Money: tightening up? Photocredit: http://www.flickr.com/photos/59937401@N07/5856883959/
It hasn’t been a good week for the British economy, as woe upon woe is heaped upon an already worried nation.
In the week that the Chancellor of the Exchequer, George Osborne, released his gloomy Autumn statement, the UK economic forecast was downgraded, with Britain’s GDP expected to grow 0.9 percent, as opposed to 1.7 percent as stated in March. The Institute of Fiscal Studies said that Britain’s families will have seen disposable income drop by 4.7 percent in the years from 2009 to 2012, and that on this current path, families in 2002 were better off than they will be in 2015. There was also a huge public sector strike, with up to 2 million workers protesting against cuts to their pension plans.
Mervyn King, the Governor of the Bank of England, called for dividend and bonus restraint so that banks can build up there reserves to cope with the current crisis. Meanwhile, in the Eurozone, German Chancellor Angela Merkel is pushing for fiscal union through changes to treaties, in order to solve the crisis through budget discipline. She threw out the possibility of intervention by the European Central Bank, and said that it would take “years” to stabilise. President Nicolas Sarkozy of France is meeting British Prime Minister David Cameron in emergency talks about the debt crisis.
Is there a way out of this gloom and doom? Well, markets have risen on the hope of the recovering American employment market. It’s not really enough, though. And politically speaking, commentators agree that Labour have got it wrong; their insistence on spending is not resonating with the public mood. And while some say that Osborne is steering in the right direction, others are wondering whether worrying about growth all the time is even the right thing to do. Most agree that banks are pretty villainous, all told.
At least they’re telling the truth. Fraser Nelson, in The Daily Telegraph, was quietly optimistic about the Tories’ prospects, and even about the economic situation. He said that all over the country, the strikes led to “resilience rather than paralysis” – 85 percent of NHS workers went to work. “Union leaders badly misjudged the national mood, and have since gone uncharacteristically quiet.” What Labour and the Unions don’t realize is that economic debate has shifted; it’s now “about putting food on the table.” The British public supported cuts long before the political parties; we’re “a nation of realists.” Osborne’s seven-year plan is “credible”, as opposed to Labour, who were about “illusion-making” and is now simply a “lobby group for higher state spending”. This is annoying, because we should be debating over high to grow the economy. But “only the Government” is speaking the truth. Which is actually bad news for Ed Balls, and good news for Osborne.
Look to Japan? Osborne’s thinking in the wrong terms, though. Let’s bin this obsession with growth, said Mary Dejevesky in The Independent. We need to learn how to deal with recession – we could “improve living standards” by “doing more with less.” We’re long past the emerging economy stage; it’s no use comparing us with China or even Poland – just out of repression. Don’t forget to look at per capita GDPs – China is “poor”, and won’t change that soon. But what the boom” actually did was make those at the top stratospherically rich; everyone else suffered, and now suffers even more because of the squeeze. Look at Japan – they have “some of the highest living standards in the world”, with productive workers and universities busily researching into aging. Their “static growth” doesn’t mean “falling living standards.” We Brits are similar. We should “use what we have more rationally.”
Imprisoned by disaster. Not only is Osborne thinking wrongly, but the Autumn statement, said Philip Collins in The Times, is a “disaster” for the Tories’ image. The niceness of the modern Tory party has been stymied by the 2008 crash. Now we have “only austerity.” There are still bad schools, and the Chancellor makes no secret of his “disregard for green policies.” The Labour party is trying to make political capital by saying that Osborne always wanted to cut and is only using the economy as an excuse: the truth is “he has been imprisoned by economic disaster.” Even Labour would be behaving like Tories if they were in power.
More of the same. But Labour won’t get much of a chance to gain power. It’s too soon to say if the “coalition is a failed government,” said Martin Kettle in The Guardian. But it’s very likely that there will be another coalition government after 2015. Sure, we won’t get through the economic storm in 18 months, now. But the public seems to be behind Osborne’s statement – or at least, they think, according to a YouGov poll, that Labour would be doing a worse job. Also, the Liberal Democrats have put their stamp on several policies. The current mood is “hang on to what we’ve got, ride out hard times and submit to perceived necessary austerity.” Which means that we’re likely, politically speaking, to see more of the same in future.
Banks should take responsibility. Ruth Sunderland in The Daily Mail said that we should listen to Mervyn King. The Bank of England governor is using “exceptional candour”, though still employing “abstract terms.” In a worst case scenario, people could see “life savings wiped out, pensions vanishing, the value of assets falling.” It’s a “disgrace” that he even needs to give this warning – it shows how “toxic” the culture of banking has become, if they’re so “lacking” in “wider social responsibility.” Bonuses should be “more sensible”. Whilst the risks of banking are “borne by society as a whole”, the “rewards are corralled privately.” Banks need to ring-fence their “casino” parts, and should return to partnerships, where partners bore personal liability for failure. The “bonus cancer” needs to “be halted now.”
More on the economy
- What you need to know about the Autumn statement
- Is the UK economy doomed?
- Winter of Discontent II looming?
- Pay gap slammed
- Northern Rock sold to Virgin Money