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You can find the current article at its original source at http://www.theguardian.com/commentisfree/2013/aug/26/uk-economy-creativity-recovery-hi-tech

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UK economy: creativity is the key to recovery UK economy: creativity is the key to recovery
(25 days later)
So, according to George Osborne, austerity is paying off and the economy is on the mend. If only. Britain's GDP is still 3.5% below its pre-crash level (that represents a £50bn loss of income), while Germany is 2% above theirs, the US 4% and Canada 6%. Stockmarkets, City private equity and bankers' bonuses are certainly on the up, but real average wages of the other 99% have fallen 5.5% since the crash and are expected to slip further until 2018. Joblessness is still stuck at 2.5 millions and youth unemployment still rising at over 19%. The banks remain largely unreformed and still mainly invest in property, overseas speculation, tax avoidance and financial derivatives rather than in UK industry. There has been no manufacturing revival and last year imports of traded goods exceeded exports by £106bn which is simply unsustainable. To cap it all, Osborne's Help to Buy scheme is stoking another massive housing bubble – exactly the wrong way to boost the economy. No lessons learned. Some recovery!So, according to George Osborne, austerity is paying off and the economy is on the mend. If only. Britain's GDP is still 3.5% below its pre-crash level (that represents a £50bn loss of income), while Germany is 2% above theirs, the US 4% and Canada 6%. Stockmarkets, City private equity and bankers' bonuses are certainly on the up, but real average wages of the other 99% have fallen 5.5% since the crash and are expected to slip further until 2018. Joblessness is still stuck at 2.5 millions and youth unemployment still rising at over 19%. The banks remain largely unreformed and still mainly invest in property, overseas speculation, tax avoidance and financial derivatives rather than in UK industry. There has been no manufacturing revival and last year imports of traded goods exceeded exports by £106bn which is simply unsustainable. To cap it all, Osborne's Help to Buy scheme is stoking another massive housing bubble – exactly the wrong way to boost the economy. No lessons learned. Some recovery!
So what should be done? By far the best way to cut debt is by expanding the economy – sustainably, not by short-term fixes – to get the jobless off benefits and into work. By greatly increasing net government revenues, it would close the deficit on a far bigger scale than cutting public expenditure has so far done or ever will do. There is certainly plenty of work to be done in house-building, infrastructure improvement especially in energy, transport and IT, and laying the foundations for the new low-carbon economy.So what should be done? By far the best way to cut debt is by expanding the economy – sustainably, not by short-term fixes – to get the jobless off benefits and into work. By greatly increasing net government revenues, it would close the deficit on a far bigger scale than cutting public expenditure has so far done or ever will do. There is certainly plenty of work to be done in house-building, infrastructure improvement especially in energy, transport and IT, and laying the foundations for the new low-carbon economy.
This can be paid for without any increase in public spending at all. Either a new round of quantitative easing could be targeted not at the banks, but directly into industrial investment, in consultation with business leaders and service providers. Or state-owned banks RBS and Lloyds could be required to prioritise investment in British industry and jobs. Or the mega-rich – just 1,000 richest British individuals have increased their wealth in the last 4 years by a staggering £190 billions according to the Rich List – could be charged capital gains tax on the increased value of their assets, which would be enough to generate more than a million jobs in two years. That would signal too that at long last job creation had been restored as a fundamental objective of economic policy rather than unrestrained markets enriching the wealthiest at the expense of persisting high unemployment.This can be paid for without any increase in public spending at all. Either a new round of quantitative easing could be targeted not at the banks, but directly into industrial investment, in consultation with business leaders and service providers. Or state-owned banks RBS and Lloyds could be required to prioritise investment in British industry and jobs. Or the mega-rich – just 1,000 richest British individuals have increased their wealth in the last 4 years by a staggering £190 billions according to the Rich List – could be charged capital gains tax on the increased value of their assets, which would be enough to generate more than a million jobs in two years. That would signal too that at long last job creation had been restored as a fundamental objective of economic policy rather than unrestrained markets enriching the wealthiest at the expense of persisting high unemployment.
But that is not enough. The basis of the British economy remains highly dysfunctional, with an over-dominant City finance sector counterpoised by a shrivelled manufacturing sector. Some of the biggest banks need to be broken up and smaller banks created focusing on Britain's real needs for science and innovation, regional development, green economy and small businesses. The control of the money supply and hence of the direction of economic development, which has been franchised to the big five private banks over the past 30 years, needs to be brought back into public policy to ensure that primacy is given to manufacturing and exports over consumption. And the investment arm of banks needs to be completely separated from the retail arm so that no taxpayer bailout is ever required in future.But that is not enough. The basis of the British economy remains highly dysfunctional, with an over-dominant City finance sector counterpoised by a shrivelled manufacturing sector. Some of the biggest banks need to be broken up and smaller banks created focusing on Britain's real needs for science and innovation, regional development, green economy and small businesses. The control of the money supply and hence of the direction of economic development, which has been franchised to the big five private banks over the past 30 years, needs to be brought back into public policy to ensure that primacy is given to manufacturing and exports over consumption. And the investment arm of banks needs to be completely separated from the retail arm so that no taxpayer bailout is ever required in future.
Further, despite all the talk about rebalancing the economy from finance to manufacturing, from south to north, and from profits to wages to increase demand, which remains elusive, none of this has happened. Yet the only long-term sustainable future for the British economy is through a major expansion of hi-tech manufacturing tapping into the creative skills and inventiveness at which this country excels. Policy priority should therefore focus on rapidly increasing the flow of qualified, skilled workers, ensuring adequate access to finance, restoring the crucial supply chains broken up by Thatcher's sell-offs and privatisation, rewarding increased market share over short-term profiteering, and driving innovation.Further, despite all the talk about rebalancing the economy from finance to manufacturing, from south to north, and from profits to wages to increase demand, which remains elusive, none of this has happened. Yet the only long-term sustainable future for the British economy is through a major expansion of hi-tech manufacturing tapping into the creative skills and inventiveness at which this country excels. Policy priority should therefore focus on rapidly increasing the flow of qualified, skilled workers, ensuring adequate access to finance, restoring the crucial supply chains broken up by Thatcher's sell-offs and privatisation, rewarding increased market share over short-term profiteering, and driving innovation.
Two other factors are holding back Britain in Osborne's austerity economy – a deep resentment about unfairness and the breakdown in corporate accountability. Both urgently need tackling. The former requires not merely a proper living wage but also a maximum ratio between directors' pay and the median wage in large organisations. That might best be achieved by whole-company pay bargaining involving representatives of all the main grades of employees in an annual decision-making meeting. The latter requires that company directors are held to account, not by large fines in effect paid by shareholders, but by themselves being subject to large fines or disqualification from office or, in the worst cases, a custodial penalty.Two other factors are holding back Britain in Osborne's austerity economy – a deep resentment about unfairness and the breakdown in corporate accountability. Both urgently need tackling. The former requires not merely a proper living wage but also a maximum ratio between directors' pay and the median wage in large organisations. That might best be achieved by whole-company pay bargaining involving representatives of all the main grades of employees in an annual decision-making meeting. The latter requires that company directors are held to account, not by large fines in effect paid by shareholders, but by themselves being subject to large fines or disqualification from office or, in the worst cases, a custodial penalty.
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