Thursday 27 January 2011

Premature Conclusions

Those of us whose memories of economic and political data go back to 1970 and the freak Balance of Trade figures* which helped to scupper Labour's chances of getting elected for the third consecutive time know that it is unwise to jump to conclusions on data relating to to one period. Nevertheless Tuesday's figures showing that the economy has shrunk by 0.5% in the last quarter of 2010 is cause for concern. Another quarter of "shrink" (why do we call it "negative growth"?) and we are once again technically in recession - the "double dip" that the government has so confidently proclaimed their wisdom has avoided.

It is par for the course to hear George Osborne blustering about the effects of the snow and the possibility of an error - he is, after all, from the partly that so publicly declared in the 80s that the high level of unemployment we "worth it." But it is painful to hear Vince Cable so loyally (loyal to whom, to what?)protesting that the correction of the deficit must be the governments "first priority." It's as though the 1930s had never happened and that Keynes had never written. And Cable is from the party that is supposed to care.

Some commentators write that Cable is the the cabinet members most worried about the damaging effects of the economic policy. Let's hope so, that his loyal defence is just a public front, and that he is working hard at a plan B.

* If I remember correctly, the figures, announced just before polling day, showed a trade deficit of about £66million - peanuts by today's standards, even if adjusted for inflation. The figures were later revised (not a trick but a necessary adjustment as data is often incomplete and some comes in later)to show a surplus, but by then it was too late: the election had taken place, Wilson was out and the Tories under Heath in. That was also the election when the opinion polls first demonstrated their fallibility.

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