Some economists are saying that the recession is officially over. Well, we know these same “experts” were caught with their trousers down before last autumn’s meltdown, (being re-enacted on television tonight) even while lesser mortals like A World to Win were warning about the collapse of the financial house of cards.
And, evidence has emerged about how near things came to within a squeak of complete financial breakdown. According to insider Hector Sants, chief executive of the Financial Services Authority, the FSA was ready to close RBS and HBOS cash machines and stop the banks taking deposits or allowing withdrawals.
But what about now - is it true that “the UK economy is on course for positive growth”? Here is the reasoning advanced by the National Institute for Economic Research, for example and other so-called experts.
• Manufacturing output has risen. But this is boosted by government subsidies to people who trade in their old bangers, and it cannot last.
• Big mergers and acquisitions in the City. Well, yes, some people in the boardrooms may be happy, but mergers are inevitably followed by huge job losses and they are a sign of weakening markets.
• The housing market “has stabilised”. That’s no comfort to those who can’t keep up their mortgage payments because they have lost their jobs and young people who can’t find an affordable home.
Underneath the small rises in output and spending is a massive black hole of debt and soaring unemployment. The UK budget deficit will reach £175 billion by this March, the biggest shortfall since World War II and among the worst in the developed economies.
Moody’s the financial ratings agency, has spelled out the need for a “severe adjustment of fiscal policies” if the government is to be able to continue to borrow on the money markets without punitive interest rates. In plain English, this is a call for massive cuts in public services, and government spending of all kinds. Which will affect the poor, the young, the elderly and the vulnerable most of all.
The underlying economic conditions which lay behind the financial meltdown have in no way improved. The manufacturing powerhouse of the global economy, China, has already cut back dramatically resulting in huge job losses and political unrest.
It used to be said that if America catches a cold, Europe comes down with pneumonia. Well, nowadays, it’s China which has a fever and the rest of the global economy goes into depression. And the UK is worst positioned for recovery, due to its emphasis on the financial sector and service industries
The political consequences? They are being spelled out behind the scenes at the exclusive Ambrosetti forum, the Italian version of the Davos club of businessmen and political leaders. The meeting is held annually in a luxury villa on the shores of the beautiful Lake Como. Some participants didn’t mince their words:
“Rising unemployment, the return of bankers’ bonuses public spending cuts, could provoke an ugly political backlash next year 2010 – we risk a real revolt on the part of our people”, said one participant.
Conservative leader David Cameron is busy fastening on widespread popular contempt for Parliament by trumpeting Tory plans for real cuts in major services, which will provoke the resistance that the gathering on Lake Como is concerned about.
It is this scenario which lies behind New Labour effectively throwing in the towel and will let the Tories romp back into government. We have been warned and better get ready for the tumultuous, unstable political and social landscape that is certain to emerge in Britain and other countries.
A World to Win secretary