After some tough times, the U.K. is experiencing some much-needed economic growth. Because the rate of growth in the U.K. is about comparable to that of the U.S. despite radically different economic policies, debate will no doubt emerge between Keynesian-types trying to minimize the U.K.’s good news and deficit-hawks overselling it. Like virtually all such debates about public debt, these battles will be boring, dumb and unproductive, so let’s debate something else: What is the leading threat to better economic times in the U.K?
Some observers would argue for unemployment, which stands at 7.8%. That’s much lower than the Eurozone but still unacceptable. British policy makers should be particularly concerned about long-term unemployment of the sort that entrenches families in a marginal economic situation for generations. Growth in employment overall does not guarantee breaking this cycle, particularly with job-seekers from the continent being highly mobile and in many cases, highly desperate. There are many indigenous Brits who were left out of the job growth of the Blair years; the same thing could easily happen to their children.
Others commentators might suggest that inflation, at 2.7% for the year, is the U.K.’s biggest economic worry. The U.K. has the highest inflation rate in Europe, which may be a result of all the “quantitative easing” they have undertaken.
But as serious as those challenges are, they pale against the possibility that a group of reckless and misinformed people in the U.S. House of Representatives may force the United States of America into default in less than a month. No one knows precisely what the worldwide financial impact of such a disaster would be, but it certainly would be felt very keenly in a country with an outsized financial sector and extensive economic interaction with the U.S.
I feel sorry for and worried about my beloved U.K. Its economy should be in the hands of shopkeepers in Brighton, schoolteachers in Manchester, factory workers in Sheffield and elected politicians in Westminster. But instead the sword dangling over British heads is held by a bunch of Tea Party lunatics who are willing to wreck the world’s economy just to stop a democratically elected President from giving health insurance to sick people.
[Cross-posted at The Reality-based Community]
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