Sources of growth

 

           I will today be talking to the Thames Valley Chambers of Commerce at lunchtime on growth and the UK economy. This afternoon, at 5pm, I am giving a public lecture on Growth and the UK economy in the Old Library, All Souls College, Oxford.  I will have limited time to moderate.

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44 Comments

  1. Neil Craig
    Posted November 23, 2012 at 11:03 am | Permalink

    Economic Freedom + Cheap Energy = Fast Growth

    I hope, at the very least, anybody who doesn’t put that at the top of the list for achieving growth says why.

    • Mike
      Posted November 23, 2012 at 3:09 pm | Permalink

      Absolutely.

      The cheaper the energy, the faster the growth.

    • Dennis
      Posted November 23, 2012 at 6:34 pm | Permalink

      which equals trashed environment

      • A Different Simon
        Posted November 23, 2012 at 11:41 pm | Permalink

        Care to elaborate please Dennis ?

        • Dennis
          Posted November 24, 2012 at 4:55 pm | Permalink

          Growth needs resources/environment which we are exhausting more rapidly – we are too rich now to sustain equilibrium and why the need for this selfish, greedy policy to become even richer?

          When a population of 10-15 million in the uK would be reasonable to get 60 odd million and more rich is madness – what energy requirements are needed for that gross population? If other countries with a good standard of living can operate with 5 million or so why the need for more?
          Remember when Iceland was richer than we with a population of 290,000? And even now they are recovering nicely. They were intelligent enough to conserve their fish stocks when we wanted to overfish them. This is a lesson about wanting more growth – more and more fish caught without end? Some hope.

          Cameron said that we are in the position of WW2 but he is on the side of Germany – a blitzkrieg on the biosphere.

          • lifelogic
            Posted November 25, 2012 at 7:38 am | Permalink

            I can remember when non volatile memory chips cost over £10,000 per MByte now you can get that for £0.0000005 (2 thousand millionths of the cost) you are far too pessimistic about technology. We will solve energy with nuclear power, fusion, break throughs in PV costs/efficiencies, better insulation, combined heat and power, geothermal, heat pumps, better gas/oil extractions, and who knows what to come ……….

            Be more position about human ingenuity, try perhaps Matt Ridley’s excellent book The Rational Optimist.

            http://www.rationaloptimist.com/

          • A Different Simon
            Posted November 27, 2012 at 12:16 am | Permalink

            Dennis ,

            Thanks for elaborating .

            I agree that such a high population places a huge burden on the environment .

            I go fishing (river , canal and sea shore) and have noticed a drop off in catches over the past 30 years despite some rivers becoming in some terms cleaner . Similarly a drop off in wildlife diversity . This is anecdotal and I don’t have figures to back it up .
            However , water abstraction and I suspect treated sewerage , surfactants , detergents etc from a massive population exact a toll on the surroundings .

            I have some sympathy with Lifelogic’s position on energy ; that problem will be solved .

            There is absolutely no danger of running out of hydrocarbons , access to unconventional resources through horizontal drilling and hydraulic fracturing has made available several quadrilian cubic feet of gas and over a trillion barrels of oil . Even if that were used up methane and longer chain hydrocarbons can be synthesised by for instance (in situ) gasification of coal with the addition of water to provide the hydrogen .

            That’s quite apart from cheap solar which will make todays primitive efforts look like a 90’s mobile phone , storage solutions for offshore wind generated electricity so it doesn’t destabilise the grid , advances in nuclear fission with use of thorium and possibly fusion .

            I don’t know about being richer . Feel like I’m running faster than ever just to stand still .

            Agree that our system requires growth as a dynamic and that it’s time to come up with a new system that doesn’t .

      • lifelogic
        Posted November 24, 2012 at 5:46 am | Permalink

        Wind farms are trashing the environment all over the place and they do not even generate cheap energy or significant amounts of energy. Gas and Nuclear are far less destructive and they actually work.

