Recession blues

Both Labour and Tories have yet to confront the realities of the downturn - least of the full horror

Anyone who has ever experienced the misery of unemployment will have felt a chill on hearing this week's labour market statistics. It is a truth universally acknowledged that rates of alcoholism, drug abuse and depression rocket in times of recession. Joblessness has a devastating effect on people's health, physically and mentally, and the full social consequences of an economic crisis are felt in the criminal justice and education systems for years afterwards.

This is the week Britain finally woke up to the reality of the economic downturn, with levels of unemployment not seen since 1997. The latest job cuts, at Virgin Media, Yell, builders Taylor Wimpey and pharmaceuticals giant GlaxoSmithKline - more than 4,000 in total - show how widespread the downturn is likely to be. The number of people claiming Jobseeker's Allowance has nearly reached a million and could soon top the million mark for the first time this century. But most news organisations focus on the globally recognised International Labour Organisation (ILO) figure for all people without work. This figure is now 1.82 million and could hit the symbolically significant two-million mark by Christmas.

The two divergent figures are hugely confusing for the general public. One helpful adviser at the Department for Work and Pensions (DWP) explained it to me this way: "The ILO figure would include the middle-class journalist who loses his job or the lone parent on income support." Neither would show up as "claimants", but they would still be out of work.

For millions of people, this is new psychological territory. Anyone under 30 would struggle to remember the last recession, when unemployment reached three million. The Blair generation, which grew to adulthood under new Labour, has enjoyed a uniquely blessed period of economic prosperity. Whatever the truth of the claim that Gordon Brown failed to mend the roof while the sun shone, there's no doubt it was a balmy decade compared to what came before and what is likely to follow.

But for the "fortysomething" generation that now dominates British politics, the recession of the early 1990s remains etched on its psyche. This is certainly true of David Cameron, who worked in the Treasury for Norman Lamont during the darkest days of Tory economic mismanagement. Nick Clegg, David Miliband and Ed Balls all cut their political teeth in the 1990s recession, and their essential cautiousness as politicians is partly explained by this.

But it also means that younger politicians of all parties do not accept the old Thatcher-Major orthodoxy that unemployment is acceptable, or even necessary, if the alternative is rampant inflation. No Conservative today could get away with saying, as John Major did during the last recession: "If it's not hurting, it's not working." Cameron's mentor, Norman Lamont, put it still more brutally: "If higher unemployment is the price we have to pay in order to bring inflation down, then it is a price worth paying." Any senior Conservative who uttered such words now would be instantly dismissed. Tory plans to cut National Insurance to create jobs, when once they would have done so for its own sake, mark a sea-change in Conservative thinking.

The government will argue that this recession is different and that the job market still shows signs of good health. Although there was a net rise of 30,000 claimants in September, for instance, this was as a result of 260,000 coming into the system but 230,000 leaving it. The same is likely to be true for the October rise. Ministers are cheered by the fact that there are still around 600,000 job vacancies. But the November Labour Market Outlook, a survey of over 700 businesses carried out by Ipsos/MORI, revealed a significant degree of pessimism about the future. Over 80 per cent of employers thought the economic situation would worsen over the next three months. The number of companies planning to recruit in the near future had fallen and those preparing for redundancies had risen.

If you ask ministers how they are preparing for the consequences of the recession, they will tell you that the DWP is working closely with the Department for Business, Enterprise and Regulatory Reform and the Department for Innovation, Universities and Skills, to put in place early-intervention packages for companies which find themselves in trouble. The new regional ministers will also be expected to pick up specific problems around the country.

This is all to be applauded. But none of the major parties has yet found the language to describe the full horror of the return of mass unemployment. For Labour, employment has become a fetish and if we begin to witness large-scale redundancies it will be seen to have let down the very people it was elected to protect. The Conservative Party will have to show that it genuinely cares about a group of people it has previously seen either as collateral damage in the war on inflation or has blamed for their own predicament. In the end, the electorate will have to decide which party has its best interests at heart. Labour still has the most convincing story. Employment minister Tony McNulty spent almost two years on the dole in the 1980s and even the Work and Pensions Secretary James Purnell signed on for a short period. This is something George Osborne and Cameron have never had to experience. It is not in the interests of any politician to indicate just how serious the situation might get - they would be accused of defeatism and panic. But it is now certain that the next election will be fought over who can be trusted with people's livelihoods in potentially devastating economic times.

