Leaders: Economic recovery can’t be taken for granted

Published on 27/07/2012 00:00

CAN THE policies of a devolved administration make a difference to economic performance? Even in benign periods of upswing there are limits to the changes that a Scottish government on its own can wring.

But this is no benign period we are in today. And the recurring theme of the latest analysis from St Andrews House chief economist Dr Gary Gillespie is that international developments weigh very heavily indeed on our current performance and prospects.

In stressing that recovery here is critically dependent on developments in the euro area and in other key export markets such as the United States and developing country economies, he may be criticised for stating no more than the obvious. But at least it is a statement of realism and a recognition of the profoundly difficult – and dangerous – new economic world that has unfolded since the onset of the global financial crisis four years ago.

Among some political commentators there has been a tendency to regard the UK’s economic difficulties as curable by ever greater resort to monetary easing and fiscal stimulus. Hand in hand with this faith in recovery at the snap of the fingers has been a dismissal of Bank of England Governor Sir Mervyn King’s view, that we are barely half-way through this crisis, as too gloomy. But it is Sir Mervyn who has been shown to have the firmer grip on reality while every rally on the back of a euro crisis summit has quickly relapsed into renewed fears of a Greek eurozone exit and a bail-out for Spain. Truly, until reality is faced and the eurozone crisis runs its course, it is very hard to see how business confidence can recover sufficiently to kick start that longed-for investment and job-creating expansion.

There is another constraint listed by Dr Gillespie: the urgent need to reduce record levels of deficit and debt. Deleveraging can fairly be said to be the greatest challenge faced by modern welfare democracies that simply cannot carry on as before down the borrowing road.

Against this daunting backdrop, there would seem very little that a devolved administration can do. There was an upward spike in construction when the Scottish Government brought forward capital spending projects, but it was not sustained. However, there are other constructive policies to pursue.

One is to drive through improvements in public sector productivity in Scotland and to switch as much spending as possible into infrastructure projects. Here, Scottish Futures Trust has set an encouraging example. Another is to clear planning and regulatory obstacles to new business formation and enterprise.

We may not see a return to pre-2008 rates of growth for a decade. And even Dr Gillespie’s forecast of a recovery setting in during 2013 cannot be taken for granted. But for that very reason, we need to take all possible measures to ensure the recession does not get any deeper than it is.

Let the Olympics success story begin

AFTER seven years of feverish planning and preparation, the London 2012 Olympics formally get under way with the opening ceremony in the Olympic Park, East London, tonight.

It has not been difficult for the public to find cause for gripes and grumbles, including criticism yesterday from US Republican presidential hopeful Mitt Romney. From concerns over security, worries over whether immigration officials at Heathrow would be able to cope and the fast “Zil lanes” through central London for Olympic officials and dignitaries, the approach to the Games has not been without criticism. Arguably the biggest criticism from non-sports enthusiasts has been the sheer range and volume of the television hype in recent weeks.

But then, this is the Olympics. It is the greatest and most prestigious sporting occasion in the world. It is the pinnacle of achievement for thousands of participating athletes. By the end of the Games, if they are successful, as we hope they will be, Mr Romney’s criticism and the other problems will be forgotten. There will be a crop of performers, obscure and unknown today, who will have become household names across the globe.

Naturally, we wish Scots and Team GB participants the very best over the coming weeks. But those good wishes extend also to all those who have succeeded through the qualifying rounds to make it to London. And we very much hope the Games will live up to all that has been claimed for them, both in terms of regeneration of a problematic area of East London and also as a demonstration to the world of what we are capable of as a people. Let the Games bring out the best.