    • uanime5
      Posted November 23, 2012 at 10:15 pm | Permalink

      You’ve given a recipe for an economic bubble which will destroy the economy when it bursts.

      Fast growth is not sustainable.

      • A Different Simon
        Posted November 24, 2012 at 11:08 am | Permalink

        I agree , fast growth is not sustainable .

        Furthermore indefinite exponential growth is impossible . Just like ever increasing house prices .

        Our politicians did not seem to understand that house prices were a bubble and not sign of a healthy economy whilst they were puffing prices into a bubble .

        However , from our current starting point it should be possible to have a decade of fast growth though it will take a while to get going .

        As our host has pointed out in the context of the banks , going from lax credit to far too tight credit has killed any chance of the economy picking up . An awful kneed jerk reaction .

        Unfortunately we have a demand side problem . British consumers from government departments to environmentalists to families make no effort to buy British .

        So long as the UK leaks human , monetary and intellectual capital in the form of imports , sale of once publicly owned assets to foreign owners , and bright folk (engineers etc) choosing to leave the country , it will continue to sink .

        From where we are , (bankrupt) with unfunded liabilities of over £7 trillion (excluding means tested benefits to people retiring with no savings) , the only way forward is default , probably soft default by printing .

        It’s taken us 60 years to get into this mess , it won’t be fixed overnight .

      • Neil Craig
        Posted November 24, 2012 at 11:43 am | Permalink

        Growth has been sustained for over 2 centuries so far. Indeed world growth is far faster than it ever has been.

        No remotely honest person ever claims growth is not sustainable without prooviding unambiguous proof. Of course this statement means that there are hardly any remotely honest people in the “green” movement. Perhaps Unm can give some evidence that this claim is at least 10,000 times closer to honest than his normal contributions. Perhaps not.

        • Edward
          Posted November 25, 2012 at 12:20 pm | Permalink

          Yes Neil, I totally agree.
          There is a new mantra now and that is the left’s view that growth is wrong and unsustainable.
          Growth is what takes people out of unemployment, poverty and brings wealth to nations that can be spent on health, education and welfare improvements.
          In the third world growth means a reduction in hunger, disease, and childhood mortality.
          When I see on my TV, trendy lefties with big quango salaries and family trust funds dressed in their uniforms of designer black suits and white open neck shirts, tell us we mustn’t try to grow or become better off I feel ill.
          Fortunately this policy is destined for elctoral failure and will never defeat the ambitions of mankind to invent new things and improve the standard of living for themselves and their families.

  2. lifelogic
    Posted November 23, 2012 at 11:18 am | Permalink

    Growth is easy we just need the government to get out of the way, cheap non green energy, halve the size of the largely parasitic state sector, sensible employment and other regulations, lower taxes, functional banking with real competition, a smaller government uplifting vision.

    Alas we have Cameron’s absurd coalition and Labour in 2015 and no uplifting vision at all.

    • Posted November 23, 2012 at 12:01 pm | Permalink

      Agree entirely.

      Trouble is, we have the “what are the government doing about it?” brigade.

      So we end up with more and more intervention and a viscous circle.

      • lifelogic
        Posted November 23, 2012 at 4:12 pm | Permalink

        Indeed endless silly gimmicks like the green deal for example.

    • lifelogic
      Posted November 23, 2012 at 12:09 pm | Permalink

      We still have Ed Davey going on about “green jobs”. Actually as everyone sensible knows green job destruction, higher taxes to fund absurd subsidies, higher bills by about £200 per household, jobs exported and many elderly freezing to death.

      You know you can trust the Libdems!

      • A Different Simon
        Posted November 23, 2012 at 5:29 pm | Permalink

        The “green jobs” that Mr Davey and his predecessor talk about were based in Denmark and China anyway !

        Perhaps they can give him the portfolio “Minister in charge of promoting imports” ?

