What is the strategy for growing the UK economy to its potential?

The UK which is the world’s 6th largest economy, is projected to grow by 1.7% in 2011.  Growth in many developing economies will be 7% in 2011. Our expectation is that it will rise to the 2007 levels of 3% in a couple of years, so the economists say.  You see, I am no economist and do not know how these predictions are arrived at.  However, I do wonder at the assumptions that underly them.

In an economy with comparatively high GDP but which imports more than it exports, slow growth will mean increased national debt as expenditure exceeds income. There is already deep displeasure about the cuts in UK public expenditure, but there is more to come.  The logical solution is therefore to increase income earned from exports to achieve the predicted rise in economic growth. But where is this growth going to come from – what sector is positioned to produce the additional income? Will the economy grow from increased recycling of the existing funds or will overseas investors in the property market bring in enough funds to achieve the projected growth? What would need to be happening in the rest of the world for the inflow of such investment to drastically increase?  Will it be from high tech manufacturing for which the UK has competitive advantage but which is still on a smaller scale than is needed for a turnaround? The figures published today show that growth in manufacturing over April and May is essentially flat.

If nothing changes, nothing will change.  The UK has to identify a sector that has enough potential to compete with other countries in exportable products or services.  It has to be based on an existing cabability that could be extended by the government visibly investing in and encouraging training to build capability.

So how exactly can we optimise this potential? Building the basics from primary schools, giving positive messages about the desired careers, encouraging parents to guide children towards these careers, encouraging great numbers of start-up businesses in these industries and giving them real support until they either succeed or fail. I am not an economist but I can consider the future and wonder.

No free lunch

We in the UK and elsewhere continue to be reminded of the sense of this wise saying. First it was when we enjoyed cheaper and abundant credit for which we are now paying with stiflled credit lines and low savings rates.  The News of the World scandal is another brutal reminder that when we enjoy the inside stories and gossip about other lives, the private information is being obtained at a price.  Many would argue, too high a price.

But like the banking crisis, where it was easier to blame the bankers and not our appetite for consumption, we could blame the News of the World and not our desire to consume news about private lives. For a while we could despise “the paparazzi”, until the next big story entices us to buy the papers or we could reflect more deeply and take responsibility for encouraging the prying into private lives.  Which one will it be? Any bets?

I do not for one second, excuse the greed that underlay the behaviours exhibited by the bankers or the journalists in both instances.  I am just saying that there is evidence of similar greed elsewhere in society and all they are doing is serve us what we demand.