China's economy is faltering through falling exports, the United States economy is chugging along at best, the emerging economies such as India, are in for a hard landing and Europe, stuck in political ideology, stymies any economic solution.
Many of the member states of the European Union are drowning in debt. debt pooling is the favoured solution by those countries in need of financial assistance. But Germany is resisting so far in giving way to calls for this remedy. Germany knows that debt pooling would let off these countries. Bailouts on the other hand, favoured by Germany, bind the ailing countries to austerity measures with the aim of "putting their house in order". There will also be a transfer of sovereign powers from the ailing country to Brussels, or Germany effectively. Germany would therefore have a hold on these countries to ensure that budgetary discipline is exercised and prevent debt spiralling out of control.
Whatever the solution might be, government intervention is required through fiscal stimulus, which is music to the ears of Keynesians, but it must be measured. Quantitative easing, printing money in other words, has not had the desired effect in the United Kingdom as it slumped to its worst double-dip recession in more than half a century this summer.
Given this background of gloom and failed attempts, the solution to the economic quagmire lies in striking a balance between austerity measures and public intervention/funding.
The austerity measures are necessary to address a budget deficit and these will consequently lead to a return to a position where the deficit, the excess of expenditure over income, is manageable and does not choke the economy.
The search for economic growth appears to be as challenging as the quest for the Holy Grail. However, you do not search for economic growth, you create growth, generate and develop it.
The banking system requires liquidity in order for the smooth running of the parts that make up the economic machinery. Otherwise it will grind to a halt. However, public funding has to be targeted to other areas because the banking system on its own will not kick start the economy, just as oxygen on its own will not kindle a fire.
The young entrepreneurs of today are the business leaders of tomorrow. They must be trained, encouraged and incentivised.
The education system must be geared up to offering choices to those who are academically orientated and those who are not. The level at which a student chooses to exit the education system on a full time basis should lead to employment which may require training before and/or during employment. The successful renaissance of apprenticeships in the United Kingdom available to school leavers in a wide range of industries delivers a real work experience and offers a sensible transition between school and work.
The tax system must strike a balance to ensure that sufficient revenue is collected to fund the public services among other things, individuals have sufficient income to live and business has the capacity to grow and generate more jobs. When the economy fails to grow, governments may be tempted to use the tax system to mask their own failings by taking populist measures.
Encouraging technology advances and investment in infrastructure are essential for economic growth. Both require funds from the public and private sector. In times of crisis, the private sector may prefer to keep hold of their capital and refrain from investment due to the economic uncertainty. Many large companies in the United Kingdom at the moment are hoarding cash and not investing in capital projects. Joint venture companies between the private and public sector would split the risk of investment and encourage the desired involvement by the private sector.
Goal congruence, between government, business and people will see any country through difficult times. The government must be clear and positive in the direction it wants to take and the strategy must be credible. The people and business will follow as long as they can see improvements, although these will be small at the beginning of the recovery, will grow over time.
Times are hard and there will be a return to some form of normality. Business leaders are anxious for the political leadership to implement policies that will create the appropriate environment for business to thrive again. History shows that the most eminent political leaders make the right decisions in difficult times. The World awaits.
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