It’s the economy, right?

munchscreamcity I don’t know about you but I get confused every time I watch the news on TV, hear it on the radio or read about it online.

It’s that ‘e’ word – the economy. Every time it’s mentioned, I get more confused.

We’re in trouble, right? I understand that bit: you can’t move left or right without hearing someone say that we are. Therefore we must be. It stands to reason, doesn’t it? If politicians say we’re in trouble and the economy’s in a mess and if City leaders and bankers say we are, it is therefore so.

Trouble is, I don’t really trust any of that lot and what they say (reflecting a bit of a wider trend perhaps).

The always-interesting Bagehot nails it best for me in this week’s Economist:

The tide has gone out and, with a very few exceptions, Britain is swimming naked: almost nobody appears to know what he is talking about. The havoc of the financial crisis has stretched and outstripped even most economists. The British political class is befogged. Ordinary people are overwhelmed. And just as the interaction between banking and economic woes is proving poisonous, so the interplay of public and political ignorance is damaging the country’s prospects.

It’s worse than that, though:

[…] The truth is that hardly any MPs in any party have more than a rudimentary grasp of the crisis; indeed, their inability to track the City’s baroque excesses helped to foment it. (The intellectual background of MPs, few of whom have much training in economics or commerce, may contribute to this deficiency.) Vince Cable, the Liberal Democrats’ treasury spokesman, has the best record in Parliament of predicting and analysing the debacle—and precisely because he is so lucid, he seems increasingly to be regarded as an impartial pundit rather than a politician.

Meanwhile, the bodies and advisers appointed by the politicians to do the understanding for them have been largely discredited.

[…] A layman might conclude that there is almost no one in Britain capable of comprehending the financial mess, and at the same time sufficiently uncontaminated by the mistakes and ruses that caused it to be entrusted with the job of fixing it. (Lord Turner, the FSA’s new chairman—who has admitted that financial regulators, among others, missed “an increase in total system risk”—may be a happy exception.) It might help if ministers looked beyond the world of banking, of which they still seem to be in a sort of post-socialist awe, for more of their recruits.

So it’s all the fault of the politicians and bankers, then? Actually, no it’s not:

[…] The nasty little secret of the slump is that by overborrowing and making myopic investments, lots of ordinary Britons helped to bring their difficulties on themselves. Low levels of financial literacy (knowing the difference between an ISA and an iPod, and so on) are part of this problem. But so is the cowardly reluctance of politicians to say unpalatable things.

[…] There sometimes seem to be almost as few people in Britain who truly understand the credit crunch and its recessionary consequences. The public is scared and uncertain; the politicians are panicky and confused. They are leading each other around and down a worrying spiral of ignorance.

Pretty gloomy, isn’t it?

The Economist | Bagehot | The spiral of ignorance

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