Economic crisis - an end in sight?
The economist warns that optimism contains important traps. One is a mistaken belief that things are getting better.
"The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths."
We've had our beefs with The Economist in the past, but this seems like a sensible thing to say. It does, of course, have profound implications for the tax justice agenda, especially with respect to the crucial ingredient for change: political will.
Martin Wolf in the Financial Times has some interesting perspectives. While GDP data shows countries such as Germany and Japan performing even worse than the big financial-sector economies, notably Britain and the US, this masks something else: the fiscal side of things - government revenues and spending - are affected very, very much worse in the Anglo-Saxon economies, partly because of their over-reliance on finance.
"The shift in this balance in the UK’s private sector between 2007 and 2010 is forecast (implicitly) by the IMF at 9.6 per cent of GDP (from minus 0.2 per cent to plus 9.4 per cent). The swing in Germany, in contrast, is just 0.6 percentage points. When the private sector shrinks its spending relative to incomes, either the current account or the fiscal balance must shift in equal and opposite directions. The current account deficit always changes relatively slowly. It is hard to change the economy’s structure quickly. So it has been the fiscal position that has deteriorated massively.
Thus, in the crisis-hit countries themselves, the consequence of the private sector cutback has been the fiscal deterioration."
Economic prediction, at least in the short and medium term, is a mug's game. But this blogger's gut feeling is: don't bring out the champagne yet.