Thursday, 18 November 2010

Being in or out of the Euro is not the issue - economic competance is where it's at

The more I read of the economic crises in Greece, Iceland and Ireland the more I think that the membership of the Euro is not the key issue when it comes to economic management. German 10 year bond returns are substantially lower than ours. It's in the Euro. Ireland's are three times higher. So are they. Iceland's are even worse. Its not. The key is not running your country like a casino and planning for long term growth in "real" industries that generate growth and are indigenous so invest profits in your country. Britain has taken it's eye off this ball over the past 30 years and it is paying the price. Our economic strategy to focus on service industries was not a strategy it was just justifying the performance of the economy by pointing at the only jobs being created whilst what made this country great withered away.

The Euro guarantees currency stability but little else. If we were in the Euro, there would be similar interest rates, perhaps a bit higher but there would be less quantitative easing so less inflation. It probably creates a climate where you can get away with fiscal irresponsibility for longer but when you are caught out you really get into trouble and the IMF and EU run your economy.

There is no magic wand. Running your economy well will result in prosperity and not doing so will result in crashes and poverty. Even when there is  global slump well run countries come out of them stronger. So the British press need to get away from obsessing about the Euro and having proper discussions about why Britain has fallen behind most other major European countries almost every year for 60 years. But long term growth and economy are a bit boring for our schizophrenic media. Europe and the Euro help countries by providing a stable area to trade in. But if your country is run by economic illiterates like the last government and most other governments before it, it will not help.

It's time for some economic decentralisation, to at least spread the risk and ensure someone in this country gets it right. I hope the current government is getting the idea but some of its "Maoist" (Vince's words not mine!) approaches to RDAs do not encourage me.

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