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And that's the VOA Special English Education Report. You can watch a vedio version of this story at 51voa.com. I'm Christopher Cruise.

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VC's picture

Martin; if banks can`t go bust, then maybe the government should make unemployment illegal, maybe there is a test case here for "Human Right Law"? after all, the bank/corporation has the same rights of the citizen (subject), surely it works the other way round?

Cameron was suggesting the other day that employers be given money to employ more staff, instead of paying out upto £8000 a year in benefits...of course, Cameron`s real motivation is helping small business owners make more money, in reallity, its another version of family tax credit, a business subsidy which keeps pay low.

gnuneo's picture

what is required is to massively cut military spending, and switch it to other, civilian & productive spending.

writeon's picture

I'm actually irritated by by the continual references to the 'Credit Crunch' on the BBC. It's driving me barmy. It just doens't seem to convey the seriousness of the situation we face; meltdown of financial institutions that once seemed like solid granit, a global depression worse than the 1930's, mass unemployment etc.

At the moment I think we are seeing the banks employing the methods of militant workers in the 1970's, that is, a 'credit strike' and they are effectively holding the country to ransom, as they press the government for even more money to bail them out of the dire situation they've gotten themselves into.

VC's picture

writeon, be sure of one thing, the bailout money will go straight out of the US and into safer economies. As I have said all along, the whole thing was designed, the question is, "where is it taking us"?

1929-1939: 10 years to WW2. This time, it will much faster as Joe Biden has carelessly warned. The US military is at its peak right now, this won`t be the case in 5 years. The US has its largest military force on standby in the Gulf and this force is over and above the two land theaters. Its also been on location for two years.....WAITING TO GO!!

gnuneo's picture

this is indeed something planned for a long time, but it is also important to remember that there is no 'One Master Plan'.

in the 70s and before, there was a belief that the 'national economy' was a 'dead end', and that global companies - multi-nats - would be a more efficient method of organising the world's economy. Ignoring that argument, what this meant was that National infrastructure would be sold-off ("privatised"), usually at knock-down prices, to private corporations. This has all been laid out, and is easily available even from mainstream economists books from that period. No tin-foil helm stuff there *at all*.

as an adjunct to this, as a partner idea, the notion that States should eventually be bankrupted deliberately, in order to fully convert them into Corporate States, was also widely and openly discussed amongst certain economists - and political theorists - because of the belief that with the introduction of mass-****, there would come a growth in social-democratic forces, and the People would slowly gain control over the Economy and Society. For those who believe in Elite rule (and lets face it - again this is NOT conspiracy theory, how many true-blue Tories still believe in this? The vast majority. Can there be any doubt over that?), such a process had to be prevented - the Corporate State is a perfect model for so doing, because it can be built upon some elements of Classical Liberalism - ie, the Right to Private Property.

one doesn't have to be a political genius to realise that if the Russian Czar owned *everything*, and put this aspect of Classical Liberalism into political play, then bugger all would have changed.

gnuneo's picture

what we are seeing, is the consequences of this long-term plan - the destruction of the UK & US national economies (the UK is further along), in order to destroy the social and political aspirations of the majority of Britons.

now, again, i am aware of how this sounds, and who wants to believe that those in power, those *we elected* in some cases to power, may not have what most of us would consider our best interests at heart? In fact, most of them believe they do, that democracy in a proper sense is 'harmful', and they are behaving like 'proper leaders and Statesmen', and that this IS all for our long-term benefit, even if it costs a great deal of hardship for the majority.

needs no tin-foil helm, only an appreciation of the memes that operate at different levels of Britain's society.

everything that is happening now in the West, already happened recently to other 'neo-liberalised' economies, such as Argentina, along with such events as the 'pacific-rim crash'.

lets lok at the facts, and not the hype - the UK and US have both had their manufacturing capability exported, and destroyed. The service industries are reliant upon the amount of internal 'trade' - people do not go abroad for haircuts. Food, Energy and Building are all virtually entirely in the controlling hands of the multi-nats - who immediately move the profits made from British Workers out of the national economy.

