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GUARDIAN Wed, 01 Feb 2012 11:54:29 GMT
British manufacturers enjoyed a strong start to 2012 as their output grew at the fastest pace in almost a year according to the latest PMI survey. Here is what economists make of the dataHoward Archer at IHS Global Insight
The purchasing managers survey indicates that life got better for UK manufacturers at the start of 2012 after a pretty dismal end to 2011. Not only does the survey show output rising at the fastest rate for 10 months but also orders grew for the first time in seven months. This suggests that there is a very decent chance that the manufacturing sector will return to growth in the first quarter of 2012 after contributing significantly to overall GDP contraction of 0.2% quarter-on-quarter in the fourth quarter of 2011. However, whether or not the UK can avoid further contraction in the first quarter will depend mainly on what happens to services output and consumer spending.
Manufacturers still face very challenging domestic and international conditions, so it remains to be seen whether they can build on their improved start to 2012.
Meanwhile, there was some good news on the inflation front, with input prices falling for a third month running and output prices rises at the slowest rate for 27 months. This supports belief that consumer price inflation is headed down substantially further over the coming months and facilitates further Bank of England quantitative easing in February.
James Knightley, senior economist at ING
The UK manufacturing PMI has come in strong, offering some encouragement that the likely recession may not be as deep as some analysts fear. The headline index has rebounded to 52.2 in January from 49.7 in December, leaving the index at its highest level since April last year. Importantly, new orders rose to their highest level since March last year, which bodes well for production data in the next couple of months. The report also states that there has been an increase in the willingness of businesses to spend, thereby potentially offering hope for investment and hiring. Nonetheless, with consumer spending still accounting for nearly two thirds of UK GDP, we still predict a negative quarter of growth in the first quarter of 2012, which would confirm a technical recession.
Samuel Tombs, UK economist at Capital Economics
January's UK CIPS report on manufacturing adds to evidence that the industrial recovery got back on track at the start of 2012. The rise in the overall PMI from 49.7 to 52.1 – its highest level in eight months – was driven by a sharp increase in the survey's output balance from 50.2 to 55.8. On the basis of past form, the output balance is now consistent with quarterly growth in manufacturing output of close to 1%. Accordingly, the CIPS survey supports the upbeat message painted by last week's CBI industrial trends survey, which pointed to a similar rate of growth. Nonetheless, there are signs that this quite rapid growth will not be sustained. For a start, stocks of finished goods reportedly rose for the first time in April 2008. In addition, the new export orders balance fell back from 53.4 to 51.0, suggesting that overall growth is now largely dependent on domestic demand. But with consumer and investment spending likely to struggle this year, we doubt that this will provide a sustainable foundation for growth in the year ahead.
David Tinsley, UK economist at BNP Paribas
We have some very good news from the UK manufacturing PMI for January. The headline index 'soared' to 52.1, up from 49.7 in December. That was the highest index since April 2011 and well above the market expectation.
In the detail, the output index rose to a 10-month high, as new orders rose from both domestic and foreign buyers. Markit/CIPS report that demand rose from clients in Brazil, China, the Middle East and China.
Input prices declined for the third month in a row and the rate of deflation was the steepest since June 2009. Output prices rose, but the rate of increase has slackened...
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GUARDIAN Wed, 01 Feb 2012 13:39:31 GMT
Thinktank argues chancellor could give economy £10bn fillip on 21 March without risk that Bank of England would hike interest rates in response
George Osborne could provide the economy with a £10bn fillip by cutting taxes or increasing spending without the risk of higher interest rates from the Bank of England, according to the Institute for Fiscal Studies.
The independent thinktank said the deterioration in growth and a softer approach to monetary policy by the Bank meant "the case for a significant short-term fiscal stimulus to boost the economy is stronger than it was a year ago".
It added: "There seems little prospect that it would prompt an offsetting monetary tightening in the present climate."
Paul Johnson, the director of the IFS, said his organisation was "sitting on the fence" on whether a budget giveaway would be a good idea but said he would not criticise the chancellor were he to announce pro-growth measures on 21 March.
He added that a £10bn loosening of fiscal policy would only lead to a slight improvement in the economy's growth prospects this year, and that there was a risk that the financial markets would take fright at a boost large enough to make a major difference.
In its annual "green budget", which analyses the state of the economy and the public finances, the IFS said lower Whitehall spending this year would mean that the chancellor would need to borrow £124bn this year, £3bn less than he forecast in the autumn statement in November 2011. By 2016-17, borrowing will be £9bn lower, providing the chancellor with more fiscal flexibility at the time of the 2015 election.
The IFS warned, however, that work on repairing the £114bn "black hole" in the government's finances had only just begun. It said that 75% of the deficit reduction programme was still to come, including 88% of the benefit cuts and 94% of the reductions in departmental spending.
Oxford Economics, which produces forecasts for the green budget, said the economy was on course for a double dip recession – two successive quarters of negative activity – and would grow by just 0.3% in 2012, lower than the 0.7% predicted by the Office for Budget Responsibility.
It added that risks were heavily skewed to the downside, and predicted that a breakup of the eurozone involving five countries would send the UK spiralling back into a deep recession that would see output fall in both 2012 and 2013.
Economics
Budget
Thinktanks
George Osborne
Tax and spending
Tax
Larry Elliott
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GUARDIAN Wed, 01 Feb 2012 14:32:35 GMT
The Institute for Fiscal Studies thinks government borrowing will be lower than forecast. But it is far less sanguine about lost output, recession, public finances, austerity and the euro
A broken-backed economy with devastated public finances and a long, hard slog ahead. That's a brief summary of what the Institute for Fiscal Studies was saying in its "green budget", which sketches out the options for the chancellor in this year's budget and beyond.
Before looking at the bad news – of which there is plenty – it's worth mentioning the one or two snippets of good news. George Osborne has exercised such control over his cabinet spending colleagues that they are on course to spend £3bn less this year than the chancellor had allowed for. By 2016-17, borrowing will be £9bn lower than the projections made by the independent Office for Budget Responsibility last November. At the election, due to be held in 2015, Osborne may have a bit more wiggle-room for some vote-winning sweeteners.
The rest of the IFS report, though, is not for the faint-hearted. Concern number one relates to the enormous cost of the recession of 2008-09, which has cost £200bn in output lost for ever. Concern number two is that a second period of retrenchment is now under way, with the co-authors of the IFS report, Oxford Economics, predicting a double-dip recession in early 2012 and growth of just 0.3% for the year as a whole.
An economy that suffered as big a collapse as that in the UK would normally bounce back quickly and strongly. The dependence of the UK on debt-driven growth in the financial and housing sectors has been brutally exposed, as has the impact of high inflation in an era when wages have been depressed.
Concern number three is that the public finances are in a terrible mess. The IFS calculates that since the financial crisis and recession began, a £114bn black hole has opened up, and because of the slowdown in the economy this is £23bn bigger than estimated at the time of the 2011 March budget. By 2016-17, borrowing will be £24bn – not much different from Alistair Darling's forecast in his last budget, despite the austerity measures introduced by the coalition. Faced with weakening activity, Osborne has been running to stand still.
Concern number four is that the planned squeeze is unprecedented. The IFS delved into the record books to see whether there was anything comparable in the UK's history. There wasn't. They then looked at the records kept by the Organisation for Economic Co-operation and Development in Paris to see if this sort of austerity had been tried anywhere else. With the possible exception of a three-year period of retrenchment in Ireland in the late 1980s, there hadn't. The IFS, in the light of that, wonders whether Osborne's plans are deliverable, particularly since the real pain is yet to begin on the spending side. While 73% of the tax increases have already come into force, only a third of the cuts in investment spending, 12% of the benefit reductions and 6% of the planned fall in non-investment public spending have taken effect.
