The British Economy Is in Trouble

The British prime minister is not hiding ‘under a desk’ — yet

The British prime minister is not hiding “under a desk,” as David Cameron claims, because the government is actively doing something about its broken economy, as the government’s own figures show.

In June, the International Monetary Fund (IMF), which was once happy to describe Britain as an “economy at the intersection of the world’s two largest financial markets,” issued a new report that showed that, “for many years, UK consumers have benefited from the favorable terms of the world’s financial markets. However, the UK economy appears to have run out of steam in recent years,” as unemployment among the under 25s is at the highest level since comparable records began.

The IMF’s analysis is being greeted with the usual derisive comments about “naivete and complacency” being peddled by Cameron. But the IMF says that it’s simply the latest, and only, signal that the British economy is in trouble.

And what is it about economics that makes it so hard for the British people to understand?

Economics is one of two main branches of human knowledge, the other being mathematics. Economics is the study of markets, the prices of goods, and the flow of money. It teaches that markets are essential, and that free markets must be maintained whenever they are in a state of equilibrium. It is also based on the assumption that prices of goods, and the money and trade flows they represent, will adjust in response to changes in other factors that are important to the economy.

If that assumption is incorrect, however, then the market will be distorted. A good that would have been perfectly available at the prices available to your friends and rivals, will be so available if the prices are distorted.

The fact that I am writing this column means I am not at all naive. The last British prime minister I can think of who was “naive” about economics was Tony Blair, the man who managed the British economy to its zenith and then left office just as the world economy was falling apart and Britain was emerging from the longest period of economic depression in the modern history of the world.

To give a flavour of how wrong Mr. Blair was about economics in Britain, I quote his own words.

“The fundamental difference between this world

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