THE BLOG
01/02/2016 10:30 GMT | Updated 01/02/2017 05:12 GMT

Heaven Knows We're Miserable Now

As I contemplated the murky, dreich, weather in the Surrey Hills over the weekend it felt like a metaphor for the British economy. Dark clouds are, it seems, gathering. In the past few days we have seen figures from the ONS saying that UK GDP growth was weaker in 2015, at 2.2%, than in 2014. And at the same time IPSOS Mori polling for the Evening Standard suggests that Britons are feeling increasingly pessimistic about the year ahead. Nearly two-fifths of us now think things will get worse over the next 12 months.

Who can blame us? Every day this year we have been assailed by news about gyrations in world stock markets, and about plunging oil and commodity prices. It feels like we have never lived in a time when macro factors - the state of the Chinese economy, the deliberations of the US Federal Reserve, and the impact of El Nino - have been watched so avidly by so many people. It is a febrile and highly uncertain time.

Economic uncertainties have only been exacerbated by political manoeuvring and diplomatic chicanery. It feels like just as we put one problem, say Iran's nuclear ambitions, to bed another issue, for example North Korean nuclear sabre-rattling, bubbles up. As Argentina normalises its economy, Brazil's apparently implodes. As Vietnam takes steps forward, Thailand, Indonesia and Malaysia regress. The election of Tsai Ing-wen in Taiwan gives China-watchers the jitters; the resurgence of Law and Justice in Poland at the same time as Angela Merkel is distracted by immigration woes and in-fighting means that the workings of the European Union could easily become gummed up; and the continued malevolence of ISIS, Boko Haram and others makes everyone nervy. Markets are unsurprisingly jumpy.

But some of these problems are entirely of our own making. Trump vs Clinton (or even Sanders) did not emerge from a clear blue sky: the weakness of the candidates in the US election, and the uncertainty it brings, is primarily the fault of a credulous and partisan electorate. Similarly the slide to the margins of the Labour Party in the UK; and the huge boost given to populist parties in France, Germany, Spain, Greece and elsewhere. At a time when we need responsible political leaders with a strong and long-term vision we have as electors saddled ourselves with pygmies and demagogues. We all have to take responsibility for the choices that we've made.

That said, we cannot be held responsible for everything our political class does when in office. So I am still not entirely clear what George Osborne was thinking of when he warned a couple of weeks ago that interest rates will have to go up this year. I doubt very much that they will, but anyway it was an odd thing to say to anxious consumers. And the lingering doubt caused by the referendum on our membership of the European Union does nothing for long-term planning. It is also a huge distraction for David Cameron at a time when he could be focused on dealing with structural shortcomings in the UK economy, making the long-term changes to education, training, infrastructure and connectivity that will improve our productivity and genuinely give us a leg up in the 'global race'.

So we live in uncertain times; and in part at least we have to blame ourselves for that. But things really are not that bad - at least for the UK. Yes, the financial markets are going to be difficult to navigate during the first half of the year at least. But GDP growth of 2.2% is still handy. Unemployment is relatively low. Many sectors of the economy are doing well, and have a bright future ahead. Our banks are in far better shape than eight years ago. There is plenty of liquidity around. As several commentators have said this week, we must not talk ourselves into a recession. If our politicians can avoid self-inflicted mistakes, and if we demand more and better from them, there is no reason we can't do well this year and in future. We just need to take responsibility and hold our nerve.