When the NICE Decade went Nasty

December 31st 1999. Economic-Boom

There were two things that we didn’t know as we took our seats upon the New Millennium Express and stared expectantly out of the window as it pulled away.

Firstly, even though modems were about as clever as technology had ever become, they were going to look pretty clunky in a couple of years’ time; and secondly, we were entering something that would one day be called the NICE decade.

NICE, is one of those rather wonderful ‘reverse acronyms’ that people dream up (in this case that nice Mr Mervyn King, the former head of the Bank of England) where, unlike things like NATO and UNICEF which aren’t really words, we get things like Depart Into Eternity (DIE) or Dutifully On Guard (DOG) or even A Clever Ruse Of Nudging Your Memory (ACRONYM). The NICE decade was so-called because it was a period of Non-Inflationary Constant Expansion – see what he did there? In other words, we were going through a period – that started just before the year 2000 – where the economy grew year on year but without the usual by-product of prices rising faster than our wages.

Those of us who are old enough to remember the early part of this century will recall that we spent most of the time wondering around in soft-focus with soppy grins on our faces giving young urchins shiny coins and ruffling their hair. It was the 21st century version of a Quality Street tin and there was a street party in the town square where that nice Mr Brown declared that he had put an end to the days of "boom and bust” and the economic road ahead was paved with government bonds. The growth of GDP would be such that UK economists would need to invest in new computer screens that were twice as high as they were wide so that they could see the top of their graphs.

Banks staggered around the high street like drunken sailors giving money to anyone who looked as if they might fancy a bit of spare cash in case, oh I don’t know, the urge to bathe in Bollinger was just too strong. Basically, it was one big party with servants taking round a huge pyramid of Ferrero Rocher for everyone. That’s how I remember it anyway, and I’m never wrong.

Then, suddenly, as the streamers were swept away from another New Year party, we pulled in to the station marked “2009” and realised that the outlook had changed. Where there had once been factory workers holding their lapels and clicking their heels as they jumped in the air, there were now empty streets. Children had stopped dancing ring-a-roses together and were now launching heavy objects at shop windows and helping themselves to the goods. Where there had been boom, there was now bust. The train stopped and eventually we were all told to get off and walk. The NICE decade had finished and we hadn’t even realised it had begun.

Quickly, the country swung into action. Brown was booted out of government and replaced by two blokes who looked like regional managers of Next. They had some hard work to do in repairing the country’s problems and they needed to talk to us urgently. They then did something a bit odd.

The one called Dave told us that he was going to stop spending the country’s money and pay off its debt, he urged us to do the same otherwise we’d all be in the poorhouse. He wasn’t quite sure where this was or what happened when we got there but he had been told that it was pretty ghastly and we should avoid it. This was good political advice, right out of the Maggie Thatcher Good Housekeeping book of political speeches. The trouble is, it made no economic sense.

In times of recession, (and this was double-dip, hold on to your hats, empty the piggy bank and don’t give anything to carol-singers recession) the one thing the Government should be doing is spending, not saving. Previous years of NICE-ness should have been used to squirrel away tax receivables so that we had some cash in the bank when we needed it. If Dave and Nick stopped spending and the rest of us followed suit, the economy would shrink even more wouldn’t it? This may make economists lives easier because their graphs wouldn’t be so high but a shrinking economy means rising unemployment. That means a double hit for Government because none of the unemployed will be paying tax and all of Dave’s savings will be used up in benefit payments. The downward spiral becomes a vortex.

The Grandfather of macroeconomics, J M Keynes, realised that misers are not the ones that make money; it is those who invest for a return. The government are about the only institution that CAN spend money they don’t have, not only that, they SHOULD do it. What entrepreneurs need – apart from their heads tested every now and then – is some encouragement that there is future growth on the horizon. It fuels what is known as their ‘animal sprits’ and tempts them to invest in plant, machinery, technology and infrastructure. All of this needs labour – 'people' to me and you.

I think Dave may have got the hang of this now. The High Speed Rail project and some seriously flirty eye-fluttering at the Chinese are just two signs that the country is putting some boom back in its bust, attracting some proper foreign investment in the UK and spending it on long term capital projects. Ok, I know, there’s huge issues around both these things but that’s called ‘Politics’ and that’s Russell Brand’s field.

So, are we going into another NICE decade? As someone said, economics is like driving a car by looking out of the rear view mirror. Based upon this, I’ll tell you in 10 years’ time. What I do know is ‘animal spirits’ are rising. The recruitment industry witnessed a 3.1% annual growth in 2012/13 and forecasts by the Recruitment and Employment Confederation (REC) for the coming two years are between 7% and 9%. Inflation has fallen in October to 2.2% and, most importantly, unemployment has fallen to 2.49m, this is shamefully higher than 2008 levels but, at least below its 2011 peak of 2.7m (over 8%).

So, the Millennium Express train has been replaced by the good ship ‘Economic Recovery’, moving in a more stately fashion across choppy waters to the safety of dry land somewhere over the horizon. Cap’n Dave and First Lieutenant Osbourne are on the bridge but that could still change so forget them and get yourself down into the engine room with rest of us and make sure we don’t go into reverse.

Terry Brame is Director of Anne Jagger Recruitment Ltd

For the full article please see http://annejagger.com/blog/were-we-ever-that-nice/

terry@annejagger.com

Anne Jagger Recruitment, 85-87 Bayham Street, London, NW1 0AG

T: 0207 424 7833 M: 07802 362949 W: www.annejagger.com The Right People