Education and Health are following, slowly but surely, along with Prisons, who are already being constructed and run by US-based multi-nats. (and not given new UK contracts based upon quality of provision, that's for damned sure.).

so how much of the British Economy is actually run by, and for the benefit of, the British Citizenry?

the answer is damned little, and even that little is generally in a economic hierarchy dependant upon multi-nats at some point.

gnuneo's picture

so there is little internal economy left, what Adam Smith would have characterised as a healthy, free market economy anyway. But still, even after the Thatcherite 80s, Britain still had a lot of internal wealth left. So then the debt cycle was set up, fabulously cheap debt became available, Thatcher deregulated the credit companies, and instead of the internal economy generating higher living standards through higher productivity leading to higher household incomes, instead the higher productivity was hived off as 'profit' and replaced with the option of borrowing the amount of money needed to purchase all these 'essential' goods the workers built themselves... or bought from the new factories abroad.

you don't need to be an economist to see this is an unsustainable model - in fact, it seems having an economists degree could in fact blind you that this is unsustainable. How many Angels can sit on the head of a pin? How much debt can a national economy hold without harm whilst constantly dropping real wage levels? Both these questions occupied the 'professional Intellectuals' of their day, and both are/will be seen as irreducible Intellectualist clap-trap.

but back to the point - so we Briton's are sitting upon a mountain of debt, that was pushed upon us by the Ruling Party (the Tory/new-Labour one-party-two-wings 'end of politics' profiteering and corrupt swine), with little industrial capacity and that in the hands of either foreigners or British Elite who care not one whit for the sufferings of the People, with service industries that employ mainly due to an internal market that is about to restrict *massively*, and basic industries such as food, energy and water in the hands not of communities, but of uncaring, multi-national monstrosities.

looking to Industry, or politicians in the pocket of Industry/banking/media elites, is like hoping the shark that just bit off your legs, will turn around and help you swim to shore.

gnuneo's picture

so how long will this recession last, and how deep will it be?

that is unanswerable, and with good reason - the end of this 'recession' will only come about like all recessions end - when real wages and incomes rise again, allowing the internal market to start its work. But WHY, when the very same owners cold-heartedly watched millions across South America and Asia, will those 'owners' care enough about us normal Britons to decrease their own profiteering, their own power hunger and financial greed, in order to 'give' enough back for the economy to rise again? Especially when they are part of the system that created this mess in the first place, due to their beliefs about Elite control and rule?

it would be nice to think that some of them did not understand what was happening, and they will change course and increase worker ownership, share-schemes, increase wages and try to build sustainable local industries and communities. It would be nice, but i'm not holding my breath.

no, IMHO the recession will end when the British Worker decides they no longer need 'British Employers', and take direct control of factories they work in, and build networks of similar cooperatives in order to work and produce.

http://www.newstatesman.com/south-america/2007/08/argentina-workers-move...

to put in the absolute baldest terms, what we Briton's need is to decolonialise OURSELVES, we are in virtually all respects now a dominion Nation, ruled and owned by foreigners or our own grotesque so-called Elites, it is time for Gandhi's lessons for India to be pulled out, dusted off, and looked at carefully.

there is one alternative - 1984, with our vaguely educated young sent off to die and murder in their millions, for ends as vague as "Empire", and "they hate us for our freedoms".

"Imagine a Boot stamping down on a human face forever..."

Never More.

gnuneo's picture

whoops - sorry, small correction to first post:

"because of the belief that with the introduction of mass-franchise, there would come a growth in social-democratic forces, and the People would slowly gain control over the Economy and Society."

writeon's picture

Martin,

I believe there is a lot of evidence that we are heading for a really deep and long recession, rivaling the Great Depression. I don't say this because I'm looking forward to it. I think most pundits, politicians, journalist and mainstream economists are substantially underestimating the size and consequences of the current 'credit crunch' or 'recession'. I think it's a slump of gigantic proportions and a Depression, that's just around the corner. If we escape a second Great Depression, it'll be by luck more than anything our political leaders are doing.

In a number of ways we are actually far more vulnerable to the effects of a deep recession than we were in the 1930's. This sounds very radical and not overly optimistic, but that doesn't make it untrue.