Concern number five is that things could turn out to be even worse than this. The baseline IFS/Oxford Economics forecasts are based on the assumption that the eurozone sorts out its problems. In the event of a break-up involving the five most vulnerable countries – Greece, Portugal, Ireland, Spain and Italy – the UK would be plunged back into a second deep recession within five years. John Walker of Oxford Economics described that prospect as "challenging". He added: "By that we mean 'absolutely awful'."
How will Osborne react to this? The IFS suggest that he should say publicly what he will do if the economic outlook deteriorates significantly, and that is sage advice. Keeping to the current plans with the economy crash-diving into recession would be economic suicide. On the immediate budget decision, the IFS was more equivocal. On the one hand it said the case for a fiscal boost was....
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GUARDIAN Wed, 01 Feb 2012 17:41:18 GMT
• IFS predicts two-year slump if eurozone breaks up
• 10% risk Italy, Spain, Portugal, Ireland+Greece quit euro
• Eurozone manufacturing output drops in January
• Greece mired in recession, but Germany's doing OK.
• UK manufacturing returns to growth
• The agenda
• Blogging now Nick Fletcher
5.39pm: Time to call a halt for tonight after another busy day which has seen a series of fairly upbeat manufacturing surveys across the world lift global markets.
However it looks like Belgium is the first eurozone country to go into recession.
Elsewhere Portugal got a bond auction away despite fears it's next in the firing line after Greece.
Tomorrow sees Spanish and French bond auctions and the Greek government is preparing various meetings ahead of talks with the Troika, amid the continuing saga of the country's debt negotiations.
Goodnight, thanks for all the comments, and see you back here on Thursday.
4.52pm: Now I know we've been here before many times, but could we be finally seeing Greece announcing a deal with its bondholders? (Cynics would say probably not). Steve Collins, global head of dealing at London & Capital Asset Management, has just tweeted:
French TV is reporting that Greek PSI is completed. 72% NPV loss for bondholders. ECB to take no losses.
Talk is of "hours" now for an agreement, not the "by the end of the week" or "by the end of next week" we've become accustomed to. Still, probably best not to hold your breath.
4.43pm: European markets have closed, and it's another positive result after reasonable economic data across the globe (leaving aside Belgium which seems to have gone into recession).
The FTSE 100 has finished 109.11 points higher at 5790.72, close to a six month high which is pretty remarkable given the continuing uncertainty about Greece, Portugal et al (and Belgium). This is the first triple digit rise since 3 January.
Germany's Dax is up more than 2%, France has risen just below 2% and Italy is up a healthy 2.7%. On Wall Street the Dow Jones Industrial Average is currently up 137 points, or just over 1%. Michael Hewson at CMC Markets said:
Investors continue to push concerns about Europe and Greece to one side and focus on the fact that despite economic concerns markets remain keen to focus on the positives. January manufacturing PMI data from China, Europe and the UK showed some signs of recovery and this has helped bolster these positives.
Oil prices continue find support against a backdrop of Middle East uncertainty as well as optimism about the Chinese economy, after the latest official manufacturing PMI data beat expectations to the upside. Brent prices still continue to outperform US prices but also find it difficult to sustain levels much beyond $113.
4.12pm: Most of the global purchasing manufacturing figures have been fairly positive so far, certainly as far as China, the UK and US are concerned.
But there is one country which has been hit hard by the global downturn, as shown not by surveys but by hard data.
Plucky Belgium, it seems, is the first eurozone country to go into recession. According to official figures, Gross Domestic Product (and we should be formal here, given the gravity of the situation) for what is the eurozone's sixth largest economy fell by 0.2% in the fourth quarter. That follows a 0.1% fall in the previous six months, thus meeting the technical definition of recession as two quarters of decline.
It may be the first, but will it be the last?
3.28pm: Fitch senior analyst David Riley has just been chatting about the eurozone crisis in New York. Looking at his comments on the wires, he appears to be arguing that Italy should resist deeper austerity measures.
Riley also predicted that Greece will remain in the eurozone. Here's the key quotes:
We don't think that fiscal austerity is self defeating. But nonetheless further fiscal austerity given where they [Italy] are probably wouldn't be credible and
feasible.
They should focus more on growth........
