Economics Straight and True

Earlier this week, it became official that the UK was in a double dip recession; an announcement that had been softened somewhat by previous data that suggested the UK economy had once more begun to shrink.

Now there are calls for the government to alter their course of action so as to encourage growth before the new dive becomes irreversibly damaging to trade and economic prospects.

However, austerity measures already in place took some time and considerable budget planning to come into force and it is highly unlikely that a swift change of course will come by the end of the month, or summer for that matter.

No, the government will cling to a belief that whilst many other countries, both across Europe and the globe as a whole, were reassessed and had their credit ratings slashed a few months ago, Britain was spared in part thanks to these current policies.

It is no little truth. Of course, the trend of growth, strength of the sterling and increasing import/exports all had a swaying hand on the decision, but a key factor in the assessment process is the perceived overall management of a country’s finances. Fiscal priorities from Westminster over the past twenty-four months have been second to none and, whilst the hard medicine approach has drawn parallels with the unpopular measures of Thatcher, now (as then), there is still an overwhelming feeling of support for the government as they remain resolute in their course of action.

Indeed, polls at the beginning of the month, following the budget report indicated drops for the Conservative party, but these were immediate back-lash reactions and not measured voices who had considered the situation.

A situation that is, at best, precarious. Sudden shifts in strategy could in fact damage the overall economic efforts. Initial reaction to another statement of new measures would see widespread panic throughout the City that would in turn spark a weakening pound and a possible rush on banks.

Not to sound overly apocalyptic, but the trust that the public and businesses place in government policy is a fine balancing act. Even the slightest hint of disruption could threaten the stability that has slowly ebbed its way back into consumer and business life.

Moreover, with Spanish unemployment at a new high, continued Greek unrest, and further burdens on Germany as AAA lone ranger of the Eurozone, the British need to put support behind government efforts to consolidate progress so far achieved. With the costly problems facing Europe, our markets need to continue to prosper, or else both pound and euro will undoubtedly ride down the abyss together, so inherently linked are the two zones.

Whilst the budget measures are unpopular and few benefit from the changes, it would be unwise to declare the policies as inappropriate and unsuitable to the current climate. The phrase “we’re all in it together” still rings true in ears across the country: only in a resolute front of support can businesses emerge from the staggering financial crises and people become more liberal about their expenditure. Riots like last summer show the potential fragmentation that lurks underneath our society, and similar disruptions seen across mainland Europe in country’s with governments weaker than our own are testament to the need for a straight and steady course, perhaps even to protect us from ourselves.

I (Do Not) Agree With Nick: The Latest Economy Stance.

Amidst continuing financial woes, Deputy Prime Minister Nick Clegg stated earlier today that the government will not change course on spending cuts.

Of course, the long mocked slogan ‘I agree with Nick’ from the previous electoral campaign rings ever more true, as the Lib Dem defence of the cuts outlines how far they have backed from original party politics in order to hang on to the coattails of power.

Despite declaring that his party would stand up for themselves more openly in May, Clegg has reiterated that the cuts will continue as projected, amongst growing concerns of a double dip recession.

Following moves from the International Monetary Fund (IMF) earlier this week, there are rumours that £5bn could be released to deal with boosting economy infrastructure. Within the past few days, the IMF cut its growth forecast for the British economy not only for 2011 but subsequently for 2012 too, despite the prospect of being the Olympic host. In addition, the organisation said the government should delay its deficit reduction programme if growth slowed further, or risk loss of consumer confidence and a deeper recession.

Ministers pushing for such a move believe it would not be seen as a U-turn as the money would be capital spending, on infrastructure projects like roads, rail and broadband, rather than current spending.

However, Nick Clegg insists that the ruling coalition is not about to alter the course of its plans over any of the concerns. It is thought that such a move would again raise eyebrows and threaten already stalling growth figures.

Of course, this is not likely to help Clegg’s tumbling popularity figures, which in turn could lead to a situation by which the nation would want to ratify a different route of recovery.

In the wake of the widespread riots that overran various UK cities last month, there was a perceived understanding that the government would alter several of its policies in response to such an unpredicted outcry of sentiment. Whilst various reasons have been attributed to the sudden unleashing of fervour, one of the most resounding put forward is that many people believe that they have little money and little leisure time and space, whilst a capitalist economy boasts the many luxuries that are outside swaths of Britons’ pockets.

Remembering a time when election politics foretold a riot if Tory cuts were implemented, it seems as if Clegg has not fully appreciated the wisdom of his own words.

Yet in spite of such scenes, Clegg presents the recovery as it stands as “the right thing, not the easy thing”.

It appears that it is a game of nerve and cheek. Reflecting on the economy as ‘a game’ firstly is not going to install any confidence. But it would seem that here lies the government’s wish that the city hold firm in the face of probing questions and concerns over the state of finances in Italy and Greece.

The aim is to continue with the outlined plans so as to “build a new economy. An economy for the whole nation.”

However, Clegg’s bravado does not muster the same feeling of unity that it did in May 2010. Such idealistic views are no longer heeded with the same anticipation and there remains a great unease that this latest government has made little headway into resolving the deficit crisis over its 16 months in Westminster.

Cries of ‘I agree with Nick’ are now few and far between.