Debt killed growth
[Re: Economic perfect storm: The four trends that killed Western growth, yesterday]
The debt supercycle, as Tim Morgan puts it, captured politicians, consumers, and companies in its wake, defying all logic. But only two of those groups have since woken up to its consequences. The latest government deficit figures remain appalling, and it’s entirely credible that Britain will miss its target to have debt falling as a proportion of GDP by 2018.
Morgan draws an inference from debt levels that the chancellor seems to have missed – the negative consequences of burdensome debt on long-term economic growth. The failure by George Osborne to clearly explain the economic, not moral, importance of paying off debts is likely the source of his failure to make courageous cuts to spending. When advised to make sacrifices for the sake of their fictional great-grandchildren, it’s not surprising that many voters choose instead to defend their self-interest.
Morgan is eccentric on globalisation. He castigates companies for shifting production abroad. But fails to explain that those very companies are largely owned by the same consumers who also benefit from cheaper goods.
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Lack of focus at Davos is likely to hinder any real progress. The Eurozone will make up only four out of the 140 sessions.
David Cameron has done the pro-EU camp a favour. He’s forced it to state its case and public opinion has started to shift.
Weaker sterling has hampered growth – exports have not benefited and consumers have been squeezed. It’s the wrong policy.
I’m sure Cameron will plug an EU-US free trade deal in his speech today. Fair enough, but it doesn’t weaken the case for leaving.