The end of the recession? (Western Mail Thursday Essay – Feb 11, 2010)

The news earlier this month that the UK economy had returned to economic growth, all be it by a paltry 0.1%, was met with typical glee from Labour politicians who hope it might provide a springboard to a political recovery that might halt the Tories gaining an overall majority at the forthcoming General Election. I fear their bullishness is somewhat misplaced. With the UK having lost 6% of its economic output from peak to trough in the longest lasting contraction since records began – the severity of the recession will be the determining factor for the slaughter they face in the polls whenever the Prime Minister strikes up the courage to call the election. If I were a Labour strategist, I’d be imploring Gordon Brown to go before the next set of figures is published as there is no guarantee that growth will be sustained. This will not be a V or even a U shaped recession – we are looking at a period of prolonged economic fragility at best. Indeed, based on the declared policies of all the London parties during the election to slash public investment before sustained economic recovery then we will be heading for a double dip recession which will disproportionally affect public sector reliant economies such as ours in Wales.

Rather than engaging in a debate about economic stats – our focus should be the social consequences of the downturn. We know from previous recessions that there is a lag between the true human cost of any given downturn and a return to economic growth – even if recovery in economic terms is rapid and sustained. Let’s not forget that many of our communities in Wales have yet to recover from the Tory recessions of the 80s and 90s.

The statistics are worrying. A quarter of Welsh households live in fuel poverty; Save the Children recently reported that 96,000 Welsh children live in severe poverty; we know that a lost generation has been created which will have devastating social consequences as unemployment amongst the UK’s youth reaches the million mark.

Despite the respite in the latest labour market stats, we can expect unemployment to continue rising in the short to medium term. If we want a clear warning on the perils of Cameronomics – let’s look no further than the Republic of Ireland which has tried to cut its way out of a recession and who now finds itself with an unemployment claimant count of 12% which is expected to increase to at least 14% in a matter of months.

The client stats of the Citizens Advice Service provide a perfect barometer for the social consequences of the recession and the likely consequences of its aftermath. With London Labour having deliberately stimulated economic growth on a sea of personal debt, there is little surprise that the service finds itself inundated with clients unable to service loans and repayments. Last year alone saw an 11% increase in debt related enquiries to well over 110,000 client problems.

With £1.4 trillion of personal debt currently circulating in the UK economy – the equivalent of 100% of GVA – the human cost of this recession will be particularly acute and could well last until the end of the decade. The human cost will be deepened by the reckless public investment cuts proposed by all the London parties as the floorboards beneath the economy are removed and the services vulnerable people depend upon are decimated.

The Welsh Government with the limited tools at its disposal has pursued the correct strategy in investing in our people. The fortunes of our economy and consequently the social impact will always be determined by those that hold the key policy leavers. The misfortune for our communities is that they are currently held by political elite in London who work in the interests of the super rich alone.

The General Election is currently being fought on the basis of a Dutch auction amongst the London parties about who can the cut the most. It is a great disservice to electors across the UK and especially here in Wales. What we should be discussing is what policy interventions are going to be needed to address the social consequences of the recession; how are we going to ensure sustained economic growth and a more balanced economy which is less reliant upon the financial sector; how are we going to turn the tide of Labour/Tory wealth polarisation and create a more equal society; and how to address the systemic failures of global finance. These are the real issues of the day rather than the current shallow focus of the London parties. Unless action is taken on these fronts, this will not be the end of the real recession but merely the end of the beginning.

3 Responses to “The end of the recession? (Western Mail Thursday Essay – Feb 11, 2010)” [latest first]

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  2. during the height of the economic recession, our online and offline business in the US have suffered some major drop in sales. now our sales are getting slowly back to normal.

  3. Our home business was really affected by the Economic recession, we have to cut jobs just to cover up our losses. fortunately, we have already recovered. “

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