Yesterday, I quoted a Daily Mail report from Saturday about the UK economy: Don't expect a miracle year. This was in connection with forecasts for 2020. Oddly, Larry Ellison in an article for The Guardian also used the same word yesterday, but he was talking about the year 2010 when he said nobody expected a miracle then. What they did expect was a reasonably quick recovery from the depth of a huge financial crisis with the stuttering economy picking up speed and then going through "a couple of years of rapid growth to compensate for the lost output in 2008-09 and then return to its pre-crisis trend rate of growth, which had been in the region of 2.5% a year."
As we know, that didn't happen. The economy has continued to perform badly. Those who voted for Brexit in the hope of kick-starting a period of rapid growth are once again going to be sorely disappointed. According to the great majority of serious and credible economic forecasters we are in for another decade of sluggish growth which would make it by far the longest period in our history with little or no increase in incomes or prosperity. It remains to be seen who they will blame in 2030.
Ellison ends his piece with this:
"Will Brexit be the catalyst for the economic reset the country so obviously needs? That’s a lot more questionable. One thing that has not changed down the decades is the dogged hope that there is a quick fix for all the economy’s ills, if only it can be found. There isn’t one."
Brexit is simply the latest example of what he calls a "dogged hope" that there is indeed a "quick fix". Over the years we have had all kinds of efforts by politicians from Barbara Castle's In Place of Strife White paper from the late 60s to Brexit in 2016 seeking that silver bullet. The foreign exchange rate has been falling for a century without sparking off any "reset". Interest rates are at a record LOW and business investment is actually FALLING. We have had apprenticeship schemes, tax breaks, regional industrial policies ad nauseum with no sign of success.
Like all the other hare-brained ideas Brexit will also fail.
There is no magic solution. The only way to prosperity is to produce goods and services of the right quality for the market and at a an affordable price. It's addressing the details, satisfying and keeping customers and making small imperceptible steps towards that goal every day for decades. There is no other way.
I also mentioned yesterday the Brexiteers favourite economist Patrick Minford. He is favoured because of his leading role in the pro-Brexit group Economists for Free Trade and his pursuit of tariff free trade around the world - something he admitted in April 2016 would "mostly eliminate" manufacturing in this country. Minford claimed we would be £135 billion a year better off after Brexit.
He also founded Liverpool Macro Research (LMR) which came bottom of the list of economic forecasters in December 2018. At 2.6%, their predicted 2018 figure for GDP growth was hopelessly out, way above trend and every other forecaster. It was almost twice what we actually achieved (1.4%). Bear in mind each 1% is close to £20 billion of GDP.
David Smith's latest annual league table for 2019 was published yesterday in The Sunday Times (below) and Minford is third from bottom, with another optimistic forecast which failed to materialise. LMR thought the economy would grow by a reasonably healthy 1.9% in 2019 It didn't. We hit just 1.3%.
He was just kept off being joint bottom by Fathom Consulting who only provided a partial forecast anyway. In 2020 Minford thinks we'll reach 2.0%, once again he is the most optimistic. We shall see how he does.
This uncanny ability to see a cloudless blue sky when everybody else is battening down the hatches as the storm clouds gather marks out the true Brexiteer. Nothing seems to diminish their unshakeable faith that once free of the "shackles" we will leave the EU standing.
They really do think Brexit is the solution. It isn't, which is why it will fail.
They really do think Brexit is the solution. It isn't, which is why it will fail.
