Economics
Change is a constant 2025 marks the first quarter of the 21st century. Since the turn of the century, we had the dot-com bubble (it burst in March 2000), the 2001 terrorist attacks of “9/11” (which have shaped world events ever since), the rise of China as a global force (marked by joining the World Trade Organisation in 2001), the 2007-08 global financial crisis and now wars in Europe and the Middle East. Over this period, climate change has also emerged as a defining global challenge.
It is also exactly five years ago that the first cases of COVID-19 were reported in the UK. The national lockdown and disrupted global supply chains set the scene for the cost-of-living crisis that was to follow. Unprecedented government intervention cushioned the economic fallout but also undermined trust in governments. When the worst was over, society returned largely to pre-pandemic behaviours as quickly as it could.
The main lesson from all this must be that change is a constant. While we might feel like we are living in times of unprecedented change, our times and challenges might not be that unusual after all. The status quo will always be fragile and our focus ought to be on strengthening resilience and adaptability of our institutions and economic structures. We will always have to be ready for the unexpected. Economists and policy advisors would be well advised to keep that in mind.
Adult social care reforms – this time lucky? Being ready for the unexpected is one thing, addressing well-understood, structural challenges is another. In principle this should be easy but in practice policymakers are struggling to implement even bi-partisan advice. The government has now announced the launch of a new commission on adult social care reform tasked with designing a national care service fit for the future. Everybody agrees that social care is in urgent need of reform, but this is the third major commission in three decades (many of us will remember the Dilnot Commission from the early 2010s and a Royal Commission in 1999) alongside many other reviews. The Kings Fund has an excellent summary of previous work in this area coving 25 separate reviews since 1997. We hope that a socially and financially sustainable solution can be found.
The cost of trade wars Since the late 2010s the number of trade restrictions has ballooned as geopolitical tensions have risen. The return of Donald Trump as US president could mark a step change in protectionism. While Mr Trump’s main target is China, the Chinese government has plenty of ammunition to retaliate. So might the EU but smaller economies might be more exposed. Tariffs on goods (much of it in the automotive sector) imported from Canada and Mexico could be particularly damaging, including for the US economy itself. Each vehicle produced under the United States-Mexico-Canada Agreement crosses the border an average of eight times during production. Ultimately it would impact manufacturers exporting to the USA, including the major US brands, and lead to much higher prices for US consumers. Tariffs are not a win-win.
The end of the world is nigh, or is it? It is easy to be downbeat about the future with all that is happening nowadays. Not that long ago governments around the world started using well-being to guide policy, with New Zealand even introducing Wellbeing Budgets for a time. The ONS regularly updates its national well-being dashboard, which looks at 59 measures on the individual, community and national level.
In the latest edition of November 2024, the ONS reports no change in terms of personal well-being, a marginal deterioration in our personal relationships but also more positive environmental outcomes. And trust in government has increased – albeit from a very low level. Around a third of people trust government, up from only a quarter previously. At least this is a start!
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