Five economic policies for changed times
I work on the floor below Nigel and the sound of the gauntlet hitting the ground as he wrote that last post was deafening. So what economic policies should social democrats be championing now given that: a) we are about to enter a serious recession and we need to protect those who face hardship while also finding a way out; b) the credibility of free market solutions and financial services as a growth leader is shot? These are my top five but willing to be challenged.
1. A fiscal stimulus to get some money and confidence back into the economy. Even if its effect is short-term, it could help us over the worst while the global economy sorts itself out. I’ve suggested elsewhere what this might cost and how big it should be.
2. Rewrite the remit of the Monetary Policy Committee to allow it to balance growth and employment against inflation when setting interest rates rather than focussing on inflation alone. This could be a temporary measure based on the principle that the remit was never written with a stagflationary period in mind (see a previous post on this).
3. Aim for export-led growth to pull us out of recession. The City has shown itself to be too volatile, too reliant on debt and it hasn’t proved effective at delivering growth outside the south-east. We also need to get our current account deficit back in the black to end our reliance on the City and credit. There are 31 sectors in the UK that have out-performed the UK economy as a whole in terms of growth and productivity and many have great export potential (a future Touchstone pamphlet will cover the research underlying this); let’s get the right policy, legislative, incentive and skills framework in place for them and they can lead us out of this mess.
4. A shift of our energy sources away from foreign oil and gas towards clean coal, renewables and nuclear. Oil and gas are insecure and inflationary and our use of oil is environmentally destructive; a huge effort to shift towards low carbon energy production and vehicles will generate growth, cut carbon emissions and provide energy security. Such a shift would also make us a global leader in renewable energy particularly for the new wave of offshore wind (it’s absurd that we are the windiest place in Europe and yet the onshore wind industry in Denmark and Spain is way ahead of us because the Government did nothing to nurture the industry).
All of these will reinforce one another and will require the state and other agencies to take a pro-active role. Any takers? Any free-marketeers still got the nerve to challenge them?