Business and the economy provide two separate stories. Local businesses may cautiously report optimistic expansion but the national story is one of stagnation.
In their April 2012 Economic Review, the Office for National Statistics showed us that the recovery now compares badly with the Great Depression. In newsrooms and the corridors of power, commentators are beginning to wonder what they have been missing. There are three things:
Firstly, we based our economy on reckless consumption funded by deliberately cheap debt. It was a phenomenon which could never last. After a tripling of the money supply through new lending, there can be no return to those days without accelerating inflation.
Secondly, in their July 2011 report “Thinking the Unthinkable”, inter-dealer broker Tullet Prebon highlighted that six of the eight largest sectors of the UK economy were dependent on private borrowing or public spending.
Finally, when production is directed by the choices of politicians and officials, we cannot know how the public values it. Only the language of price determined by families’ free choices, individuals and firms can convey the relative value of things. With government spending at about 45 per cent of GDP, GDP itself is fictional.
Some businesses are doing well but the problem of the GDP figures runs deeper than is commonly understood. Ours is a great country founded on that essential element for prosperity, the rule of law, but its hope lies in little short of a revolutionary commitment to entrepreneurship. Our society must be based on private production, saving and investment. That requires sound money and a commitment to lower spending, lower taxes, flexible labour legislation and an end to economic interventionism. There’s no other way out.
Steve Baker is MP for Wycombe and a director of The Cobden Centre, an educational charity for social progress