David Smith lays aside his mourning coat and sees some good cheer in 1992.
Be positive, the editor told me. Let us hear something about the British economy's plus points for a change. You economics writers aren't really cheerful unless the rest of us are miserable. Ouch! So much for my careful, constructive criticism. But then I began to wonder. An endless diet of gloom can cause indigestion for those with the strongest stomachs.
So here goes. Armed with a sunny disposition, I offer the following: 10 reasons to be optimistic about Britain in 1992.
The first, plainly, is that what lies in prospect is a good deal better than what has gone immediately before. So 1992 will be a better year for growth and investment than 1991, on that the gloomiest (sorry) forecasters are agreed. That does not mean another boom, which brings me to my second reason for optimism.
The boom of the 1980s created some unhealthy attitudes, which the subsequent recession has, I hope, killed off. These included the widespread notion that, when it was so easy to make money without effort, through capital gains in the housing market or financial market deals, only suckers toiled hard for their living. Now, attitudes are more realistic. The image of the enterprise culture was of smart young wheeler-dealers with mobile phones. A real enterprise culture, is built on invention, innovation and hard work.
Thirdly, the importance of producing things is now recognised.
Manufacturing, having been there before in the early 1980s, 'was better placed to cope with the 1990-91 recession than the greenhorns in many of the service industries. John Banham, director general of the CBI, has an ironic phrase for it: 'Genius is a rising market and a short memory.' True genius was to be found in the productivity performance of manufacturing industry in the recession. Government ministers lied to give the impression that manufacturing did not matter. We will not hear that again for some time.
And straightaway, we have reason four. The recession in the service sector has destroyed the myth that some parts of the economy always escape the worst of any downturn. No longer can job security be cited as an argument for Britain's brightest and best to stay away from industry. And it was notable that, in a climate of retrenchment, industry generally maintained investment in skills and training.
Fifth, exports. As the chart shows the idea that Britain's share of world trade is in decline has been obsolete since the mid-'80s.
Industry stabilised and then began to increase its share of overseas markets long before the recession took its toll of domestic demand. There are special reasons for optimism in, for example, the car industry, where transplant production by Nissan and Toyota should help eliminate Britain's trade deficit in cars in the '90s. A growing foreign market share should not be adversely affected by uncertain trading conditions in key overseas economies.
Exports have done better of course because Britain has learned to control its costs better, which gives us reason six. The chance to recapture the economic ideal of low-inflation growth has come around again surprisingly quickly. In the autumn of 1990, when inflation was touching 11%, it did not look likely that within 12 months or so we would be looking to improve on 4% inflation. But so it is.
Seventh, I make no apology for believing that membership of the European Exchange Rate Mechanism (ERM) is a clear plus. It removes a major uncertainty for exporters, and it eliminates a source of doubt and concern for inward investors.
Indeed, and this is my eighth reason, the Labour party's conversion to the ERM (Pre-dating actual entry) is symptomatic of a more general coming together of the main political parties on economic policy.
Ninth, related to this, I detect that government attitudes have changed on public sector investment. It is essential in the transport infrastructure in particular, if British business is to compete successfully. The years of neglect leave a legacy of infrastructure shortcomings but matters are improving. There is also evidence of strategic thinking at work in the proposed Channel Tunnel rail link and the possibility, no more, that if some public sector investment is required in the project it will be forthcoming. Finally, through boom and recession, successive surveys have shown that British companies perform well in international comparisons. One such survey, in a recent London Business School Business Strategy Review, had 15 British companies in the top 100 in the world for added value, with the table headed by Glaxo. Such results are perhaps the best reason of all to be cheerful.
David Smith is Economics Editor of The Sunday Times.