UK economy must perform a rebalancing act

Long time readers know that I am a huge fan of Martin Wolf, economist and columnist for the Financial Times. His writing is the reason to get the Pink Lady (as the Financial Times is known) as far as I am concerned.

This week's Outside the Box has two columns back to back from last week from Wolf, talking about the problems in Britain which look like the same problem all over the developed world. Wolf argues (rather cogently) that the answer is to increase exports and for a further weakening of the pound. Quoting:

"Weak sterling, far from being the problem, is a big part of the solution. But it will not be enough. Attention must also be paid to nurturing a more dynamic manufacturing sector. With the decline in energy production under way, this is now surely inescapable."

Can I envision the pound at parity with the dollar? Yes, I can. But look at what that implies. It makes it tougher on US exporters just when we need a strong export base. Can every country devalue its currency (or allow it to fall?) as a way to become prosperous? And against whom? Will Europe sit by? What will that do to the US earnings of multi-national corporations? Will Senator Schumer accuse Britain of currency manipulation and want a 25% tariff?

I have made the point many times that not every nation can export their way to prosperity. Someone has to buy! While Wolf has the right prescription for Britain, it is the same prescription that every nation wants to pursue. But we can't all do it at once. Read these columns in that light.

Have a great week.