Can economic pain be good?

Right here is the question: Can economic pain be good?

At the moment everyone in the UK is faffing around because the growth of our economy isn't shooting along at 3-5% and instead it is just bouncing around 0-1% if we're lucky.

As a consequence people seem to think that the answer is more public spending. At first I thought they were wrong, after all you don't get yourself out of debt by spending more money. Then when growth didn't pick up I thought maybe they were right. Maybe spending on infrastructure projects would be really useful.

To an extent I still believe that infrastructure projects would be useful. Right now the UK is far too London-centric. You want to work in Finance? Go to London. You want to Work in Law? Go to London. You want to work in Government? Go to London. You want to work in tech? Go to the South East (London, Cambridge and Oxford).

The consequence is these places overheat while the rest of the UK flounders. Demand for housing, education etc is far too high in the South East, meanwhile in parts of the North East you can buy a house for the same price as a family saloon. It doesn't make sense. One way to help reverse this is to improve infrastructure. So, building HS2 rail seems like a good idea.
(even if it was knocked back today: http://www.telegraph.co.uk/news/uknews/road-and-rail-transport/9932958/Government-forced-back-to-drawing-board-on-high-speed-rail-compensation.html)

So to a certain level I am in favour of investment that will level the playing field, bring business out from the overheated South East and up to the neglected North of England, Scotland and North Wales. But many people seem to think that the answer to economic stagnation is just generally more public spending. Preventing cuts to public servies etc. This will, it is claimed, reduce unemployment, help keep people out of financial problems and help get the economy going once more. I'm not so sure however.

In the short term, public spending will reduce unemployment, that much is almost sure. But so what? There are a huge number of ways people deal with short term problems that just make the future worse. Essentially this usually involves treating the symptom rather than the problem. For example, if one has toothache and they just take painkillers, it may be that the symptom is dealt with, but the problem continues, until one day, when perhaps the mouth gets infected and teeth need to be removed. Or another option would be a broken leg, where isn't of getting it reset with a splint (which would be painful in the short term) one ignores it and their leg fixes itself in a deformed manner. I'm sure we could think of endless ways to illusrate the point. The same goes for our economy.

How does this illustrate our economy? Well, say we do give out lots of public contracts instead of cutting back. People will continue to have work in the short term, but the underlying issue will not have changed. What is the underlying issue? Our economy is stuck in the past.

How is our economy stuck in the past? Simple, it is facing the wrong way. Sure we have all the knowledge and technology we need, but who does it serve? Us, the UK, the EU and the US. In short our economy is largely arranged to serve the West. To show how this is the case people often quote how more trade is conducted between the UK and Ireland, a country with only 4,600,000 people than India, a country with over a billion people living there ( around 1,200,000,000). That is right, we trade more with the tiny republic of Ireland than with a country that comprises over a 1/6 of the world's entire population. Now obviously part of that could be explained by our proximity to Ireland, but distance doesn't stop China from trading huge amounts of goods with the US and the EU. The truth is our economy is still concerned with the question that mattered in the last few decades; 'what can we sell to rich westerners?'. The answer to that question was mainly 'cheaply manufactured products made in China'. And as a result the wealth of the so called BRIC nations has increased hugely (BRIC: Brazil, Russia, India, China). As a result of their increase in wealth and industry, we're no longer in position to pay ourselves large salleries in the form of public service jobs, because all our money is very quickly being sapped out of our country and spread to the four courners of the globe. Previously we could just keep borrowing, but that option is running out fast as money is being better invested elsewhere around the world. We as a nation need to stop huddling with the other western nations, turn around and embrace the brave new world around us. A world where is isn't all about 'us' any more.

This simply won't happen if we keep on borrowing and providing public service work. If we keep borrowing to provide work, our economy will continue to be an 'us' focused economy, we'll still be busy trying to pretend we don't have to go out and work for our standard of living, pretending we can borrow to keep ourselves in the manner to which we've become accoustom, all the while our economic position would grow precarious, and the government would be less and less likely to be able to pay its debts. In addition other economies would steal a march on us, being quicker and more ready to adapt to the new state of affairs. Once that happens it is much harder for us to play catch up....

Of course we don't need to have this happen, we could just start the change now, we could just stop looking for more debt, and start looking for what we can do to serve others in the world.... and pay our way in it.