Trade, saving and an economic disaster
The UK is running a trade surplus. No, really, I am not joking. This is from the ONS's latest trade statistics release:
The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billion
It's the first time the UK has run a trade surplus since the late 1990s:
And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020:
Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August - and yet the trade surplus continues to widen.
This is no doubt music to the ears of balance of payments obsessives. Could the UK at last be pivoting away from a consumption-led growth model to an export-led one?
The import figures for August show that domestic consumer confidence is still on the floor. And this is supported by the GDP figures:
If the prosperous country, driven by mistaken envy of the poorer country's trade surplus, deliberately depresses domestic incomes to gain international market share, and shreds its safety net with the aim of "making work pay", then it might find its saving ratio rises and its trade balance shifts towards surplus. But its population won't be more prosperous. They will be poorer. Rather than the poorer country becoming more like the richer one, the richer one becomes more like the poorer.
Right now, the UK's high but divided saving ratio is raising its (already high) wealth inequality, while collapsing consumption is destroying the jobs and incomes of those at the lower end of the income spectrum. The trade surplus and high saving ratio aren't making us prosperous. Indeed they have no causative effect at all, in either direction. As is so often the case, the switch to trade surplus and excessive saving simply reflects the effects of an economic disaster. Those who think that a trade surplus and a high saving ratio are the route to prosperity for all might like to reflect on this.