Blog
Recovery at any cost?
30th September 2010
With the Government cutting public spending, growth in the economy will have to come from the private sector. But businesses are only going to increase output if someone wants to buy it. So we have to start spending.
This is also the view of Charlie Bean, the Bank of England’s deputy governor. So while we have learnt that it was our profligate spending habits at the root of the recent recession and that savings ratios need to rise, we are now being exhorted to spend. A magazine article for the BBC entitled ‘How to spend to mend the economy’ looks at the purchases that are most likely to boost the economy.
It’s a fun idea to brainstorm – what should we buy to best help UK recovery?
The article suggests that we choose a UK-built car, holiday at home, fill up with petrol and indulge in vices like smoking and drinking. But before we all book our trip to Newquay in a mini, we should consider the negative externalities of such a strategy. This too is a useful exercise.
It begs the question – are the external costs of spending in such a way (more waste, greater depletion of resources, more CO2 emissions etc) outweighed by the external benefits of recovery?
Or should we be considering a more long term view of sustainable growth?