Turning around a struggling economy, like turning a business in distress, is a complex process where it is wise to be mindful of the possibility of unintended consequences.
Here are a couple of examples of ideas and policies that seemed like a good idea at the time.
First, of course, was the idea that it was possible to mitigate the risks inherent in subprime mortgages by packaging them with safer loans and creating complex insurance products for protection such as Credit Default Swaps and we all know where that led us in 2008.
More recently, despite many warnings against creating new housing bubbles, the Government’s Help to Buy lending scheme was supposed to encourage construction firms to start building sorely-needed homes. What has happened so far? Anaemic growth in house building, surging house prices and an explosion of Buy to Let mortgages.
Removing planning restrictions in order to make it easier to convert redundant High Street shops into homes is one scheme of many to revive struggling High Streets. How about actually addressing the issue of sky high business rates, last set in 2008 before the financial crisis with a review postponed until 2017? There are approximately 40,000 High Street shops currently empty. Why would anyone start up a new retail business when business rates are so high?
I am sure you will all be able to come up with many other examples.
Two questions: why do we seem to be incapable of learning the lessons of history? Do we rely too much on social, economic and business models that can never accurately encompass the complexities of real life and real people?