Austerity versus Investment - the double dip answer

ONS GDP and the Labour Market - 2012 Q1 - April GDP update

Last week the ONS released the official statistics that show we are once again in recession.  As the table I've copied here, and the explanation summary that goes with this table state:

"..total output has declined by 0.5 % over the last two quarters.  The economy has not expanded at all over the last year.  Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by a total of 0.2%."

Now as a Keynesian, I unashamedly will see this as an example of how the austerity package isn't working, especially when compared to the current performance of say, the USA.  However I believe it also demonstrates the importance of one of the key characteristics of collaborative capitalism - long-term sustainable investment.


When I talk about sustainable investment, I am of course talking about triple bottom line investment, but with the environment as perhaps the most important of the three factors.  The last Government invested heavily in our social infrastructure - in rebuilding schools and hospitals in particular.  What I believe is now needed is an investment in our environmental infrastructure, if we are to be truly competitive and have an economy that has a chance of being successful over the next few decades.


At the CIWM Midlands AGM last week, Martin Brocklehurst gave a great presentation about the importance of resource security and how that is currently driving the EU environmental agenda.  It is an argument I have mentioned before; one being made by the Green Alliance and the Ellen MacArthur Foundation in this country.  But it is one that our policy makers talk less about.  If we want to 'rebalance' the economy then we need to make sure that our manufacturers have a secure and price-stable source of the resources they need.  And the thing we know about most of these resources, if they are raw materials? That despite the dismissal of the limits to growth arguments, they will run out (in an economic, if not a real sense).  


Right now, China produces over 90% of the world's heavy rare earth metals which are used in mobile phones, computer screens and hybrid car technologies.  Until quite recently US demand was met by its domestic supply, now that demand is met by China.  This oft-cited example is a snapshot of potential future resource security issues, but there are many more examples on our doorstep.  In the waste and resources sector we collect valuable materials for recycling, and then send them abroad for processing, while domestic companies struggle to find the same clean materials as feedstocks for their processes.


Environmental investment would be investment in these areas.  We must support the infrastructure that will allow us to keep these valuable resources and materials in the UK, beingprocessed here and made available for manufacturing.  This is how we will support business and job growth in the future.


It's not just waste and resources infrastructure that needs the investment.  In environmental investment I also include energy, water and transport.  We have benefitted hugely from the Victorian legacy of infrastructure built to last and benefit future generations, not just this week's shareholders.  This is the type of investment that should be at the heart of Government policy right now.  It's a key part of Collaborative Capitalism and a should be top of George Osbourne's to-do list.