Deep Singh

This is really only for those that like me accept that a recession in the USA and Eurozone is here. Will China and India follow? Is there a chance that their growth, though slower will continue?

Thanks

Petem95

US and Europe are consuming all their products, so if we're in recession and buying a lot less of their exports, then their economies can't fail to suffer, but on the other hand their economic growth rates are so high then even with a fairly big knock they wouldn't be in recession.

Will be interesting to see how everything pans out - hard times are clearly ahead.

Martin2005

BBC NEWS | Business | US economy 'growing but sluggish'

No recession yet, but likely I suspect

john banks

There are well stated arguments on both sides of the decoupling argument. That means I haven't formed a firm opinion although I've been reading a lot on economics. Will India and China find consumers internally to replace the lost US consumers in a recession then? I'm sure they will, but they won't be able to spend like the Americans have?

I get the feeling that the US and Euro governments/banks are scared stiff of recession, when it could be considered a normal part of the cycle and efforts to forestall it may in the long term make it worse. Riding a bull for so long has made them think they can stop the bear? Efforts to prop up sub-prime exposed banks and borrowers will not only create moral hazard, but prolong the agony?

Depending on your view on money supply, you could argue that it is printing money without a gold standard that has pumped up asset bubbles and overheated things to get us in the mess. Economic activity has been diverted into blowing up asset bubbles rather than turned to productive output. Meantime, people borrow more off the back of unrealistic asset valuations. The government go mad with spending and everyone feels good for a while, but surely they realise it can't last deep down?

The US and UK are running deficits to fund our plasma tellies. They are being propped up by Asian surpluses with artificially undervalued currencies.

I expect the US to thoroughly bounce back whichever party is in power. The UK will be stuck in socialist gloom until we have another Thatcher?

Martin2005

I was with you right up until you said socialist, as I think thats stretching this government political philoshophy a bit far

john banks

I know, I was being provocative. It surprised me the veneer of competence they showed for a while, but I have to laugh when Gordon talks about prudence. He wastes taxpayers' money at an astonishing rate. His stealth taxes are ridiculous. And all his PFI projects (albeit a Tory idea I gather) will have the nation indebted for years.

We can't blame the forthcoming recession entirely on labour though, but they could have prepared the country better for dealing with it by getting the public finances in order rather than partying until the last with nothing left to sort out the inevitable hangover.

Martin2005

Indeed

He'll be gone soon enough, time for a change anyway, regardless of the economic outlook. The government looks tired and out of substantive ideas.

scoobynutta555

In a purely economical view we do have a very socialist gov't.

Martin2005

We REALLY don't!

scoobynutta555

Erm, vastly increased taxes, massive public spending with a great increase in public employees. Hardly Thatcherism is it?

Martin2005

No it's not Thatcherism, but it's not socialism either is it?

I wouldn't call tuition fees, private funding in public services, privatisation etc etc, as particularly high up the average socialist priority list.

This governments most fierce critics are from the socialist left.

Shark Man

Here's to another 10 years blaming the previous government. Except when the next government take over, it'll be 100% justified.


I honestly cannot say what will happen to the Indo-China economies, should the EU and US go into deep recession. But one has to realise, there are many other countries out there. Will be an interesting study though.

scoobynutta555

My three points pretty much cover the economy as a whole re socialist policy. Your points are tinkering at the edges of the big economic issues TBH. Privatisation, I suppose you mean the railtrack, not much else they could have done. To counter that, how about Northern Rock, £50 billion at the last count for the next publically owned body. PFI? well at the end of the day it's public spending on a massive scale, and wasteful spending too.

Some of the biggest beasts in the public sector have seen their budgets soaring, NHS education etc.

Pretty much every economic counter shows that we have a high spending and high taxing government, so again I'll say in economic terms we have a very socialist gov't.

scoobynutta555

Oh and the last point, the far left will always be a fierce ctitic of any gov't we have due to their very beliefs. And I do not agree for one minute the fiercest critics of this gov't are the left with the massive socialist economic policy, union friendly laws, minimum wage we've seen. And if they are, maybe they've forgotten something in the past 11 years.

Klaatu

Tony Blair's Labour is more Tory than the Tories ever were.

blockmonke@fsmail.net

It filled me with fear the other day when i heard that the government has not ruled out stepping in and running northern rock. If they run it anything like the country its hand over for those billions

alloy

Historically a recession only lasts 6 months, may be a tightening in consumer spending as already seen, but i cant see it being an on going problem

Deep Singh

Sorry chaps but can we try to keep this on track ie Indo China economies? There are plenty of other threads about the UK govt/ economy etc.

All opinions with reasons welcomed.

Many thanks

scoobynutta555

Not regarding the economy they are not and their spending patterns.

Also deep, quite obviously if big economies like Eurozone and the US go into recession, then India and china will follow suit due to there being far less demand for the goods they produce. China and India do not have the breadth or depth at the moment in their economy to fuel demand for techonolgy adevanced goods from within their own economies.

Deep Singh

Ok that goes for China but Indias economy is more service driven than manafacturing ie call centres, software/computing etc As the US and Eurozone suffer won't the multinationals out source more to India to save on costs?

