Economic Recovery Is in the Air?
By Staff News & Analysis - October 17, 2009

Cut through the mood of pessimism and despair that grips the nation like some kind of mass pandemic, and beneath the tormented surface something unexpected is stirring – signs of life in the real economy. Yes, that's the real economy, not the financial markets or multi-million-pound banker bonuses. These are already swinging along as if the banking crisis never happened, to the understandable though misplaced disgust of the public. Yet the real economy may not be far behind. Both at No 10 and the Treasury, there is a marked change in mood, a growing confidence not just that the corner has been turned, but that the economy might actually be showing moderately decent levels of growth by the time of a general election. The dour and serious is being replaced by the breezy and optimistic. – Telegraph

Dominant Social Theme: The stimulus is working. The wise men have gotten it right?

Free-Market Analysis: We think this article may be just a tad optimistic. We're not certain about a recovery of the larger economy any time soon either in the United States or Gordon Brown's (pictured left) Britain. But beyond this we have a question as to what Britain's economy would recover TO were it to recover. We have mentioned some of this in the past, but since it applies in a sense to America as well, let us rehearse it once more.

It cannot be repeated too much (since the mainstream repeats it hardly at all) that Britain is representative of a certain kind of industrial policy that has laid waste to companies and socialized large swaths of the economy. Gone are the glory days of British worldwide empire. Gone is the industrial revolution when savvy, tough Brits built the modern Western world one machine at a time.

It is even hard to think of Britain in terms of the long-ago "industrial revolution." Gone are Britain's auto manufacturers, its heavy industry, its medical leadership. In place of industry, Britain has regulations – local ones, domestic ones and now ones laid over the top of all the rest courtesy of the European Union. Instead of producing ocean liners, Britain now employs doctors and nurses who leave hospitals idle on the weekends. Instead of laying tracks and building locomotives, Britain now employs vast numbers of teachers whose efforts have not lifted the literacy rate a wit for decades. Instead of building beautiful cars (maybe with the exception of Rolls Royce) Britain now bans auto traffic from downtown London and then places cameras in strategic public locations to film pedestrians 24-hours-a-day.

What has gone wrong with Britain has of course gone wrong with the West generally. In fact, parts of Europe are Britain writ large while America is increasingly Britain writ small. But the differences are ones of degree to a large extent rather than direction. That's why we wonder how optimistic people can be at the thought of a recovery that brings back to life more of what already is. Here's some more from the article:

It would be easy to dismiss this mood swing as yet another personality change manufactured in desperation by the Brownite spin machine in the hope that voters might believe the message. Yet there is also something substantive behind the makeover. The economy genuinely is improving again, and in a manner which may even turn into a sustainable recovery. Unfortunately for Mr. Brown, it almost certainly comes too late to save him. Voters will remember the crisis, and blame Labour for presiding over it. The Government will get little credit for any recovery it might have helped nurture. Happily for David Cameron, it also means that the coming economic consolidation may not need to be quite as brutal as his electoral strategists pretend.

I don't want to belittle the nature of the challenge. The public sector in Britain has reached an unaffordable and stiflingly large size, which must be vigorously pruned back to avoid eventual bankruptcy. The good news is that the task becomes a whole lot easier with the following wind of economic growth.

What is the evidence, other than the renewed boom in financial markets, of the recovery I speak of? Living in Londonderry, the West Midlands, or Hull – some of the worst unemployment blackspots – you would be hard pressed to recognise any at all.

The big negative is industrial production. Despite the weakness of the pound, UK industrial production plunged anew in August and has shown little sign of a pick up since.

This has led the respected National Institute of Economic and Social Research to conclude that third-quarter GDP statistics, to be announced next week, will show no growth at all.

Now admittedly we have culled portions of this article, above, to make a point. The writer has trouble summoning facts to buttress his optimism because the numbers themselves are bleak. What the writer has, apparently (he indicates as much) is a feeling of optimism shared by the current British government – which is facing a critical election. The current British government, in our opinion, is cooked anyway. But the idea that the "economy is turning a corner" in either Britain or America (or anywhere in the West) begs credibility.

What Western governments have done is pump money into increasingly socialized and unproductive economies. The money that has been printed has fostered a bit of an artificial equity boom and some of this may flow to the real economy eventually. But there is still so much mal-investment that is difficult to see how much money will find its way to truly productive ventures that would fuel true growth.

After Thoughts

Even were Britain (and the West) to see an economic recovery, whatever that is supposed to be these days – the West will have to grapple with the larger issues that are currently dragging down living standards in so many hitherto prosperous countries. The mania of regulation, constantly increasing taxes and endless monetary stimulation from central banks cannot but end in tears. The solution is to return to limited government, honest money and to encourage entrepreneurship rather than increased socialization of over-socialized economies. Thanks to the Internet, we are fairly sure there will be a backlash against what is occurring now and these modest solutions (suggested by so many on the ‘Net) will be increasingly implemented. It cannot be too soon. Then there will be a REAL recovery.

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