“Red warning lights are flashing on the dashboard of the global economy,” remarked David Cameron last weekend. The Prime Minister was highlighting, rightly, the plethora of economic and geopolitical risks currently stalking the world, all of which threaten the UK’s fragile recovery.
Referring to a “dangerous backdrop of instability and uncertainty”, Cameron pointed to conflicts in the Middle East and Ukraine, ebola, a slowdown among the big emerging economies of the East and, with a flourish, “a eurozone that’s teetering on the brink of a possible third recession”.
The Japanese economy is supposed to be recovering. Just a couple of weeks ago, official data indicated an expansion of 0.9pc during the first three months of this year. That placed the third-largest economy on earth among the developed world’s top-performers.
Here in the UK, our GDP increased by just 0.3pc during the first quarter of 2013, while the United States registered 0.6pc growth. The Eurozone, meanwhile, remained stuck in reverse gear, its economy contracting 0.2pc over the same period.
Last weekend’s election results in France and Greece, we’re told, show that eurozone voters want “growth, not austerity”. In the UK, too, the deficit-cutting coalition government is being widely castigated for “lacking a growth policy”. In reality, though, “growth versus austerity” is a false and dangerous dichotomy, a misleading policy choice that has been formulated and fed to electorates in Britain and elsewhere by opportunistic politicians and their pet intellectuals.
“Economic growth” isn’t a decision a government can opt for. It is, instead, an outcome – an outcome we want and need, and which can be achieved in a variety of ways, none of which is guaranteed. There are, on the other hand, many ways to guarantee that growth won’t happen. One way is for country to borrow and spend far beyond credible limits so that, in the end, bond markets refuse to roll over their sovereign debts. Growth won’t happen in the midst of a creditors’ strike, when sovereign bond markets are in meltdown and interest rates spiraling out of control.