The recovery bubble
City and media commentators think that things are definitely looking up for the British economy. The statistics that they are basing themselves on certainly show a vigour in the economy that has not been present for six long years, since the crash of 2008. The housing market is moving forward at a great pace, and not just in London. So much so, there is definite anxiety about an unsustainable bubble. Unemployment has fallen sharply – much faster than predicted by the Bank of England. The UK car industry has seen a long period of growth with sales rising for 27 months in a row (although presumably some of the demand is met by German output, for example). Some see exports doing well, but the UK’s trade deficit with the rest of the world widened by more than expected in April, because of weaker manufacturing exports, which were offset by the usual surplus in the services sector.
But British commentators do look for good news about the performance of the economy, and like to compare it with Europe where possible. As a commentator in the Evening Standard (5/6/14) said: “Consider that the eurozone economy grew by just 0.2 per cent in the first quarter, missing targets, while Britain advanced at four times that rate. The European Commission forecasts 1.2 per cent growth for the economic bloc this year followed by 1.7 per cent next; it has pencilled in 2.7 per cent and 2.5 per cent for the UK over the same periods.”
A key reason why the commentators feel a little less restrained in talking up the performance of the British economy is that it has finally, at this point in time, arrived back at the level of output prior to the financial crash in 2008 (i.e. 6 years). Previously, even if, at times, the economy appeared to be on an overall growth track, everyone knew that there was no recovery in the formal sense: arrival back at the level of economic activity before the recession. Furthermore, the time taken to arrive back at the starting point for Britain is longer – much longer – than in the case of the Great Depression. In the Great Depression (in the 1930s) it took ‘only’ 4 years for the economy to arrive back at the level of output it had at the beginning of the recession. This is one reason why the state authorities (notably Mr. Carney and his colleagues at the Bank of England who have responsibility for interest rates) take quite a very measured view of the performance of the economy and have caught out speculators on interest rates more than once.
The ‘recovery’ takes many forms. The level of employment in Britain in actual numbers is much higher than it was at the beginning of the recession. Historically, it is higher than it has ever been. This is a bit confusing since unemployment is very high as well – even after the recent falls, it is over 2 million (and that is only the official count). Nonetheless, it is true that employment has expanded as the population has expanded (partly due to natural increase and partly due to immigration). Now, one does not have to be an expert to see that productivity has therefore fallen – significantly fallen. To figure out national productivity the bourgeoisie simply divide the overall economic output by the number of people working. Since the economy has only just got back to where it started (in 2008) it follows that productivity has fallen since the working population is significantly larger. That is a very serious problem for the bourgeoisie and has a profound implication for the ‘success’ of the recovery. That is why the bourgeoisie do not talk about their success in employing so many new people as often as one might expect – despite the fact that what has been achieved on this level is not replicated in every country.
Furthermore, for the bourgeoisie’s purposes, claims of ‘falling unemployment’ are not undermined by the growth of chronic underemployment, highlighted by the scandal of zero hours contracts; and ‘overall economic output’ tends to include any number of parasitic and unproductive activities, such as property speculation. In sum, more reasons for being sceptical about the ‘recovery’.
This is why for every proclamation of progress in the economy, usually from the government and its least critical supporters, there is also caution. The British Chambers of Commerce (BCC) recently upgraded their predictions for growth, but “dampened some of the feelgood factor with a warning that 2014 could mark the high point for the economy as households come under renewed financial strain next year once interest rates start to rise.” (Guardian 30/5/14). The director general of the BCC warned that “The task at hand is to ensure that 2014 is not ‘as good as it gets’ for the UK economy” (ibid) A spokesman for the treasury agreed that “we cannot take the recovery for granted” (ibid).
Other commentators are more blunt. “James Meadway, a former adviser at the Treasury, has criticised Chancellor George Osborne’s claim that newly released GDP figures prove ‘Britain is coming back.’ He argues that the government’s relentless pursuit of stringent austerity and expansion of household debt is reinforcing the risk of a major economic crash. Meadway argues that the policies driving UK growth are fatally flawed: ‘We are setting up… exactly the conditions that helped produce the crash of 2008: debt-led growth, in which stagnant or falling real earnings are masked by increasing levels of household debt that sustain continued consumer spending.’
Despite the 0.8% increase in growth over the last quarter, current performance indicates that manufacturing output ‘will not recover to its 2008 level before 2019.’ With average earnings rising at a rate of 1.4%, and the Consumer Price Index’s inflation figures ignoring the large cost of housing at around 40% of household income, real inflation ‘is now running at 2.5% a year, well ahead of increases in earnings…The fall in real earnings since 2008 is the longest sustained decline in most people’s living standards since the 1870s.’” (Guardian 1/5/14)
This particular bourgeois expert comes perilously close to telling the truth: that the ‘recovery’ is largely a sham fuelled by debt, that the prospects for future difficulties are clearly discernible, and that the perspective for the working class is a continuing attack on its living conditions.