Brexit and Malaria and what they have in common

An old friend of mine was an intensive care specialist at a prestigious hospital. He told me of a case he once had to deal with, of a wealthy business man who went hunting in Africa every year. All had gone well for ten years but in the eleventh he’d returned suffering from malaria in an advanced state and spent several weeks in Intensive Care, much of the time close to death.

“But,” my friend asked him, “didn’t you take anti-malaria tablets?”

“Not this time.”

“You mean, you always had before, but just decided that this year you wouldn’t?”

“Yes,” replied the patient, “you see, I never had any trouble in the previous years, so I decided I didn’t need them this time.”

Christmas this year was fun. As well as many English friends and relatives, we also saw people from abroad, mostly from other countries of the EU. We took full advantage of the opportunity to do so since, in two or three years, it may become a great deal harder. 2016 has turned into the year of the wall: Trump won office in the States on a promise to build one, England and Wales voted to retreat behind new barriers to separate them from their nearest neighbours.

So, though fun Christmas was also poignant.

Still, I’m assured by Brexiteers, not least on Twitter, that I’m wrong to see Brexit as anything but an opportunity. It seems that it will give us the chance to strike some exciting new business deals.

Presumably that would be impressive deals, like the one that allows us to trade without customs or other barriers, with the world’s biggest trading block, embracing over 500 million people and three of the world’s top seven economies. That would be the rest of EU. The organisation to which we still belong, for the next two or three years, and which absorbs over half our total trade.

We can get out and strike some new deals with major economic powers. Like Bahrain, recently visited by Theresa May, and worth 0.3% of the EU’s Gross Domestic Product.

Bahrain: ideal post-Brexit partner, worth about 1/300th of the EU
And the labour practices are a great model for the times
when all those pesky EU regulations have been swept away

Still, she also went to India, whose GDP is about 44% of the size of the EU. Per head of population that’s only one-seventh of Germany, but let’s not get pedantic about matters of detail.

Anyway, we’ve been a member the European Union for 43 years, and we’ve barely notice the trade benefits. Why should we need them now?

It’s just like malaria tablets. Take them, and you never get malaria. And if you never get malaria, why bother to take the tablets?

UK economy: two cheers for the government

‘We are building an economy fit for the future,’ the UK Chancellor of the Exchequer, George Osborne, announced today.

The reason for his satisfaction? The figures for GDP in quarter 1 show we have avoided a triple dip recession: to my heartfelt relief, GDP grew in the quarter and the unrelenting decline seems to have been stemmed. For now.

But how much was the growth? Just 0.3%. If that’s a harbinger of the economy of the future, there isn’t a lot to look forward to. 

On the other hand, looking back isn’t particularly heartening, either, at least for the administration.

The British ConDem government, the so-called coalition between Conservatives who run the show and the Liberal Democrats who rattle along behind, like cans attached to the back of a newlywed couple’s car, doesn’t play the blame game. Of course. No-one does. 

It merely points out that it inherited a miserable economic position from its Labour predecessors.

That’s not blame. That’s recognition of the fact that Labour was in power before them and applied its economic policies. So it’s obviously their fault. Not blame, just a statement of fact.

What they’ve never explained, at least not to my satisfaction, is how the presence of a Labour government in Britain caused so much damage to the economies of the United States, Italy, Ireland, Spain and, indeed, most of the rest of the world. It had always seemed to me that there might have been some kind of global economic crisis, of which Britain, even under Labour, was more a victim than a perpetrator. But, hey, I may just be naïve.

Just for the sake of argument, though, let’s say that what happened back in 2008 really was the worst financial crisis since 1929. Wouldn’t you say that to get us back out of recession after just five quarters, and then take growth to 7% as part of five consecutive quarters of growth, was quite impressive?

Alistair Darling: a comparison that doesn't flatter Osborne

Well, so would I. Quite an achievement by Osborne’s predecessor, Labour Chancellor Alistair Darling. 

Particularly if ten ConDem quarters later, as the graph shows, we’ve had only five quarters of growth. One was impressive at 0.9%, but the rest were pretty anaemic. And the latest, as we were saying, was just 0.3%.

An economy fit for the future? Osborne’s not really very ambitious, is he? Or maybe he prefers to keep us looking forwards rather than back. Because he’s way behind the performance achieved under Labour just before he took office. 

