SOMETIMES, we don’t need statistics to tell us what is happening to the economy. London during the past few days has been a case in point: the Olympics are a great success, of course, and those retailers and companies positioned to cash in (such as the Westfield Stratford shopping centre) are doing a roaring trade. But the rest of the capital’s economy is suffering, in some cases severely.
Shopping areas away from the Olympic venues are hurting, many hotels have been forced to slash their prices, British visitors from outside central London are staying away, as are other non-Olympic tourists, some people are “working from home” and the roads are much emptier than anybody could possibly have imagined (it is often faster to get around by car at the moment, despite the Zil lanes, than during normal times). Many of the warnings against over-crowding have worked far too well.
There are no sound statistics as yet – most numbers being cited are ultra-local or rough approximations – but it’s looking grim. The West End in particular is reeling, but it isn’t alone. It feels as if London and its many attractions – including museums and theatres – have lost more visitors than they have gained, and many business trips have also failed to happen.
One genuine piece of data yesterday did confirm that we are in a deep economic hole, albeit one unrelated to the Olympics. Real household actual income per head fell by 0.6 per cent in the first quarter of this year, compared with the last three months of 2011, taking it back to its lowest level since the second quarter of 2005. In a way, this is about right: all of the extra income supposedly created by the bubble has vanished. The past seven years have been entirely wasted.
IF only Milton Friedman were still with us today. The world desperately needs more voices of sanity and Friedman, who would have celebrated his hundredth birthday yesterday, would have provided a brilliant counterpoint to an economic debate that is more dominated by left-wing public intellectuals that at any time for four decades. All of the big names – Paul Krugman, Nouriel Roubini, George Soros – are of the left. I’ve no doubt Friedman would have made intellectual mincemeat of them.
The US Nobel prize winner would have spotted the bubble, which went hand in hand with an explosion in the money supply. It was a classic case of what Friedman warned against: an excessive amount of money chasing not just too few goods but also too few commodities, and ending up creating a massive housing bubble. He would undoubtedly have backed the early incarnations of quantitative easing – his big lesson, learnt from the 1930s, was that the money supply should never be allowed to collapse after a banking crisis – but would never have supported the mad central bank activism of the past two years. He would have demolished the deficit deniers and pseudo-Keynesians who want to borrow ever more.
Left-wingers who hate Friedman should remember that he campaigned against the draft, helping to secure the abolition of conscription in the US. He was pro-immigration. He backed drug legalisation because he thought that the costs of prohibition – including the creation of powerful criminal gangs – outweighed any benefits. He hated bailouts and corporatism, and argued that capitalists who seek privileges from the state (rather than compete in a truly free market) are their own worst enemies. The world would be a better place if he and his powerful advocacy were still around today.