Many large corporations that consider themselves successful, well-managed and with little room for improvement could benefit from a little impartial, frank, strategic advice from external consultants. So too with nations. Greece, most obviously, would do better to listen to the advice proffered by its European partners and the IMF about structural reforms, rather than simply pleading for debt forgiveness.
The harsh truth is that Greece will always run into economic difficulties, inside the euro or outside, if it fails to structurally reform its economy and become competitive. Austerity, in other words, has been painful and to an extent counter-productive in Greece; but that does not mean that Greece is better off ignoring reform. Far from it.
In the case of Britain, we can indeed look over our garden fence at the chaotic scenes in the eurozone and feel pretty smug about economic life. We can reflect on a record rate of job creation, latterly in full-time, permanent positions, and count ourselves fortunate. We can even take some comfort in the collapse in inflation; while in Japan and Europe this has mostly been due to a critical failure in consumer confidence, in Britain it is more benign, and more to do with the moderation in commodity prices, notably oil, and a strong pound. Thus the cost of living crisis, for those fortunate enough to be in work, has subsided.
And yet there is much to fret about too, as the OECD, taking the role of economic consultants, points out in its latest report. This country’s problem with low productivity goes back a long way – arguably to the 1870s when other great powers such as the United States and Germany started to catch up with industrialised Britain. In the 1960s we imagined planning was the answer: in the 1980s, free markets. By the 2000s, the Chancellor, Gordon Brown, and his chief adviser, Ed Balls, made much of the issue. It has never gone away, though it is so familiar it often gets overlooked.
The OECD performs the useful service of reminding a complacent nation that it is still very much there, and still stymying growth in wages and our living standards – because in the long run no nation can consume more per head than it produces.
No less sound is the OECD’s suggestion that Britain invest more in its infrastructure, if needs be by a more imaginative approach to paying for it, such as through toll roads and public-private partnership schemes. It reminds us that our housing market is an engine for instability as much as wealth creation, and that the politically accepted approach of protecting “frontline” spending on schools and on the NHS has distorted public expenditure, delivering huge cuts in the budgets of unprotected departments.
On the whole, the OECD is complimentary about Britain’s performance, and the policies pursued over the past few years. QE and low interest rates have worked; the policy suggestions it makes about our current success being converted to a longer-term improvement in economic growth are unlikely to be accepted by the political parties. Reform to the housing market; fees for using the roads; cuts in the NHS and education; “creeping privatisation” in public services – all political poison.
For all its innate strengths, occasional charm, and mercifully rare corruption, British parliamentary democracy has also displayed plenty of immaturity, perhaps justifying the old adage that we get the politicians we deserve. In any case, the OECD with its sensible, rational, logical approach to Britain’s economic flaws will not be standing in the next general election. If it was, it would lose its deposit.Reuse content