Recession, regulation, and rubbish


Well, it turns out that the UK is in for an even deeper recession than originally suspected. The CBI (Confederation of British Industry) says unemployment may rise to 2.9 million in 2010, instead of the 1.8 million previously forecast. The UK economy shrank for the first time in 16 years between July and September of this year. CBI warns this is far from over; the size of the economy could decrease by 1.7 percent in 2009, which is a staggering change from the 0.3 percent predicted in September.

CBI blames two major factors for the economic slowdown that lies ahead, which is expected to cause five quarters of negative growth. First of all, the banking crisis has diminished the accessibility of credit and credit insurance for all kinds of businesses. Secondly, the negative reports about the economy resulted in a decrease in consumer confidence, reducing the demand for products and services.  This declining consumer spending, in addition to less investment spending and significant drops in inventory, will be the largest contributors to the downturn.

Unite, the UK’s largest union, has come up with a plan to stimulate the economy by increasing public spending and instituting stricter regulation of the financial sector. But why would one want to do that when too much box-ticking regulation helped get us here in the first place? While they hassled firms and companies with nonsense procedures and stipulations, stifling innovation and impeding progress among businesses, regulators completely neglected the bigger issue of financial stability. Although some regulation will surely be needed, the economy will fair much better if companies have more say in their operations and management, and regulators get back to focusing on the big picture.

Ultimately, as long as competition and free market ventures are put on the backburner, the bad news will just keep coming.