It may be too late to prevent recession

George Osborne's policies have failed. He talked down the economy -- and now it is sinking.

The data releases this week have all been bad for the coalition. It started in the United States, which matters because generally what happens there is repeated in the UK a few months later.

First, the Conference Board published data on consumer confidence that showed a much greater collapse than had been expected, especially in relation to the respondents' expectations for the future.

Second, the Case-Shiller house price index -- the leading measure of US home prices -- shows that the US National Home Price Index declined by 4.2 per cent in the first quarter of 2011, after having fallen 3.6 per cent in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter's data and posted an annual decline of 5.1 per cent versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels. As of March 2011, 19 of the 20 MSAs covered the index were down compared to March 2010.

Third, ahead of the official release of employment data on Friday, an ADP Employment Services report suggests that private-sector payroll growth slowed sharply in May, falling to the lowest level in eight months. This prompted some economists to lower their forecasts for job growth in Friday's data release. It looks as if the US is slowing.

In Europe, the final Markit eurozone manufacturing PMI fell sharply to a seven-month low of 54.6 in May, down from 58.0 in April and below the flash estimate of 54.8. The fall in the index was the largest since November 2008, as manufacturers reported slower rates of increase in output, new orders, employment and inventory accumulation. China is also slowing. Economic output in Australia shrank by 1.2 per cent in the three months to March -- the worst quarterly slide since 1991 -- the national accounts of the Australian Bureau of Statistics showed yesterday.

The data releases for the UK today were truly awful. They follow from the public finance data that shows that, far from paying off the debt, Osborne is increasing it. Plus such growth as there wasn't -­ GDP grew by zero over the past six months -- was driven by government spending. Then, today, the PMI for manufacturing in May was worse than the market expected.

According to Capital Economics, on past form, that leaves the balance consistent with quarterly falls in manufacturing output of around 1 per cent. Some of this fall, it argues, is likely to have been driven by the temporary disruption to supply chains caused by the Japanese earthquake. But Capital Economics points out that the new orders balance also fell from 50.8 to 48.3, which, it argues, suggests that "beneath the monthly volatility, a sharp underlying slowdown in demand is taking place".

There were also a number of statistical releases from the Bank of England, which added to the bleak picture. It appears that banks are simply not lending enough to get the economy moving. This suggests the poorly named Merlin project -- which should be renamed the Mickey Mouse project -- has not worked any magic. First, the money-supply growth was weak. Second, the stock of lending to UK businesses overall contracted in the three months to February, as did the stock of lending to small and medium-sized enterprises. Third, the number of loans approved for house purchases fell by 4 per cent to a four-month low of 45,166 in April ­- the lowest figure for April since records began in 1992.

This inept Chancellor has talked the economy down by falsely claiming it was bankrupt when it wasn't, which has decimated animal spirits among both businesses and consumers. He has also tried to blame a once-in-a-hundred-year global financial crisis on the previous government, which was clearly also untrue and hyperbolic. Osborne has implemented toothless regulation over the banks and has demonstrably failed to get them to lend. He also has no interest in controlling bankers' bonuses, despite his absurd claims to the contrary when he was shadow chancellor. And all of this before the public spending cuts hit: currently it is the public sector that is the driver for growth but that is all about to change. The public finances are worsening, not improving.

The government's economic policy is in total disarray and the economy is sinking. Osborne has been hoisted by his own petard; his numerous false claims were inevitably going to catch up with him and now they have. The coalition's austerity programme was never based on sound economics and was simply a political move to shrink the state. Interestingly, the claims that the economics profession supported his actions have turned out to be false. In my NS column in the issue out tomorrow, I make clear that one of the initial signatories to the letter to the Times that Osborne touted as supporting him ­- the 2010 Nobel Prize winner in economics, Chris Pissarides -­ has now, embarrassingly for Osborne, turned against him and now opposes the ill-conceived and wreckless austerity programme of cuts and tax increases.

It is hard to find any economists outside the City of London that do support the government's strategy, other than a few of the usual right-wing hangers-on.

It is time for Osborne to explain to the British people why his economic policies have failed and what he intends to do about it. My fear is that Slasher has inflicted so much damage on the British economy that it is too late to prevent us slipping back into recession.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Wrists, knees, terrible rages – I felt overwhelmed when Barry came to see me

I teach my registrars to be aware how a consultation is making them feel: that can give valuable clues to the patient’s own emotional state.

To begin with, it seemed that Barry’s wrists were the problem. He told me about the pain he was experiencing, the pins and needles that came and went in his hands. I started to examine him. His palms were calloused, his fingers thick and stubby, veterans of the heavy work he’d undertaken throughout his 57 years. Even as I assessed this first problem, he mentioned his knees. I moved on to look at those. Then it was his back. I couldn’t get to grips with one thing before he veered to the next.

I teach my registrars to be aware how a consultation is making them feel: that can give valuable clues to the patient’s own emotional state. Barry was making me feel overwhelmed, the more so as I learned that he’d been experiencing all these problems for years.

“Why are you coming to see me about them now,” I asked, “rather than six months ago – or in six months’ time?”

“I need some time off, doc.”

There was something about the way he wouldn’t meet my gaze. And again, that feeling of being overwhelmed.

“What’s going on at work?” I asked him.

His tone hardened as he told me how he’d lost his temper a couple of days earlier. How one of the others had been winding him up, and something inside him had snapped, and he’d taken a swing at his workmate and landed a punch.

Barry had walked out and hadn’t been back. I tried to find out if he’d heard from his boss about the incident, if he knew what was likely to happen next.

He told me he didn’t care.

We talked some more. I learned that he’d been uncharacteristically short-tempered for months; his partner was fed up with being shouted at. Sleep had gone to pot, and Barry had taken to drinking heavily to knock himself out at night. He was smoking twice his usual amount. Men like Barry often don’t experience depression as classic low mood and tearfulness; they become filled with rage and turn in on themselves, repelling those closest to them in the process.

Depression is a complex condition, with roots that can frequently be traced right back to childhood experiences, but bouts are often precipitated by problems with relationships, work, money, or health. In Barry’s case, the main factor turned out to be his job. He’d been an HGV driver but at the start of the year his company had lost its operator’s licence. To keep the business afloat, his boss had diversified. Barry hated what he now had to do. He was now a “catcher”.

I didn’t know what that meant. Getting up at the crack of dawn, he told me, driving to some factory farm somewhere, entering huge sheds and spending hours catching chickens, thousands upon thousands of them, shoving them into crates, stashing the crates on a lorry, working under relentless pressure to get the sheds cleared and the birds off to the next stage of the food production chain.

“It’s a young man’s game,” he told me. “It’s crippling me, all that bending and catching.”

It wasn’t really his joints, though. Men like Barry can find it hard to talk about difficult emotion, but it was there in his eyes. I had a sudden understanding: Barry, capturing bird after panicking bird, stuffing them into the transport containers, the air full of alarmed clucking and dislodged feathers. Hour after hour of it. It was traumatising him, but he couldn’t admit anything so poncey.

“I just want to get back to driving.”

That would mean landing a new job, and he doubted he would be able to do so, not at his age. He couldn’t take just any old work, either: he had to earn a decent wage to keep up with a still sizeable mortgage.

We talked about how antidepressants might improve his symptoms, and made a plan to tackle the alcohol. I signed him off to give him some respite and a chance to look for new work – the one thing that was going to resolve his depression. But in the meantime, he felt as trapped as the chickens that he cornered, day after soul-destroying day.

Phil Whitaker’s novel “Sister Sebastian’s Library” will be published by Salt in September

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt