A Return to Liberal economics

On a trip to London at the weekend I saw little evidence of the credit crunch but then it was the start of half term and shops cafes and trains were all crowded. How much money was being spent was more difficult to assess. It was the same picture at Glyne Gap too.

These things take a time to filter through but there are signs of a downturn. The housing market locally has definitely slowed and small companies whose business is not of an essential day to day nature are seeing a substantial downturn. There are a surprising number of empty shops in our towns, considering that we are in the pre Christmas period. Once businesses struggle, jobs start to go and the unemployment figures for the South East are rising.

I do not, as I have said before, have a degree in high finance but I do understand the basics of supply and demand. If there is a shortage in the supply of money then there is bound to be a downturn in demand for goods. Even if there is an oversupply of cheap goods there will be little demand for them if people do not have the money to buy.

We have to reflect on how we got here and find the way out. Much has been blamed on over borrowing with too much freely available, but ultimately unaffordable, credit. This has not just been the fault of banks but also governments, companies and individuals.

The government has given a massive bailout to the banks but ministers must now look at the bigger economy. The money needs to circulate. Progress could be made by a substantial cut in interest rates, which will particularly help small businesses. It does need to be accompanied by a tightening of financial regulation.

Another reason surely for the current crisis in this country is the simple fact that we have ceased to manufacture anything. Too much faith has been put in the 'post-industrial phase' of a belief that we could all live happily ever after on the back of financial services and theme parks. Services account for over 70% of the economy. I am glad to see that agriculture, which forms part of the small remaining amount of the economy, is seeing a definite upturn.

Much of the blame for the state we are in can be laid at the door of the Thatcher and Major governments which oversaw the running down and closure of big industry, supported the demutualisation of building societies and other such moves.

We need to look no further than to one of the most famous Liberals of the last century for some of the solution. John Maynard Keynes is fashionable again and it was his idea that you should use a recession to re-tool and re-skill. Modern Liberal Democrats now advocate that his is the way forward.

Now is the opportunity for investment in public works. Those who are brave enough to advocate wind farms should ensure that the equipment required is manufactured here. We need to encourage rapid investment in the industries and skill training which will enable us to invent, design and manufacture the equipment needed for a new environmental revolution.

Even the Conservatives are arguing for a high-speed rail link, a good green form of public transport. And finally, our local building craftsmen could be put to good use and further skills developed by the building of social housing.