When the current government came to power in May 2010, the overriding message was we have to clean up the mess the economy was left in, and that they planned to do this by making stringent cuts across the board.
They said that it will get tough but in their opinion it was the only way forward, now over two years later things aren’t looking any better, we are officially back in a recession, interest rates are stuck at 0.5%, and the Bank of England has announced another round of quantitive easing taking the total to £375 billion.
Estimates for the economy growing are continually being revised down and there seems to be no indications that things are going to get better anytime soon.
This government repeatedly stressed that the best way out of the difficulties was to cut, cut and cut some more, but there is an alternative way to drag the economy from the depths of despair and its effectiveness has proved much greater than the tactic we’re currently employing.
It’s called investment and spending, this is what America decided was the best way out of economic uncertainty, they did this despite the fact that their debts much dwarfed those of any other nation and instead of cutting they invested and spent.
I thought this was that model couldn’t work, but when you look at the numbers they speak for themselves, America’s economy is expected to grow more than 5% over the next two years, compare that to ours which isn’t expected to grow close to half that rate.
While the Americans are largely responsible for causing the economic mess the world finds itself in, they have at least shown there is a way out.
Maybe our government should take a leaf out of their book and consider investing more, because if you continuously cut something it’s only going to get smaller.
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