No mileage for Osborne in drawing attention to that comparison...

Submerged by the Brazilian surge

There was some shock in Britain this week at the discovery that the UK had been knocked off its position as sixth largest economy in the world to be overtaken – oh, indignity – by modest little Brazil. Modest and little because it has a population of only 190 million compared to our mighty 62 million, making Brazil barely three times bigger.

Well, OK, just over three times bigger.

I’m not quite sure what losing sixth slot means. We don’t make the cut? We don’t get to play in the final? That can’t be right. If you listen to the doom and gloom merchants, the final is already under way, and not the final match but the final act, and we’re all in it.

What I don’t understand is why it was such a big deal that most of the papers carried the story, as did the BBC. Surely if it's interesting at all, it’s a matter for congratulation, isn’t it? For far too long Brazil was struggling with poverty, crime and vile military regimes. They’ve apparently successfully put the military back into its box. Crime seems pretty much as endemic as ever. If they’ve started to make some inroads on poverty, well that has to be good news on two fronts out of three, and not something we should be getting upset about.

If anything, a bit more of the same would be good. Leaving to one side the issue of how much growth a resource-constrained world can stand, a bit more GDP per head would be good: in Brazil, it’s still about a third of Britain’s. So great that they’re doing better than they were, but a bit more of the same might be no bad thing.

As it happens, the people who brought us the news about Brazil’s move into sixth place do reckon they will keep doing better. Here’s the league table they produced:

  Source: ECBR

Now that table is just brilliant, in so many ways. Look at Germany dropping like a stone, leaving it hovering only just ahead of the UK; France even falls behind us.

And look at Russia and India just powering up the rankings. Heady stuff.

But that’s not what I mean about the table being brilliant. The brilliant bit is the stuff around it. Let’s start with the word ‘forecast’, on the column for 2020. Did they imagine that without it we would believe that they’d built a time machine, travelled to some time after 2020 to take a look at the state of the world, and then had the goodness to travel back and tell us what they had found out, not as a forecast but as a matter of historical record? 

Even more important is the source of the information. The ‘CEBR’ is the Centre for Economic and Business Research. That casts the notion of ‘forecast’ in a completely new light.

A Centre for Research of any kind just demands your respect, doesn’t it? 
If I pop down to the pub with four or five mates and we talk about the dire state of the world, that’s just whinging over a drink. But if we raise some money and take an office in a prestigious location and stick a brass plaque on the door with ‘Centre for Research’ on it, we become a reputable authority deserving to be taken seriously. Even if round the meeting table it’s the same five guys, with the same beer and the same brand of crisps.

Things are pretty much the same in those great centres of contemporary power, such as rating agencies. As I’ve said before, they’re seen as forces of nature expressing the will of God, or perhaps the will of the Market, insofar as they make any distinction between God and the Market, but in fact they’re just twelve guys sat around a table condemning Greece or Italy or anyone else that attracts their ire, to several more years misery.

Of course, you can't really compare these people with my five mates. These are experts in economics or business. Which makes them special. And I really mean special: economics and business experts are the only people who prevent weather forecasters being at the bottom of the mockery pile. Which presumably making them fundamental to the forecasting profession. If only in the sense that the fundament is the bit we all sit on.

Here’s a little illustration.This is the Guardian on 27 December talking about the Italian plan to sell more bonds in an auction over the following two days: ‘In an indication that traders fear the auction could prove expensive for Italy, the indebted country saw its 10-year cost of borrowing rise by about 11 basis points to 7.13%, before settling back below the psychologically important 7%.’

The following day, when things turned out rather better than expected in the first phase of the bond sale, the Guardian blog ran with the headline ‘Successful Italian bond sale cuts its borrowing costs’.

Then on the 29th, after the second auction didn’t raise quite as much as the maximum hoped for, the paper gave us ‘full details of today's Italian debt sale’ and commented ‘analysts aren't impressed.’

Yeah, right. Would these be the same analysts who were so concerned about Italian debt on Tuesday, reassured on Wednesday, now reverting to pessimistic type on Thursday?

Personally, I’ll reserve my admiration for economists until they get that time machine built.

In the meantime, all I can say is – ‘good on you, Brazilians. Doing well. Keep it up.’