Thursday, 26 April 2012

Gideon's economic disaster zone

Britain is suffering a double dip recession for the first time since 1975. Yesterday’s output figures show that the UK economy is nowhere near recovering from the credit crisis that started in 2007.

What does a ‘double dip’ recession mean? In jargon, it means that in six of the eight quarters (each year is split into quarters) since the ConDem coalition took office, the British economy has been shrinking. When Gideon Osborne, the 'arrogant posh boy' Chancellor, took office, the economy was growing by 1.1% per year. Once he started the drums of ‘austerity’, cutting public services to keep the rich in the City happy, that growth quickly turned negative.

In reality, a ‘double dip’ recession means that the charity UK Foodbank, which provides food parcels to people unable to pay for themselves, doubled the number of people who it helped last year. It is opening 2 new foodbanks every week at the moment. For the last six years, wages have fallen behind price rises and the cuts in benefits have made the suffering worse. If people have less money to spend, then less will be bought in shops so the service sector (a whopping 75% of the British economy) is stuck in recession.

The banks are still holding huge debts and fear about the crisis in the Eurozone as they buy property debt, government debt and banking debt then sell it to make a profit. This works until the realization that the debts cannot be repaid which has happened in the last three years. Banks represent a third of UK output because the Conservatives pushed banking at the expense of manufacturing in the 1980s. So the banks are refusing to allow people to buy things using debt such as credit cards, mortgages or even investment funds for businesses. The result is that this makes the squeeze on income even worse as most people financed themselves using debt for the last 20 years.

With less investment available and people buying less, business is stuck in a cycle of cutting jobs to survive and hoping that exports can save them. The main market for exports has been Europe where Spain, Italy, Holland and Greece have experienced shrinking economies in the last few months.

Osborne launched the ‘austerity’ cuts because he feared that the financial markets would lose confidence in the British economy. By cutting public services and driving down living standards, he hoped to keep his friends onside. It hasn’t worked. The financial markets are losing confidence rapidly. HSBC is cutting 2,000 more jobs, youth unemployment has hit 1 million and the TUC estimates that the real number of unemployed is nearly 6 million. Osborne has borrowed £500 billion and pumped £325 billion into the banks (which disappeared into their coffers). We are now in the longest economic depression for 100 years and the suffering is growing.

The assault on benefits, NHS, council services and jobs has made the position worse. There needs to be an urgent programme of investment in jobs, especially green jobs, council house building, public services and increases in benefits to help the economy grow and help people survive. Wages need to be increased to help people buy in the shops rather than given to teh bankers who just buy more debt. All three major political parties have bought into Osborne’s siren cry of ‘austerity’ and it has failed. Britain desperately needs a new economic strategy with its people at the heart. We need a new politics that is willing to stand up for public services and jobs against the nightmare of bankers deciding our policies. This need becomes more urgent by the day.