Economic Problems Remain Unsolved

So great is the preoccupation with the almost hopeless muddle which Brexit has become, with its scale and complexity far beyond the comprehension of its promoters, that other potentially more threatening economic problems are going on unheeded. The daily diet of bad news, today it is a rise in homelessness, has become the accepted norm, like a burger junkie en route to a health crisis with each bite and every meal.

For the plain fact is that our economy is a mess. It will become a worse mess because of Brexit, but even if nobody ever thought of Brexit, it would still be a mess. The government is trapped in austerity without enough income from an over complicated tax code to meet its obligations, giving us such diverse symptoms as a rise in homelessness and vast new aircraft carriers without any planes or enough escorts to protect them on a hostile sea.

The reason is productivity is far too low because the economy survives on asset inflation rather than wealth creation. Simply put our GDP is about 20% smaller than it should be. Government policy, such as subsidising excessive rents charged by private landlords with public cash, make matters worse, as do schemes which make unaffordable homes affordable through public subsidy.

Add to that a vast industry of private corporations running public services making a profit at taxpayer’s expense, plus the seeming inability of the Bank of England to restore interest rates to their rightful place as a quick response tool of economic management and you have a toxic mix leading to a circular decline in the standards and prospects of the many, in favour of the gluttonous enrichment of the few. You arrive at a point where correction becomes impossible and only collapse and a reboot can effect positive change.

We are not there yet, but we are very close. There are now prospects of serious disruption from strikes across the public sector and a renewed banking crisis if Brexit turns nasty. What is needed is a programme of huge government led investment in housing, infrastructure renewal, home production of manufactures and food, re-configuring of the currency so that it puts the UK on the leading edge of competitive world trade, and the restoration of the levers of economic control to democratic institutions. Dynamic Quantitative Easing will have to be used to fire up the base of the economy at least to the magnitude QE was used to stabilize the financial sector.

Do not hold your breath. No political party has the measure of all of this. Labour is nearest, but what the hour demands is a political revolution which changes the economic map at least on the scale of 1945 or 1979.