    • Bazman
      Posted November 23, 2012 at 5:12 pm | Permalink

      We know at the time you and the likes of you would have been bankings chief cheerleader for getting out of the way. The government did get out of the way with and look what happened. Your energy free for all will produce the same results as sure as night follows day. You are against sustainable energy I presume? I never said green. I said sustainable. What you propose is not ‘sustainable’. Won’t effect you as you live in France you claim and we know how they run their energy policy don’t we? More silly fantasy. Sorry for spoiling you Tory Right love in Edward. You can both ram it.

      • Edward
        Posted November 25, 2012 at 11:22 am | Permalink

        As usual Baz, you far too quickly decide what other peoples views are and then criticise them for holding them. As a result this becomes your fanasy not mine.
        In what should be your Para 1:
        I did not agree with Blair and Brown when they relaxed banking regulation and I did not agree with “save the world” Gordon’s policy of bailing out the Banks when they got into trouble, so what you claim are my views on Banking are completely wrong.
        In what should be your Para 2;
        I am not against sustainable energy, I like to see a secure balanced portfolio of the various types of energy production, but with more bias towards nuclear, similar to France’s sustainable energy policy.
        So again, what you claim are my views on energy are completely wrong.

        I don’t mind criticism of my views, which unlike some people I could mention, are not fixed, as I too may learn and improve, which is why I value this site, but do try to get your facts right.

        • Bazman
          Posted November 25, 2012 at 7:35 pm | Permalink

          Praise the Lord! We have a sinner repenting. LOL!

          • Edward
            Posted November 26, 2012 at 6:42 pm | Permalink

            Indeed Bazman, you will learn a lot if you take time to read what I am actually saying.
            It is better than guessing what you think I believe, based on your general dislike of all right wing opinions and then attacking that.

          • Bazman
            Posted November 28, 2012 at 4:51 pm | Permalink

            Your right wing opinion are to expensive to implement. Cut everything and then pay private companies tto pick up the pieces. Why don’t they just leave the pieces after the cuts have been made. To expensive is the answer.

    • uanime5
      Posted November 23, 2012 at 10:16 pm | Permalink

      So your solution for growth is reduced employee rights and worse working conditions. Don’t expect a demotivated workforce to be a productive workforce.

      • Electro-Kevin
        Posted November 24, 2012 at 11:21 am | Permalink

        Uanime5 – We have the ‘ultimate’ in demotivated work forces here already in the UK.

        When the country has finally gone bust and the welfare state has run dry those lucky enough to be able to find work will be plenty motivated – including those who won’t bother to get out of bed to earn their living today.

        • Electro-Kevin
          Posted November 24, 2012 at 11:24 am | Permalink

          ‘ultimate’

          I don’t know why I typed it like that.

      • Bob
        Posted November 24, 2012 at 12:09 pm | Permalink

        @uanime5

        More workers rights does not necessarily equate to increased motivation, often the reverse is true.

      • lifelogic
        Posted November 24, 2012 at 2:25 pm | Permalink

        The good workers will the uplifted by not having to carry the poor ones the company will thus be more competitive and so grow – and be able to pay the good workers better.

        Why would they be demotivated quite the reverse?

        • Bazman
          Posted November 25, 2012 at 8:50 am | Permalink

          They pay what they can get away with. Your idea that increased profits lead to increased wages is just another of your silly fantasises all evidence show this is not the case. Despite large profits many companies are still cutting pay. As believes they need to be desperate and this desperation is to be created by cleaners and the like cutting each other throats for work and to keep their jobs? This is Bobs silly fantasy. They will just not work and claim benefits and who can blame them when bankers are supposed to be motivated by seven figure bonuses and the lowest are to be motivated by homelessness or at the least subsistence living. It’s really pointless talking to some of you as you are all so thick and protected by middle class welfare, but at least you have the pleasure of being talked to by somebody with little status or education and being without reply. Ram it.

