The Leisure Review: the editorial

Edition number 61; dateline 4 March 2013

The difficult questions of theoretical economic realities

As the deadline for the March issue of The Leisure Review whooshed by again (Why is February so short and how long can we use that excuse?) news came the Bank of England was planning to avert an apparently imminent triple-dip recession by reaching again for the tin on the top shelf marked in the governor’s biggest letters: ‘Quantitative Easing’. Just visible on the label below this legend in much smaller letters are the words: ‘Emergency use only’. In this tin the Treasury wallahs seem to have found the sum of £25 billion, the spending of which, they seem to think, will finally bring some reflationary impetus to the UK economy and make Britain once again a nation fit for the persecution, stigmatisation and punishment of impecunious heroes.

It must be a big tin. To date some £375 billion has been pulled out of it to prevent the previous dips that have, rather inconveniently for the economists and the Bang of England bigwigs, already blighted our financial landscape; the latest pot will bring it to £400 billion. The term ‘emergency use only’ should perhaps be in slightly larger letters because the use of quantitative easing does tend to prompt rather awkward questions, such as: where has all that money gone? And: where did it all come from anyway? Unlike most other economic policies, which are discussed by politicians, academics, special advisers and other self-proclaimed experts with the presumption that the rest of us are simply too ill-educated and under-intelligenced to understand, quantitative easing is a comparatively simple process that is designed to have a very clear outcome: big piles of money in one end, increased economic activity out the other.

For these self-proclaimed experts, this makes quantitative easing very dangerous indeed because an assessment of the policy’s success is fairly easy and the time we spend waiting to see if it has worked can be spent considering the original awkward questions. The answer to the first – where has all that money gone? – is, as far as anyone can ascertain, into the banking system to shore up the liquidity of some of the most fraudulent and criminally inept corporate creations in the history of human endeavour, leaving these same organisations and their senior staff free to keep their heads down, avoid prison and any effective changes to their working practices, and award themselves huge bonuses out of the public purse. If you know an economist or someone who works in the financial sector ask them the question. I have a five-pound note here that says that not only will they not be able to answer you but that they won’t be able to look you in the eye while they attempt so to do; at least not without laughing.

The second question in this not particularly amusing parlour game – where did it all come from anyway? – is an equally taxing question for those supposed to be in the command of the financial facts. There will be plenty of theorising and explaining but all of the answers proffered will involve numbers being added to balance sheets somewhere in the Bank of England, creating imaginary cash to be shipped off to theoretically solvent and unfeasibly credible financial institutions. Sometimes the reassurance is that in a digital age the system is just saving the armoured security vans the hassle of loading up the fifties and driving them down Threadneedle Street; sometimes the reassurance is that all this money is entirely theoretical, doesn’t really exist anyway and is therefore nothing for us to worry about. Whatever the answer, this will probably have wiped the smile off the face of your financial friend because if there is one thing that makes them nervous it is someone not being fobbed off by a load of under-graduate economic jargon.

Four. Hundred. Billion. Pounds.

Wherever this £400 billion has gone and wherever it has come from, we are obliged to come back to the question of whether this quantitative easing process has worked. Given that the Bank of England has now been pursuing this policy for at least three years and that it has had to keep pumping new tranches of money into the system to follow the last lot, it is surely logical to arrive at the conclusion that it has not. Confirmation of this logic comes not only in the headlines reporting the nation’s first recorded triple-dip recession but also, perhaps more convincingly, in the very nervous look in the eyes that sit just above the chancellor’s perma-smirk. While it is likely that Mr Osborne did not understand the theory of the inputs, the expression on his face shows that he clearly understands the practical consequences of the outcomes, at least for his job security.

Four. Hundred. Billion. Pounds.

For the sport, leisure and culture sector, the failure of quantitative easing poses another pair of questions. First, what could not have been achieved by the sector with funding on this epic scale? Dust off your wish list, or even last year’s budget, and dream. Whatever we did find to do with it – and the transformation of the infrastructure relating to physical activity would perhaps have been as good a place as any to start – we could at least be confident that the outcomes would be far more impressive than those achieved to date by the Bank of England. However, before we get too self-congratulatory we should also remember that we could say that if we bought a new set of goal posts and that the sector’s record of capitalising on gold-plated opportunities is not particularly strong.

The second question is slightly more nuanced: if the governor of the Bank of England came to his senses and decided to transform the nation’s health and wellbeing by directing all quantitative easing funds into the sport, leisure and culture sector to whom would he go for guidance? The answer to that question is rather more difficult to arrive at than the answer to the first first and may even have something to do with the fact that Britain remains a nation fit only for bankers.

Jonathan Ives
Editor