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GUARDIAN Wed, 01 Feb 2012 18:05:28 GMT
Institute for Fiscal Studies argues chancellor could give economy £10bn fillip on budget day without forcing Bank of England to raise interest rates
The Treasury is insisting that it will stick to its tough austerity plan despite being told by Britain's leading financial thinktank on Wednesday that a £10bn budget giveaway would be possible without running the risk of forcing the Bank of England to raise interest rates.
Warning that Britain was on course for a double-dip recession this winter, the Institute for Fiscal Studies said: "The case for a significant short-term fiscal stimulus to boost the economy is stronger than it was a year ago."
At the time of the 2011 budget, the IFS was against any let-up in George Osborne's deficit reduction plan, but on Wednesday the thinktank's director, Paul Johnson, said he was now "sitting firmly on the fence".
Johnson said there was still a need to repair the fiscal damage caused to the economy by the deep recession of 2008-09, but that he would not be critical if the chancellor announced a package of tax cuts or increased spending worth £10bn on budget day, 21 March. The IFS director added, however, that £10bn of fiscal easing would only be a small boost to the economy, while a more aggressive loosening – worth £15bn or more – would run the risk of unsettling the financial markets.
A Treasury spokesman said: "The IFS say that tackling the deficit is necessary; that without the government's deficit plan borrowing would be much higher; and that any fiscal stimulus big enough to make a difference would undermine investor confidence and so risk higher interest rates."
Osborne believes that it is the Bank of England that should be responsible for boosting economic activity in the short term, and that the credibility of the Treasury's deficit-reduction programme allows the Bank's monetary policy committee to keep the interest rate, which is currently 0.5%, lower than it would otherwise have to be.
But Rachel Reeves, Labour's shadow chief secretary to the Treasury, said: "The independent IFS is right to say that the case for short-term action on jobs and growth, for example through the temporary tax cuts Labour has been calling for, is now stronger – and will get stronger still if the eurozone crisis deepens.
"But rather than waiting for things to get even worse, George Osborne should take urgent action in next month's budget. Years of slow growth and high unemployment are not just bad for families and for the deficit, but also risk permanent damage to our economy.
"We agree with the IFS that the best form of stimulus would be a temporary cut in VAT, a cut in national insurance contributions for employers and additional infrastructure spending, which are three of the five elements in Labour's plan for jobs and growth."
In its annual "green budget", which analyses the state of the economy and the public finances, the IFS said lower-than-forecast Whitehall spending would mean that the chancellor would need to borrow £124bn this year, £3bn less than he estimated in the autumn statement in November 2011. By 2016-17, borrowing will be £9bn lower, providing the chancellor with more fiscal flexibility at the time of the 2015 election.
The IFS warned, however, that work on repairing the £114bn "black hole" in the government's finances had only just begun. It said that 75% of the austerity programme was still to come, including 88% of the benefit cuts and 94% of the reductions in departmental spending. "The sheer scale of the cuts is daunting and almost without historical or international precedent", the IFS said.
Oxford Economics, which produces forecasts for the green budget, said the economy would grow by just 0.3% in 2012, lower than the official estimate of 0.7% made by the independent Office for Budget Responsibility.
It added that risks were heavily skewed to the downside, and predicted that a breakup of the eurozone involving five countries would send the UK spiralling back......
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GUARDIAN Mon, 30 Jan 2012 17:33:00 GMT
Nervousness over Greece drags down European shares, with financial and resource stocks particularly hard hit
The FTSE 100 index in London has finished the day 62.36 points lower at 5671.09, a 1.09% fall. Market nervousness is increasing over Greece, which is teetering on the brink of a debt default after talks with creditors over a crucial debt restructuring stalled - yet again - over the weekend. Germany's Dax and France's CAC closed down 1% and 1.6% respectively.
Michael Hewson, market analyst at CMC Markets, said:
If today's moves in European markets signal anything, they signal a lack of confidence in European leaders to deliver on what investors had hoped last week would be some form of progress with respect to a Greek debt deal, over the weekend.
