Of Civil Unrest & Public Spending

5th January 09 - Of civil unrest and public spending

A thread that has run through the prophesies for 2009 of the more serious economic commentators has been a muttering about civil unrest. Those nations that have built their financial surpluses from exports are witnessing a return to their rural homeland of workers hitherto pulled to the urban factories for mass production. Compounding this reversal of population flow is the dearth of jobs for the university graduates as turned out by the hundreds of thousands. The dashing of expectation can be a toxic mix and the fulcrum is China not least due to the swiftness of the turnaround. As recently as October 08, China’s exports rose by 17.6% year on year and yet only one month later predictions were for a growth rate of somewhere between 5%-6%. December 08 is likely to see an actual contraction. The scale of this change is massive and it is having a knock-on affect across the whole of the Far East and not least South Korea where exports fell in December by 15%. One can only hope that of all the dire predictions for this new year, any form of civil unrest is not one that materialises.

This diary has commented earlier on maverick Germany in the sense of not toeing, indeed vociferously opposing, the Anglo line on financing the banks. Latest reports seem to indicate that the mood is changing albeit the methodology is different. A package of measures totalling £24bn is close to agreement and the beneficiaries will be infrastructure such as railways and roads. This route is similar to that taken by China, Japan and perhaps soon to be the US under its new President.