      • M.A.N
        Posted November 24, 2012 at 3:01 pm | Permalink

        Workers are only demotivated by earning a wage that won’t allow them a decent standard of living. Governments and the left wing press are demonising big business to divert attention away from the fact they spend too much. Small businesses are having a hard time of it and aren’t taking on. Green taxes are a luxury in this country given out finances, it all has to be paid by someone…The more I see of life, I am a business owner myself, I see the problems created by left wing ideology. It pervades every aspect of our lives, on a cost per person outcome it doesn’t add up, no matter how well intentioned the origin.

      • Bazman
        Posted November 24, 2012 at 3:06 pm | Permalink

        They will be motivated by desperation is the hope.

    • Bazman
      Posted November 24, 2012 at 3:01 pm | Permalink

      The state sector funds a large proportion of the private sector so cutting the state sector in half would reduce the private sector considerably.The private sector would not automatically expand to fill the gap and millions would be on the dole and benefits. No amount of deregulation and tax cutting would prevent this. Your absurd and prejudiced religious ideas are just repeated without thought. Still waiting for a reply about holiday homes. Have you changed your beliefs and if not why not. Are you brainwashed by right wing fantasy?

  3. Bert Young
    Posted November 23, 2012 at 1:14 pm | Permalink

    Sorry I will miss your lecture at All Souls . A bad cold and no sleep for two nights prevents me from attending . It was an event I was looking forward to .

  4. Kenneth R Moore
    Posted November 23, 2012 at 3:48 pm | Permalink

    Uncle Redwood,

    Would it be possible to post notes from your lecture for those not able to attend ?

  5. Posted November 23, 2012 at 4:40 pm | Permalink

    See you later Moderator. In a while at Balliol.

  6. Conrad Jones (Cheam)
    Posted November 23, 2012 at 6:12 pm | Permalink

    Sources of Growth according to the Bank of England:

    “A reduction in interest rates makes saving less attractive and borrowing more attractive, which stimulates spending. Lower interest rates can affect consumers’ and firms’ cash-flow – a fall in interest rates reduces the income from savings and the interest payments due on loans. Borrowers tend to spend more of any extra money they have than lenders, so the net effect of lower interest rates through this cash-flow channel is to encourage higher spending in aggregate. The opposite occurs when interest rates are increased.

    Lower interest rates can boost the prices of assets such as shares and houses. Higher house prices enable existing home owners to extend their mortgages in order to finance higher consumption. Higher share prices raise households’ wealth and can increase their willingness to spend.”

    That’s right – we’re all Lab Rats requiring external probing to manipulate our behaviour.

    So the Bank of England wants us all to take out second mortages on our overinflated House Prices, in a debt laden Economy, and spend that into the Economy. Some of this spending will go on manufactured Goods, made in China.

    Pensioners savings are losing purchasing power, Heating Costs, Food, Petrol are all going up and our savings are achieving negative interest rates.

    Central Control – especially by a Bank; does not work in a Free Capitalist Society. It usually only works in a Dictatorship like Communist Russia (U.S.S.R) or China.

    The United States; well before the ‘Federal Reserve System’ (mid 1860’s) and just after President Andrew Jackson was Elected, is what a Capitalist Society is supposed to look like. With no Central Bank dictating policy.

    I’ve heard Conservative MPs talk about “Sound Money”. I’ve never heard any define exactly what THEY mean by “Sound Money”. If we had “Sound Money”, why invent the CPI figure of inflation which disregards Housing and Energy Costs, and manipulates high cost items by replacing them with cheap items to make it look as though inflation is less than it actually is?

  7. Conrad Jones (Cheam)
    Posted November 23, 2012 at 6:18 pm | Permalink

    Depends how you measure “Growth”.

    GDP = C + I + G + (Ex – Im)

    where “C” equals spending by consumers,
    “I” equals investment by businesses,
    “G” equals government spending and
    “(Ex – Im)” equals net exports, that is, the value of exports minus imports. Net exports may be negative.

    If it’s the amount of Debt in the System, then GDP is looking very good at the moment, but as soon as you remove Government Spending, GDP would take a nose dive.