Having seen markets hold on to the gains from the previous two weeks on the back of EU officials promises that a deal was close; the lack of any progress over the weekend has seen the markets deliver its verdict and it's rather damning, with the FTSE hitting its lowest levels in nearly two weeks.
Friction between Germany and Greece over increased budget oversight hasn't helped sentiment either.
EU leaders gathered at a summit in Brussels have just agreed on a permanent ESM bailout mechanism to come into effect from July but will sign a treaty at a later stage, Reuters reported.
Financial stocks have borne the brunt of today's falls, with French banks being hit particularly hard after news that France will be implementing a unilateral transaction tax by the third quarter of this year.
UK banks are also lower with Lloyds Banking Group, Barclays and Royal Bank of Scotland at the bottom of Britain's bluechip index. Lloyds slipped 1.3p, or 4.1%, to 31p while Barclays lost 9.3p, or 4.2%, to 213.5p and RBS shed 0.98p, or 3.5%, to 26.76p.
Resource and mining stocks have also slid as investors took profits on the gains seen so far on what has been a fairly positive month for European markets.
Defensive stocks were top of the pack today, with pharmaceutical and utility stocks outperforming the rest of the FTSE, led by AstraZeneca, International Power, GlaxoSmithKline and National Grid. AstraZeneca closed up 19p, or 0.6%, at £30.55; International Power climbed 2p, or 0.6%, to 332p; GSK added 7p, or 0.5%, to £14.37 and National Grid ended the day 3p higher, a 0.5% rise, at 613.5p.
On the FTSE 250, gambling and casino group Rank was the star performer, up 4.1p, or 3.2%, at 131.1p, after the City welcomed its attempts to engineer a merger with Gala Coral's casino arm. This would make Rank Britain's biggest casino operator.
Lloyds Banking Group
Royal Bank of Scotland
Barclays
AstraZeneca
GlaxoSmithKline
International Power
National Grid
FTSE
Rank
Julia Kollewe
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GUARDIAN Fri, 27 Jan 2012 18:02:00 GMT
World leaders continue to debate capitalism, the eurozone, and Iran at a snowy Davos
• Day two at Davos, as it happened
• Day one at Davos, as it happened
8.31am: Good morning. It's the third day of the World Economic Forum in Davos, and the action keeps coming. Today we'll be hearing from US treasury secretary Tim Geithner, OECD secretary general José Angel Gurría, Nouriel 'Dr Doom' Roubini …
… and of particular interest to UK readers, George Osborne and Ed Miliband.
Interesting topics up for debate include The Future of the Eurozone, and What if Iran Develops a Nuclear Weapon.
Big questions – let's see if the Davos crowd have the answers …
8.46am: In Davos, my colleague Jill Treanor is picking up a feeling of a "bigger than ever disconnect" between the business world (particularly banks) and politicians in the UK and Europe.
Jill says:
Some business people feel as if they are being punished by their governments but at the same time being required to drive economic growth because their governments are embarking on such austere budget measures.
Yet, as (another) debate about capitalism starts – entitled 2012, the year capitalism needs to be reinvented - Salil Shetty, head of Amnesty International, sees it the opposite way. He asks a panel - on which Angel Gurria, secretary general of the OECD, is the star turn – if there is a feeling that banks have "got away with it" and that politicans and banks are "in bed" with each other.
Gurria talks about "unchecked greed" but reckons capitalism doesn't need a complete rewrite. "I don't think we've got to reinvent it. We've just got to have new policies".
On the intervention of Howard W Buffett, grandson of the lengendary investor, he added" "We need to do it stronger, cleaner and get away of the uglier aspects. We need to make it fairer."
Anders Borg, the highly regarded Swedish finance minister, reckons:
We need to reinvent the way companies are functioning, Companies have responsibility to their employees, to society, We can't have a situation where they are only focusing on bonuses.
Bonuses are hogging the headlines again, of course, after Stephen Hester of RBS was handed one worth almost £1m last night.
9.02am: You can watch a live feed from Davos in this window.
At present, it is streaming a feed from a session on "The Future of Tunisia", following the Arab Spring uprising.
9.06am: Twitter has taken off at Davos this year. At least, that's the assessment of KPMG, whose analysts have crunched the numbers and found that:
• On day one, 459 delegates generated 4,436 tweets with 8,021 replies and 18,718 retweets. The top trending topics were 'Angela Merkel', 'Europe' and 'People' relating to #Davos.
• On day two, 440 delegates generated 3,312 tweets with 4,816 replies and 14, 302 retweets. The top trending topics were 'David Cameron', 'Africa' and 'Social'.
9.17am: Serious words from Ehud Barak, Israel's deputy PM and defence minister, on the issue of Iran's nuclear ambitions (our economics editor Larry Elliott reports)
Barak was appearing on the panel for the "What if Iran develops a nuclear weapon" session. He said the very idea was deeply worrying:
You can't conceive of a stable world order when Iran has nuclear weapons.
Iran is prepared to defy and deceive the whole world to turn themselves into a nuclear power ... This will be the end of any conceivable anti-proliferation programme. Major powers in the region will feel compelled to turn nuclear.
Barak says would have been impoosible to topple Saddam Hussein or Gaddafi had Iraq and Libya had nuclear weapons. At this stage, he said it is "time for much tougher diplomacy and sanctions".
9.33am: Nouriel Roubini, the economist who predicted the financial crisis, has been discussing the impact that social media could have on the economic world.
Dr Roubini reckoned that Twitter, and its equivalents, play a key role addressing inequality and economic unfairness.
Bill Gross, founder of Technology Incubator..
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GUARDIAN Fri, 27 Jan 2012 20:00:01 GMT
If play is the work of childhood, Hornby's struggle is grim news for the future of UK manufacturing
On reading that Hornby, the maker of Scalextric and model trains, had lost out badly in Christmas sales to iPads and computer games, I thought of Pete, a friend from my 70s boyhood in York. He and his father, a draughtsman on British Rail, ran "N" gauge trains through a pretty landscape (gently undulating, thanks to papier-mache) that occupied the entirety of their box room. Being jealous, I would take the mickey: the little plastic figure of a porter had tipped over, as had the lady-with-shopping-basket. A massacre had occurred within a scene supposed to be as quotidian as possible. Pete, a shy lad, would go red as he stood them up. I myself had to be content with a bog standard "OO" gauge Hornby oval with one siding, a signal and a coal bunker.
My own sons – now in their mid-teens, and perhaps the last Hornby generation – have had to make do with equally minimalistic train sets. By way of compensation, I would take them to the Pendon Museum near Abingdon to see the greatest model railway layout in England. It was commenced in the 60s by the late Roye England, a thin, bespectacled vicar manque in beret and mac who ate only Crunchies, black bananas and boiled eggs "because they were quick", so leaving time for his layout. He once spent six years making a lineside pub; it was thatched with human hair from a hairdresser's in Swindon; the basis of the hollyhocks in the garden was cats' whiskers.
While my boys and I were still in thrall to Pendon, I learned that an older, divorced friend of mine had retained the model railway base he'd made with his own sons. It was propped behind a cupboard in his hallway, and I asked whether I might take it off his hands. "Well no," he said, "I mean … the memories." It had been a crass request, because if there's one thing every father knows about raising boys, it's that time spent making things with them is sacred. (Another is that computer games put them in a foul mood.) But the news from Hornby has implications beyond the domestic sphere.
Before going into model trains, Frank Hornby had patented Meccano in 1901, a toy inspired by his childhood love of the cranes at Liverpool docks. Both products reflected his view that "play is the work of childhood", and the boy who owned the one also had the other. Roye England certainly did, and when he was about 10 years old he had shocked his parents by making – when everyone else was out – a Meccano model of the Forth railway bridge. It was 16ft long.
Pete too was a Meccano boy, and I know he became an engineer of some sort. His birthright was a path to follow, and a coherent worldview, not least since central York was a full-sized railway layout when he and I were growing up there. Today that area is barren, except for some office suites, one of which houses a call centre for a credit card firm.