James Galbaith, son of J.K. Galbraith, was recently asked how many, out of the 15,000 economists at work in the United States, had seen the crisis coming. He replied that he thought about 15 of them had sent out warnings, only nobody was listening!

What this means is that we really don't have very many people in positions of power that really understand what's happening to the world's economy, let alone have ideas about how to stop the decline or even get us out of the hole we are falling into!

The economists we have are mostly the high-priest of Capitalism and they have faith disguised as science, wrapped in ideology. They believe that we'll bounce back and it'll be business as usual, only we are talking about the future and we cannot know what will happen. We could be entering a permanent 'recession' with the same people in charge that got us into this mess in the first place.

At the heart of the problems we face, simply put, is this massive, debt, blackhole-star, that's bigger than the entire planet's GDP. It's out of control and is sucking everything inside. It's so big it will probably swallow a quarter or perhaps as much as third of the entire US economy and it won't come back anytime soon.

writeon's picture

I've just come back from the beach, and when I was there it struck me that these 'bailouts' are doomed to failure.

Essentially our leaders are desparately trying to re-inflate a massive speculative bubble by pumping taxpayers money into it and borrowing even more. This is barmy because the 'credit crunch' was a result of the massive over-speculation on an historic scale.

Giving the patient more of the same desease, in an attempt to cure him, is a strange sort of medicine!

The point is, the economy is already way to big in many Western countries, especially the US and the UK. For years the economy has 'grown' through the creation of huge ammounts of debt, which gave the appearance of wealth and prosperity, only it was an illusion, based on faith, optimism and confidence, or rather an enormous confidence trick.

One could make vast ammounts of money by making money, not real products. The financial system and sector had rates of profit completely at odds with the health of the real economy and based on nothing at all. Rates of profit close to organized crime, the drugs trade and prostitution, and just as 'beneficial' for society.

This entire system is now collapsing before our eyes. A thirty year speculative bubble based on the creation of debt which hid the rot at the centre of the West's economy. One really big questions is, have successive governments in the United States and the UK, destroyed everything and will they drag everyone else down with them? Another one is, should the rest of the world simply write off the US and UK and refuse to finance their debt economies, cutting their loses now, rather than risk being sucked in even deeper into the maw of the black hole?

Tom Knott's picture

Just what kind of "bust" is this one? I recall the 1970's one all too well, and the consequences of the 1930's when my parents migrated and I travelled in the removals van. This one is not the same for a variety of reasons. History has seen many and various "busts", and it is difficult to sort out which may be the most comparable in form. That of the 1820's is tempting when Wellington remarked that we days away from a return to barter. My personal favourite is that of 1772, which has the right mix of elements. But I think that the one of 1847 could be nearer the mark in terms of its scope and effects. If so, this is one to be feared. And nobody is going to strike gold in the next few years to relieve it. The key aspect of the current crisis is that like many of the past, there are few, if any, people who can fully understand the complexities of what is going on in real time. And fewer who can really do something about it. When the gaps start appearing on the supermarket shelves for familiar goods and your favourite choices, you will really know that the blancmange has hit the fan.

taghioff.info's picture

Nice piece.

gayle's picture

Seriously, I think the whole United States’ recession thing has somehow affected everyone. It’s ridiculous to think that payday loans are responsible for the economic mess in America. Apparently, economists have marked December 2007 the “official” beginning of our current recession. The National Bureau of Economic Research (NBER) identifies top activity at this point, and the U.S economy has been deteriorating since then. The NBER describes recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.” It seems other organizations are in the same boat. Backed by the government, academics and the private sector, it’s as close to official as possible. These conclusions are based upon unemployment, incomes, industrial output and sales data. The highest point in employment and incomes was marked that December. In January, industrial output peaked and five months later, in the month of June, sales peaked. Democrats claimed this wasn’t a shock and called for an economic stimulus package. “The announcement simply makes official what we have long known: with rising costs of living, rising unemployment, record foreclosures and depleting savings, we must do more to help families make ends meet,” says Senate Majority Leader Harry Reid. So, this would mean that the proposal to ban payday loans is not a good plan. Reid highlighted that a recovery package must create more jobs, cut middle class taxes and instill confidence in the market and the people. Payday loans, and any other similar form of lending, have proven once again the magnitude of their importance in our economy. Click here for more information about http://personalmoneystore.com/moneyblog/what-are-payday-loans-2/, click the link.

