THE ECONOMICS OF FAIRY DUST REVISITED

The Coalition Government's policy of continued "quantitative easing" reminds me of a post of six month's ago from my alter ego "The Witch of Worcester": @ http://www.witchofworcester.wordpress.com/

"Writing in The Observer last Sunday (11 April 2010), the former newspaper editor Will Hutton bemoaned the lack of any real content in the current British General Election campaign, and the fact that the euphemistically named government policy of "quantitative easing" - ie pumping £billions of public money to prop up the banking sector - was reinforcing structural problems in the UK economy: namely, the dependence of this on the financial and property sectors.

Commentators on the article - including this one - seemed to have found much to agree with. However, I have to take issue with Hutton's assertion that the British have all been living on fairy dust - ie asset price inflation largely constructed on increasingly sophisticated financial systems, which also provided unprecedented levels of consumer credit - for the past 20 years. For there is another dimension to "The State We're In" - also the title of a book by Hutton published around the time of New Labour's election in 1997. The other side of the story is, of course, the hard labour of people in low wage countries, notably - but not exclusively - China which has produced the cheap, but nevertheless high quality, consumer goods of which we in countries like Britain and the United States are so enamoured. I therefore find it strange that Mr Hutton, now identified with the UK-based Work Foundation, should have apparently overlooked the labours of these multitude of overseas workers in his article, given that their production has underpinned, more substantially than the speculators as it turns out, the long boom from early 1990s to the late noughties.

During this time, Britain has been living not so much on fairy dust - attractive although this analogy may be to one concerned with non-material realties - but on the hard labour, and to a significant extent the savings, of people living in less-developed countries. However, I would argue that this process has not delivered the advantages at home or abroad that are frequently advanced. We are all now aware that the kind of growth which the consumer revolution has brought to China poses not only grave environmental problems for the rest of the world, but has also suppressed, and in some cases destroyed, the development of industries in other countries, including our own. Moreover, there are an increasing number of people within China who would like to see their country take a different development path, which is less reliant upon Western consumers, and the economics of fairy dust."