    If we all got second mortgages and spent this (as the BoE proposes) on goods (most of which are made in China), how’s that going to increase our GDP, it would increase the GDP of China?

    • Neil Craig
      Posted November 24, 2012 at 11:52 am | Permalink

      But if taxes & government spending were eliminated then consumer spending would be increased by G (a simplification since there is, probably, some useful government spending and we would probably want to put some of the savings into ending the deficit).

      Without government regulation and business taxes the opportunitis for investment would increase severalfold thus so would Investment (for this model foreign investment would count as increased imports).

  8. Electro-Kevin
    Posted November 23, 2012 at 7:10 pm | Permalink

    Seeing as it’s Oxford …

    Encourage bright ideas and KEEP THEM HERE.

  9. Jon
    Posted November 23, 2012 at 11:06 pm | Permalink

    In the last decade and a half there had been huge growth in credit and borrowing. There was contraction is savings and pensions. Growth requires investment and a populate with disposable income.

    Its the latter that can deliver in the longer term but thats what governments don’t like, the “longer term”.

    • A Different Simon
      Posted November 24, 2012 at 11:44 am | Permalink

      How are you going to persuade politicians to build houses to bring down accommodation costs so people have the money to invest and provide for their old age ?

  10. David John Wilson
    Posted November 23, 2012 at 11:45 pm | Permalink

    I suppose MPs giving lctures while parliament is sitting is better than them hiding in the Australian jungle.

    Reply: I gave my leture at 5pm on a Friday when Parkiament is not sitting! I also gave it as an open lecture for no fee.

    • A Different Simon
      Posted November 24, 2012 at 11:48 am | Permalink

      Up until very recently I thought Nadine Dorries was one of the better MP’s and a relatively normal one .

      She talked more sense than most .

      This made it far more disappointing when she went on a TV reality show .

      Was she always flaky or did years in Westminster convince her she was wasting her time ?

  11. Kenneth R Moore
    Posted November 24, 2012 at 12:48 am | Permalink

    Interesting to hear Mr Redwood’s views….I get the impression that the only real growth in the economy is fueled by increases in government spending.

  12. Conrad Jones (Cheam)
    Posted November 24, 2012 at 12:21 pm | Permalink

    As infinite Growth is unsustainable, I would argue that we need stability.

    1. Bring back control of the Money Supply to the Public – through Parliamentary Policy, and
    let the Treasury Create the Money based on parameters dictated to it by Parliament.

    2. Prevent speculative Lending into the Housing Market by restricting the amount that can be lent as a factor of Rentable value – allow buyers to up their Deposit but not the overall purchase price of the House. This will encourage savings and reduce private debt.

    3. As lending would be restricted into speculative – non-productive investment (like Housing), Banks would have to lend either for Building New Houses or to Businesses.

    4. Restrict Off shoring of “Means of Production” to Countries where working conditions are “Slave Like”, such as Electronics Factories in China. This promotes a lack of responsibility for Companies who just want their Goods made as cheap as possible while exporting poor working conditions abroad, and also importing unemployment to the UK. If somebody wants a Gimicky Mobile Phone or Media Device then they should pay the true cost of it and pay the cost of improved working conditions for the people who make them.
    $1.75 per hour in a Chinese Factory is (poor wages) however you look at it.

    5. Stop picking fights with countries like Libya, Syria and Iran. Along with the excessively subsidised Banking System, Military Spending has escalated over the last ten years.

    6. Bring Back a Sound Money System, whether that be with Gold (unlikely since that act of Treason by Gordon Brown, who – in my opinion should be thrown in Prison under the Terrorism Act, Financial Terrorism). The biggest threat we currently have is of our own making – weak Currency that could fold if China or Russia ever decided to dump it’s US Dollars on the Market. The Bank of England has done the best it can to make the Pound Stable – but it is an impossible job as the Pound is being abused by the Lending Practices of Banks and now the BoE has joined in by helping the Banks through QE programs.

    Fix the Money Supply or see negative growth. Banks or People – that’s the choice.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU
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