VC's picture

Its a DESIGNED bust and I`ve been saying from the start that the "bailout[s]" won`t work. At the end of the day, the total bailout will be around $5 trillion.

The reason why UK plc suffers so much, is that we rely on two forms of so called wealth creation. The City and property....UK plc has no backup when the markets sink....never mind, after the NWO contrived war on terror, we had Iraq and Afghanistan.....I call this "layer cake". Now that most of the people have RUMBLED these NWO construct, they hatch the economic crash...and because this will ANGER a lot of people....yes, thats right, they`ll DUMP another layer of crap on us. Who knows what it will be, but be sure of one thing, it must eclipse the last NWO construct. :)

writeon's picture

Carl,

Please don't take this the wrong way. It isn't meant as a criticism of you personally. I've become used to your 'style' over time.

I used to own a house in London. I even used to live there. I bought the place on sort of whim, because I liked the staircase and the front room which seemed really fancy and cool to work in.

Imagine my surprise, some weeks later, when down at the bottom of the garden, behind a huge wall of jungle-like vegetation I discovered a shed and a guy who looked remarkably like a garden gnome living in it!

I couldn't figure out if he was sixty, ninety or a hundred and ninety and I didn't ask him. Anyway he talked a lot like you, but with a big dollop of William Blake thrown in for good measure. At first I thought he was totally barmy, but harmless enough. Then when I got bored I'd take him a cup of tea and some cake and off he'd go. I learnt to read his code and slowly I realized that buried amongst the avalanch of words there were insights and an acute mind, at least some the time, like the sun peeping out from behind the clouds.

I never got to know his name and my girls were not keen on going down to the bottom of the garden, anyway it was virtually impossible to get through the wall of vegetation and bushes. One day I went down with the tea and some fruit cake. It was the first warm spring morning, and the gnome was gone and he never returned.

VC's picture

writeon, is this a veiled warning? Truth fairies at the bottom of the garden eh? Its popular for men to seek sanctuary at the bottom of the garden and usually in a garden shed. Can you be sure this wasn`t a dream. In my mind, I am way beyond caring where I`m going....so far down the pipe that going back is pointless, I think they call it destiny. Maybe your gnome decided his work with you was complete.

I was posting on the BBC Today message boards about todays financial crisis...we are talking 5/6 (& more) years ago, the Fed money supply, credit being used to prop up the globalisation scam, Greenspans rock bottom rate cut, Bush`s tax break. The Today MD`s were supposed to be an elite forum, but they still mocked me (lol). I was posting about "extraordinary redition 18 months before the MSM picked it up and even then, they focused on Gitmo and Abu Ghraib....these being NWO MSM decoys.

The BBC and their dark forces masters pre-moderated and censored me. I believe without being too big headed, that I was one of the main reasons why the Today MB`s became totally censored with pre submitted topics and question. The poor Today team have to promote the dying MB`s daily until they were closed down.

I know I`m right, or should I say "hot to warm" most of the time....the level of censorship is a great indicator of success. The Newstatesman and their SIS back up censors are removing my comment[s] daily.

I`m fast reaching the point of holding public meetings in the local hall. I will soon (reluctantly) end my NS subscription and not long after that, I expect Ben to ban me from commenting. This will be further confirmation, that we are entering a new dark age. I know I`ve said this before, but you don`t know who is reading, maybe someone new wearing rose tinted spectacles.LOL

VC's picture

Osbourne is set on self destruction by suggesting there could be a run on the pound. But the real hidden story is, WHY IS THE DOLLAR SO STRONG?

This is because of the PPT "Plunge Protection Team". I won`t go into detail, but I recommend that you google away. Mr Bush likes the FREE MARKET!lol

There is no such thing as a free market. Just remember, both Labour and the Tories have resisted European employment protection laws. British workers are no better off than farmed animals.

If Osbourn isn`t careful, he`ll be found dead in the woods, or car crashed in some tunnel....although I don`t know of a British tunnel called "Bridge of Souls".LOL

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