Although the UK economy has posted its strongest quarterly GDP in five years, Britain will become a third world economy by 2014, according to authors Larry Elliot and Dan Atkinson. In their book ‘Going South: Why Britain will have a third world economy’, they liken the UK to football club Aston Villa: “The club was great once, but is great no longer.”
Elliot and Atkinson suggest that Britain will earn third world status because “public and commercial services work badly. The average person is becoming poorer rather than richer, the economy has been pulled out of shape, and the government in the widest sense is dysfunctional.”
They are not the only ones with such a gloomy vision. Peter Blair Henry, dean of Stern School of Business, suggests that “we are in a position where first world countries, such as the United States and countries in the euro zone, look like third world countries from thirty years ago”.
Meanwhile, developing countries have significantly raised their shares of global income, making them major players in global affairs. Within 20 years, dire poverty is expected to have been eliminated in Bangladesh. China has more than doubled its economic output per person each decade for 30 years, becoming the second largest economy in the world. India, which accounts for one fifth of the third world, achieved super growth through internet outsourcing.
Henry explains that rich countries’ difficult recovery from the recent recession is “in large part due to the fact that we forgot those lessons we taught the third world”. So, surely we can learn from third world countries’ success?
The banking system refusing to give the poorest countries credit because they lack collateral is the same predicament in which UK SMEs find themselves in. Tomer Guriel, co-founder of Ezbob, said: “The same micro-finance that’s designed to lift people out of poverty in under-developed countries is exactly what is needed to help small businesses to compete and give the sector a badly needed lift.”
Micro-finance provides the poor with small loans to start and operate a business. This gives borrowers a chance to save money and pay the loan back over time. Traditional banks also need to realise that online businesses operate differently to offline businesses, so credit-lending systems need to adapt.
According to Guriel: “Taking more than two weeks to approve a loan is unacceptable for an online business that needs access to cash quickly, and with short repayment terms.”
Britain needs to keep pushing for the creation of new jobs and the education of young people. Households need to learn how to save, existing companies should continue to invest and entrepreneurs should do what they do best: innovate and create new markets.
Share this story