A few years ago, I was cycling past it, and I saw the young men in there, talking into their mouthpieces or looking vacantly out of the window. I wanted to try to write something about why it was sad that Britain had lost most of its manufacturing, and a piece was commissioned by an editor who enjoined me to interview some economists. This was the height of the Blair boom, and I spent hours on the phone before I could find one who minded in the least. The economists would chortle down the line: "We were an entirely agricultural economy in the 18th century. Do you propose going back to that?" One said: "If it suddenly proved impossible to import manufactured goods, we'd simply start making them again ourselves."
Now everyone wants manufacturing back, even the party that killed it off. Yet George Osborne's "march of the makers" seems about as chimerical as "big society", and the bad news from Hornby will do nothing to help matters at all.
Hornby
Manufacturing sector
Young people
Retail industry
Children
Andrew Martin
guardian.co.uk © 2012 Guardian.....
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GUARDIAN Fri, 27 Jan 2012 20:30:01 GMT
The days when ordinary people sold their own produce and bought the produce of other ordinary people are long gone
One brief phrase in Nick Clegg's call for tax cuts, aimed at low- to middle-income families, says more about Britain's current economic predicament than the rest of the debate around the subject put together. Clegg calls for the tax system to be rebalanced so that it "encourages ordinary people to drive growth". That sounds splendid.
The trouble is that "encouraging ordinary people to drive growth" is harder than it sounds. In fact, in a developed economy, it's something of an oxymoron.
Sure, consumption drives growth, and everyone needs to consume. But consumption needs production. What can "ordinary people" produce that other ordinary people will want to consume, so that they can drive growth? The harsh answer is: not much. Here is the great paradox of our so-called market economy. The access of ordinary people to ordinary markets has been severely curtailed by technological advancement, mass production and the globalisation that it ushered in.
One only has to look, literally, at actual markets themselves, to see how things have developed. Farmer's markets, or artisan markets – they are lovely places to shop, and sell quality goods, locally produced. But they are expensive. Shopping at that sort of market is a luxury. The markets frequented by low to middle-income families are quite a different matter. They are cheap, yes. But the goods offered are imported goods, of low quality and made by the poor of developing nations. The growth driven by ordinary people tends to be in far-off nations, not in our own economy.
The same divisions can be seen on local high streets. In areas without much money, small shops have been routed, unable to compete with the hangar-sized retail services offered by big companies. In areas with money, however, small shops selling specialised items thrive, staving off the march of the chains by virtue of the very fact that they are more individual, less "ordinary".
The days when ordinary people sold their own produce, and bought the produce of other ordinary people are long gone. In general, neither the artisanal producer nor the artisanal consumer is ordinary. This is the basic but unacknowledged problem that Britain has been struggling with for ages: how can people be kept consuming when they are not producing? How can national economies be sustained when local economies are dying?
These questions, simple as they may seem, are actually at the very heart of contemporary political debate. The last Labour government, let's face it, gave the wrong answer to the first of these questions, an answer which was not in the least opposed by the "opposition". That answer was to create cheap money, in the form of cheap debt.
The financial crisis has very comprehensively illustrated that this was not a tremendously sustainable solution. The great mystery now is how anyone ever believed that it was.
But Labour also tried to answer the second question. It created lots of public sector jobs, largely based in places with ailing local economies, which provided employment in dying places. This may not have addressed the underlying problem. In fact, it was funded using the unsustainable revenue generated by wrong answer number one.
But it was, nevertheless, socially ameliorative, a sticking plaster over a wound, but better than nothing. It has not taken long for George Osborne's belief that the public sector was strangling the private sector to be exposed for the risible fatuity that it is. The public sector grows when the private sector fails. It is not the other way round. But there is not a great deal of consolation in merely establishing that the Tories have no more of a clue about how to lead the nation to the "sunny uplands" than Labour did.
A lot of Britain's problems are encapsulated in the very fact that politicians feel perfectly comfortable pontificating so patronisingly about.......
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