“Is it just me or has everything shrunk?”
That was the principal thought running through my head on January 15th as I walked into my old high school – the Inverness Royal Academy – for the first time in 23 years. The Head of the Economics Department there, Ian Stewart, was the first person to ever introduce me to economics at the end of the 1980s. All things considered, I can’t think of anyone that has had a bigger influence on the direction of my life. It was a pleasure, therefore, to go and give a little back by talking to a group of budding economists studying there today.
It’s strange how we bury little things in our subconscious. There were little things about the school – a picture here, the view from a window there – that had not crossed my mind for 23 years but were reawakened the instant I observed them again. Many things had not changed.
But the world is a very different place to the one into which I emerged from High School back in 1991. Very few people had cell phones in 1991. Fewer still had heard of the Internet. And, while all the fixtures and fittings in my school appear to have shrunk, the UK economy has done quite the opposite. While recent years have presented a number of significant challenges, we should not lose sight of the fact that the UK economy is now two thirds larger than it was in 1991, with over 4 million more jobs than there were then.
After some remarks on my career path to help give the pupils a flavour of what life as a real-live economist is like, I fielded some stimulating (and, in some cases, pretty tough) questions. One was on the emergence of the Chinese economy and its outlook. Another was on the costs and benefits of regulations. One pupil asked about how US fiscal policy compared with UK fiscal policy.
Mr Stewart even noted that a question about central banks recent efforts to promote growth with low inflation through “quantitative easing” might have been about what the textbook calls open market operations back in 1991: open market operation essentially being the central bank buying and selling Government bonds in an effort to influence market prices which is a hugely important part of how banks implement their quantitative easing policies.
What is striking to me is that these themes would have resonated in 1991 too – the international economy, the correct degree of intervention in a market economy and the efficacy or otherwise of a Keynesian approach to economic management. But they would have had somewhat different focal points.
The question about China back in 1991 might well have been about Japan which was at that time still perceived to be enjoying an economic miracle. The question about regulation in 2014 immediately made me think of recent financial reform in the US and UK, reforms aimed at avoiding a repeat of the 2008 financial crisis such as, for example, the independent commission on banking which is leading to the ring fencing of UK retail banks from their investment counterparts.
But in 1991 regulation was most commonly discussed in relation to the then recently privatised UK utilities and how the Government controlled their pricing and profits without dampening competition and innovation. The question on fiscal policy is more timeless – it could have been posed in much the same way back in the early 1990s.
These issues are all vital to the UK’s Prosperity. The dynamics of the world economy and how we conduct ourselves within it matter massively for an economy that devotes around one third of its GDP to trade. Getting the balance right between free markets and enough Government regulation to tackle excessive levels of risk in many walks of life is a difficult one. And as the UK Government has made clear time and time again, different economies require different policies at different times, and in the UK’s case right now that means fiscal responsibility to deal with a record budget deficit.
But education and the young people in our educational establishments are also vital to our future prosperity. Indeed, that is why the UK Government is committed to strengthening the UK’s curriculum alongside driving increased rigour and accountability in schools though competition and enhanced teacher quality.
So the fact that these particular young people were asking these important questions, early on in their intellectual journeys through life, was very encouraging – the resources that will drive our prosperity are thinking about the policy issues that will govern it. That sounds like a winning combination. Maybe some of them might one day – maybe in another 23 years – go back to that school as professional economists and face those very same questions from a future generation.