoric concerning a potential pre-emptive strike by Israel could lead to the disruption of shipping through the Gulf of Hormuz causing a surge in the oil price. Moreover, it also remains to be seen how Iran’s desire to entangle itself in Syria’s intensifying civil war will manifest itself, and whether this might precipitate a wider clash within the Middle East involving Israel and possibly a number of NATO states. Either scenario would be likely to lead to a surge in oil prices, irrespective of the state of the global market.
Contrary to its
assertions, Labour has no solution to this crisis. Its prescription for
“growth”, involving as it does boosting spending on imported products, would
serve only to exacerbate our balance of payments deficit, and to reinforce the
lopsided structure of our economy. It is hardly as if Ed Balls had nothing to
do with the economic policy of the last Labour administration and the woes that
ensued therefrom, that with its twin addiction to debt and globalisation has
undermined the foundations of our economy. There is no pain free way out of
this economic crisis, and it is going to take many years to reinvigorate
manufacturing, and to develop the productive potential of new technologies to
generate the wealth required for the long-term funding of our social services.
The process of
globalisation and its attendant ideology of globalism have assisted in the
generation and entrenchment of this economic crisis, and if it is to be
overcome effectively at the national level, then both must be ditched as a
matter of policy. Investment, instead of chasing quick wins abroad, must be
directed towards our own key industrial, research and development and
infrastructure projects. These vital sectors will provide us with the basis of
a sound and sustainable economy, allowing pensioners to feel secure in the
knowledge that their funds will be invested in undertakings directed towards
the long-term, yielding wealth, jobs and a future for all of our people. This
manner of investment, rather than the solicitation of Arab petrodollars or the
savings of Chinese workers, is what is required to restore genuine national
self-determination.
Our economic policy
should not be geared towards the short-termism of the electoral cycle, but
should instead be devised with the next 50 to 100 years in mind. We need to
think and act on behalf not only of existing generations, but also of those to
come, and to develop policies in accordance with this principle. Sustainable
employment, prosperity and well-being can only be secured in a country that is
not groaning beneath the weight of excess numbers, and it will be incumbent
upon any rational government, to ensure that a demographic policy is devised
and implemented to bring about a better balance between land and people. Do not
of course expect such considerations to weigh in the decision-making processes
of the existing large parties, for they find such reasoning anathema. It will
be our task, to make this reasoning mainstream, and to ensure that it finds
expression in concrete policy.
Interest rates may
remain low for many years, as the example of Japan testifies, but whatever
level they are set at, we will have no worthy economic future if our country
does not adopt a radical new course in economic policy.
The Bank of England: Interest Rates held at 0.5%
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