After a nearly month-long absence, FT columnist Samuel Brittan returns with a look at the race for recovery from recession in parts of the industrial world. Brittan identifies a clear winner: the United States, which “pulled out the monetary and fiscal stops to keep the economy going”. More stimulus is needed, however, to address the problem of jobless growth.
The fall in output [in the US] was slightly less than that experienced in the eurozone, the UK or Japan and the recovery has been much more impressive. It is the only one of the four main groups where output has recovered to above the pre-recession peak. ….
The annual rise in consumer prices has rarely risen much above 3 per cent and the main inflationary threat comes from external energy and commodity prices generated outside the developed world. The dollar, like the other main currencies (except sterling), has fluctuated since 2007, with no pronounced trend. ….
The real US problem is that of jobless recovery. This is the other side of the rapid rise in productivity – another league in which the US heads the western world – and the answer to this problem is still faster growth rather than just special schemes.
Japan is the worst performer in this race, but Brittan reserves his sharpest criticism for the United Kingdom.
The worst showing on GDP performance is Japan, mainly because of the depth of its recession. But next worst is easily the UK. So far an anaemic recovery has left UK output 4 per cent below its pre-recession peak. ….
[T]he government and the Bank of England have a masochistic vested interest in marking down the growth capacity of the British economy. For the more low growth can be blamed on structural factors, the less it can be blamed on their own austerity programme, which it seems blasphemy to criticise.
As for the troubled eurozone countries – Greece, Portugal and Ireland – all would be better off without the euro. I was surprised that Brittan did not include Spain in the list.
A severe debt write-off by Greece and Portugal is a foregone conclusion; and in my view both countries would be better off without the euro. Ireland has carried out an internal devaluation with unit labour costs falling by 15 per cent since 2008, achieved at the terrible cost of a rise in unemployment to 15 per cent. The Republic can now stay with the euro if it wishes despite my personal view that it would be better off going back to sterling.
Of course, exiting a currency area has its financial complexities. But it has been done before ….
Samuel Brittan, “Who is winning in the race for recovery“, Financial Times, 13 May 2011.
Brittan’s old columns can be downloaded freely from his webpage. Today’s column will eventually join them.