I think this is rather cute really.
Fourth, reform of the banking sector is needed to prevent finance \”crowding out\” the other sectors of the economy. For manufacturing to become relatively stronger, the City needs to become relatively weaker, but that won\’t happen if the response to the financial crisis is pusillanimous.
So, we\’ve an agreement that crowding out can happen, is indeed potentially a problem.
To be sure, the coalition\’s austerity programme will bite more deeply in Wallsend than in Woking because state spending accounts for well over half the output of regions such as Wales and the north-east, and job creation in the decade up until the financial crisis was driven by increased investment in schools, universities and the NHS.
The same three northern regions have also seen a bigger decline in new business start-ups since 2004, an 18.8% drop as opposed to 16.6% for the UK as a whole. London has the highest rate of business start-ups of any region in the UK (11 per every 1,000 members of the adult population in 2009), while the north-east (5.7), the north-west (7.6) and Yorkshire and Humberside (7.1) are all below the UK average (7.9).
Erm, wouldn\’t it be interesting to at least consider the possibility that what\’s happening to those government dependent regions is crowding out?
Finance is some 8, 9% of the economy. The bit that everyone whines about, The City (ie, wholesale and international finance) is about 4%. Manufacturing is around 13 to 14%.
So, if 4% is crowding out 14%, shouldn\’t we at least consider the idea that \”well over half\” (in fact, in some areas, 70-75%) is crowding out the private sector?