Wednesday, 11 March 2009

Stories from my Youth (no4387): Balance of Payments Worries

JKA looks at the trade deficit and says,

"The balance of trade in goods in the final quarter of 2008 was around £23bn producing a total deficit for the year of £93bn. In 2009, the deficit may ease slightly by around £5bn but it would be a cyclical adjustment. The structural weakness is implicit in the data over the last ten years.

Ah, the memories: this was an almost nightly TV News item in the 1970s. Some frightening figure would be mentioned by a stern looking economics reporter - you counted yourself lucky if it wasn't the incomprehensibly patrician Peter Jay. A moment later, along would come the saving grace of what were then called’ invisible earnings’ – basically the balancing profits made in shipping, financial and business services and repatriated profits from overseas. The country never quite went broke because of these invisible earnings.
But after the banking crisis, aren’t quite a lot of them really invisible now ? Well, I say ‘invisible’ but I surely mean ‘all-but-non-existent’.

So the version of economic modernisation that 1970s Britain eventually embarked on - let's call it Thatcherism for short - seems to have left us back where we started. That's not obvious yet of course. The chutzpah of the government is keeping us 'running on empty'. Firms take time to respond to changed market conditions. But when people realise this there will be an almighty reaction....

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