Waltzer Economy

Model of Coalition Economic Policy

My favourite fairground ride as a youngster was the waltzer. It has three directional movement that is unpredictable, the inertia is reversible and with the loud music and screams gave the essential ingredients for a thrilling ride. Waltzer boys balanced precariously on the carousel and spun the cars randomly to increase the G forces. I was told by a girl friend that, in the late 1960's, I looked like the waltzer boy in the film Sky West and Crooked, I took it as a belated compliment.

So the Governor of the Bank of England, that nice Mervyn King, is now admitting that the economy is not quite as good as it looked earlier this year. He has not gone as far as telling the government they are wrong, he has seen what the coalition do to naysayers; he has chosen to buff up his pomposity instead. The threat of a double dip recession is becoming real as contracts from the public sector dry up, jobs are lost and people are saving rather than spending. Or if they are spending it is only to beat the next increase in VAT in January after which we will be in dire straits and I am not referring to 'Money for Nothing'.

The coalition seem thirled to the belief that the private sector will mop up all the lost jobs in the public sector and expand rapidly. Listening on the radio to spokespeople from the job agencies today suggests this is only a half truth. The majority of any new jobs being created are temporary and many of these are part time. Needless to say there is no guarantee of a workplace pension with these jobs so add that to the long term costs to the government. Meanwhile existing pension pots are being squeezed and many companies are aggressively ditching existing pension schemes.

Government action has hugely reduced capital projects in the public sector thus reducing the number of contracts and making tendering by the private sector even more of a lottery. A financial director of a large construction company recently told me that the costs and time associated with procurement in a much diminished market are threatening the long term future of the company. The savings targets will massively reduce the number of jobs in the public sector over the next few years and assuming that the private sector have the capacity to take up the slack is not going to happen sometime soon. It is an economic fantasy that even the markets don't believe nor do an increasing number of companies. They liked the rhetoric of eliminating public sector waste but are now realising that the majority of public spending on capital and supplies passes through to the private sector and many suppliers and contractors are going bust as the public spending cuts begin to bite.

Whilst I am not a fan of quangos, which are often bloated with their self importance, some of them perform important tasks in taking risks, being creative and encouraging best practice. There will be a vacuum in advancing new ideas and front loading investment by a cull of quangos particularly in the arts, leisure and the environment.  Amalgamating public sector organisations is another way of sterilising progress whilst management is waltzed around like deckchairs. The increasingly macho utterings from Dave and George seem detached from the reality of what is happening.  Companies are worried, the markets are stumbling, employees are in fear of their jobs and the confidence in the country particularly from the young and early retired is plumetting. And this is before the spending review is completed.

Perhaps we should think of the economy as a waltzer. The carousel (the state or public sector) is a large undulating lazy susan which is directly driven by public spending and rotates clockwise. The cars (private companies) are set on the carousel and freespin using the centrifugal forces of the lazy susan to generate their own momentum. This may be aided by waltzer boys (the quangos and public agencies) to take account of local circumstances. When the carousel slows down so do the cars.  The problem is that George has slowed down the carousel and cabinet colleagues have withdrawn the waltzer boys. The cars ain't spinning any more but the government is.