The summer break for MPs has begun and this column will be taking a (short) break too. So what might we all be pondering about in the next few weeks? What can we learn? How can we come back in September with a clearer eye about the future of the world economy?
I suggest we start with a sense of relief, tinged with a little fear. The relief comes from the fact that the world economy is growing strongly, more strongly than at any period since the 2008 recession. And the fear comes from extended share and property values, the result of a near decade of very cheap money. That leads to the first thought: where is real value in the world?
You can try and answer this technically by looking at different markets – say, London property or high-tech US shares – or you can stand back and think about this in a more personal way and ask about the value of one’s job or one’s friends.
If, for example, you are worried about the value of your house or the mortgage on it, maybe that doesn’t matter if you have a secure job you enjoy and won’t need to move for a long time. If share markets crash because of rising interest rates, will that really matter at an individual level?
The point here is that we tend to overrate the macroeconomic indicators and underrate other forces, such as technology or changes in lifestyles. If the world economy keeps growing, most people (sadly not all) are pulled along with it. For the moment at least, that seems to be happening. I think we will hear more of the R-word – recession – in the months ahead, but I don’t think it is yet in sight.
The second thing is more specific and matters for Britons. What is happening to sterling? Anyone who is holidaying abroad will be very aware that much of Europe and all of America has become very expensive.
On the other hand, British business is doing very well with its exports. Anyone with any sense of history will remember similar swings, but they will also remember that confidence is fragile. Right now there is very little confidence in the UK Government to get anything right. I expect things will get worse before they get better, but if that is right there will be gainers (exporters) as well as losers (holidaymakers abroad).
That moves on to something else. Anyone on holiday, be it in the UK or overseas, will have a window on a different economy. South -west Scotland is different from north-east London. Washington DC is more different still, and so on. So it is an opportunity to look at a different way of doing things, not necessarily better or worse, just different. You can learn from what you see. What to look for can range from a different way of cooking or running a shop to different work patterns. If you don’t come back with one new idea, well, you haven’t been paying attention.
One particular area where new ideas abound is in technology. For those of us, like myself, who believe technology is changing our lives even faster than globalisation, one of the advantages of the summer break is to try and think though which new technologies will change our lives, and which will prove blind alleys.
It is pretty clear that electric cars will dominate the market and the tipping point when they take over has come forward. It is fairly clear too that the cashless society has come closer, but cash may never disappear. It has, after all, been around for at least 6,000 years and it would be odd if it disappeared in our lifetimes. More important still, will we get any better at measuring the impact of technology in improving not just living standards but also life chances?
Finally, the break is a good time to think about the relationship between finance, economics and society. There is such a thing as society. Will we learn anything about the reduction of inequality within it? What is the effective role of government? How does the business community help? Are we getting better at using the skills of the old? Are we better at training the young?
There are far too many questions, but a period away from the job is always the best time to think about them, and understand a bit better the way the world is heading.
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