Thursday 28 October 2010

Shouting too soon?

The report yesterday that the economy grew during the last quarter is, of course, good news, although how good remains to be seen - the figures have a habit of being revised as more information comes to hand.  Whether it's quite as good as some claim, and whether the growth will be sustained are open questions at this stage.

Whilst politicians (of all parties) and economists debate the runes with a ferocious degree of certitude, the truth is that none of us really know which way the economy will go from here.  We 'merely' have opinions, based on economics, history, and personal or political prejudice.  And we can all find our own 'experts' to justify a particular viewpoint.  The modern global economy is so complex and interwoven that chaos theory is probably the most relevant branch of mathematics to apply.

That doesn't mean that debate is irrelevant - the impact of decisions being taken on people and families is far-reaching, and taking the wrong decisions can have a serious effect on a lot of people.  Those of us who think that the government is getting it wrong will continue to argue for an alternative approach.

Some months ago, it worried me that some people in Plaid were being just a little too quick to seize on one month's figures for unemployment in Wales to claim that the One Wales Government had beaten the recession.  Life, particularly economic life, just isn't as simple as that - as the following month's figures showed.  I find myself wondering at the moment whether supporters of the UK Government who have seized on the latest figures won't also be left with a degree of egg on face in another quarter or two.

Clearly, the quarter's numbers are good - although there is good reason to look at the detail; the dependence on construction in particular could leave them susceptible to a downturn with a cut in capital spending.  But I think we can be fairly clear that few, if any, of the government's announcements have yet started to impact the economy at all.  Governments might like to claim the credit when things are going well, but a government which has been in power for only five months, and whose major changes on spending and taxation will not kick in for some months, is taking something of a risk in claiming that the latest figures vindicate their position.


Anonymous said...

This always worries me as what we should be talking about is the state of our economy here in Wales.

Can any one tell me how well or how badly we are doing here in Wales.

We knew that the credit boom driving house prices in an ever increasing upwards spiral would end in tears as virtually no one in Wales can truly afford to own yet alone live in their own houses

The great economic drivers of our past are totally dead in the waterie Coal house /Snowdon Slate what next Agriculture milking cows by hand. Life on the railway at Whitland Oyster. dredging off Gower. Tryweryn and so on and on

So where are we going

We need a starting point and that has to be a financial statement of our current economic position here in Wales


Anonymous said...

The 0.8% figure is for the UK as a whole- is there a Welsh breakdown?

Christine Gwyther said...

Definitely shouting too soon.

Whatever our own political persuasion, we all want to hear good news about the economy. Can you really call 0.8% a bounce? I think we'd all be a bit daft if we believed it could power us into complete recovery.

As far as the construction sector goes, its dependence upon public sector capital investment is unarguable. With the demise of UK Government schemes like "Building Schools for the Future", architectural, construction and engineering firms are laying off and sucking in hard. We can expect similar outcomes in Wales, with almost half the capital programme compromised by George Osborne's CSR.

Geoff's point about the lack of Welsh economic analysis is well made and strides have been taken to get a better evidence base. While the stats are imperfect, there are certain things we do know, though.

Wales is unique in our industrial and land based heritage. But we do have things in common with other regions of the UK - such as difficult topography, geography and peripherality.

To counter these problems you need to have a strong public sector, pumping money into projects which will create jobs. Expecting the private sector to invest here without incentives just sounds hollow. And hopeless.

I know Carwyn Jones is aware of that reality. Some of the rhetoric coming out of LibCon Westminster suggests they don't. And that is perhaps the most frightening thing of all.

John Dixon said...


0.8% sounds like a very low level of growth, but it's a figure for a single quarter. If sustained over a full year, it would amount to a total of 3.2% - and that is higher than the long term trend in the UK economy.

If I were in the Labour Party, I'd be inclined to try and claim that it was actually the result of decisions taken in the last 12 months of the Labour Government, and is being endangered by subsequent decisions!

I think that would be as fraught with danger, though, as it is for the Tories to claim credit. The really big question is the 'if sustained', of course. I'm not confident, and I guess you're not either.