There is a good reason why I ask this question not just idle thoughts

fast bloke

I don't think they will keep outsourcing. There seems to be a mini revolt going on against non UK call centres. Many companies are now starting to use 'UK only call centres' as a selling point. If things start to tighten up here, it might be the case that the outsourcing scenario will be reversed and all the stuff that has been outsourced over the past 15 years will be brought in house and managed more effectively. If we get a really bad recession in the UK, people won't be buying the services that they need support for, so it won't be in house or outsourced. It will just be gone.
(We have just had a 1500 person call centre relocate from India to Belfast. Not sure who runs it, but it deals with household insurance claims for a number of insurers. It costs 15p more per call to run it from Belfast, but the companies in question reckon it is more cost effective to do it that way than spend millions on company image and then have it ruined by poor customer relations due to language barriers.... Not sure why they brought it to Belfast if that is the case )

Deep Singh

Sure, but call centres are the 'lower' end of the sort of service I was talking about. Companies will still need software and IT support even in a recession and India does this quite well. After all companies don't just shut up shop and go home in a recession (big ones I mean)
Also there is the whole of the oil rich middle east that lacks well educated graduates (that I ndia has in the millions) that will also needs these sorts of services

Martin2005

I'm sorry but this is just utter nonsense, find one, just one commentator, ecconimist who desribes this governemt as socialist.

Your arguement presupposes that more money wasn't needed to be spent on the public services, even today after all the extra money we still spend less of health care as a % of GDP of nearly all major economies. The debate should be how the money is spent, not should it have been spent in the first place, that arguement is over, it was ended by 3 general election defeats for the Tory's, they now have the SAME spending commitments, is David Cameron a socialist too?

Socialist governments increase progressive taxes, not regressive ones. Under the last socialist government the top rate of tax was 70%. Regressive taxation has been going up for 30 years (or more) was Maggie a socialist? Is David Cameron proposing to cut tax, nope (well alright inheritence tax), why? because 95% of this government economic policy is also their economic policy!

Would a socialist government free up labour markets, propose the introduction of ID cards, approve Trident, build more nuclear powerstations, propose 90 day detention for terrorist suspects and align itself with a neo-con driven White House - is GW Bush a socialist?

The simple truth is that we don't have ideologically driven politics anymore, not since Michael Foot squared off against Mrs T, and Thatcherism won hands down, why? because socialism doesn't work, never has, never will!
Both party's have converged upon the centre ground, because that's where the great British public are. The very notion that a socialist government could win 3 straight elections is fantasy.

The real debate should be around delivery, thats where this government has underachieved, so lets have a grown up debate about that, no throwing ridiculous ideological inaccuracies about.

fast bloke

They don't shut up shop and go home, but in a full blown recession, the quickest way to save money is cut salary. It is usually vastly easier to do this by dropping an outsource contract than by getting rid of your own people. Even easier if that contract is 5000 miles away - It won't even make the news here. Dunno about the Middle East and the sort of service sector requirement it has

lozgti

How can the Fed keep cutting interest rates and now they have talk of tax cuts to try and save America.

Find it quite comical.Do you think GB will do the same for us on the Tax front?

As to the thread,a lot of the current problems seem to stem from people relying on credit and runaway housing markets that have all fuelled a pretence that people were wealthy therefore spend more etc.

I know nothing about China or Indias economies on these fronts.|I have just worked on the assumption they have dived into all the areas we have neglected or thought unimportant.Manufacturing being the big one.We don't seem to make anything anymore to sell to anyone or not like we used to

stilover

Government figures will still show inflation at 2.1%. Recession or not.

Hoppy

You can make world economics as complicated as you like, but it boils down to this - a global redistribution of wealth.

We in the EU and US are massively privileged with wealth that was acquired in the 19th/20th centuries, often by force and exploitation. That position is unsustainable and now it is Asia's turn, eg China and India, with likely South America (eg Brazil) not far behind. These are huge nations.

For example, in terms of population, for every single fat American (pop 250m) there are roughly 100 people in China/India (pop 2.5bn) mostly still living below the poverty line. That is an irresistable force that is not going away. Of course there will be ups and downs, but the long terms trend is clear. We are in for a hard time.

Richard.

ScoTTyB

100, or 10?

250,000,000 - 2,500,000,000 is a 10 fold increase, not 100

Petem95

Well said Richard, and I've thought about this situation for a while. The economic cycle has always been up and down - but we've always fully recovered from the downs and regained our position as one of the strongest economies in the world. In the current situation we look like we're heading for a big recession along with the US, but what happens if while we're down China/India etc keep getting stronger?..

We'd be left with a weaking currency, massive social security costs, totally uncompetitive manufacturing base. What would happen then?

Hoppy

Scotty, I've run out of fingers but I think you'll find the combined populations of China and India are, in very round numbers, 100 fold greater than the USA.

Pete, your last sentence is the tricky, and very pertinent, question. Again in very simplistic terms, it is the international collapse of communism that is the main driver of economic shift - the astronomic rise of China, resurgence in Russia as a major player, immigration from Eastern Europe - huge repercussions. I applaud Gordon Brown's current trip to China - if we can bridge the cultural gulf between us and actually form a lasting trade base, that will be good for Britain. But I don't expect it to be easy.

Combine that with with a global lack of energy (petrol/gas) and the volatile politics that exist between the West and the Middle East (we also need good relations with Russia) and we have a potentially explosive situation that needs to be handled with extreme care. And that is currently conspicuous by its absence in the hands of the deluded Mr Bush.

The US has shown its hand by invading Iraq, ie it will use force if needs be. And the sabre-rattling between the West and Iran, with Israel the messy meat in the sandwich, is extremely worrying.

Then there is the human tragedy that is Africa, seemingly permanently embroiled in its own tribal slaughter. In blunt economic terms, that is a good thing for us but politically increasingly unacceptable.

Throw all that lot in the melting pot and it is hard to see a happy, smiling global village any time soon. Nothing new there then, except that is the wealthy West that looks most likely to take a tumble this time.

Richard.