It’s official. Manufacturing is in a slump. The rest of the economy may be following not far behind. The boom years of the late 1990s are ending with a thud. Roll on the recession: it’ll be good for the British soul, and it’ll teach our Chancellor and Prime Minister a lesson.
Why, you might ask, perhaps as you enjoy your sun-drenched holiday, or look at your latest note from your building society announcing a new cut in rates, do the economy and the government deserve such a dressing down? Because our affluence is built on sand, our assets are a chimera, and this Labour administration has connived in the deceit – just as the Conservatives did before it.
There are, broadly speaking, two types of comfortably-off folk in Britain. Most of them live in London and the south-east. Category number one comprises financial whizz-kids and fat cats. They can be of any nationality (think Luc Vandevelde at Marks & Spencer); they count their wealth in zeros; the younger ones are usually found shouting loutishly in bars outside Liverpool Street on Friday night, their taxis waiting dutifully for them; remuneration packages bear little resemblance to performance (the more boardrooms you can be removed from, the more you seem to get).
Category number two includes more “ordinary” people, mainly professionals. They are paid reasonably well, but their sense of financial security comes almost exclusively from the value of their property. In a good year, the increase in the value of their home can be greater than the amount they have earned.
These two groups have little in common except that the higher end of the housing market has been inflated beyond all proportion by the influx of market makers and movers from Europe, Asia and the United States. Those in the middle have ridden on their backs, while those at the bottom have suffered. According to a survey by one estate agent this week, more than 800,000 people are locked out of London’s housing market.
For all Gordon Brown’s talk of ending “boom and bust”, of tackling the structural weaknesses in our economy, of increasing “fairness”, the Britain of 2001 looks remarkably similar to pre-recession 1988. Then, property prices bore little relation to the fundamentals, many of our companies were in poor nick, and our material consumption was copious and brash.
Tony Blair and Gordon Brown love to lecture the rest of the world, and especially Europe, about Anglo-Saxon economic virtues, just as Margaret Thatcher used to do. Blair first handbagged our European Union partners at a meeting in Sweden in 1997. That was deemed a mistake, but he was at it again last week in Mexico, talking about the French. I mean, just look at the French (and the Germans). They still produce things. It is their media conglomerates, such as Vivendi and Bertelsmann, that are taking on the Americans, not ours. It is their retailers that are setting the pace, not ours. And it is their manufacturers who for decades have run rings round ours. Even our IT industry, seen as perfect for Britain’s “high skills” market, has underperformed.
Overall, our productivity is improving, but it still falls way short of theirs. As for management skills: which other country would have countenanced Gerald Corbett as chairman of Woolworths after his performance at Railtrack? And which other country would have stood back as Marconi went into free fall?
So what are we good at, apart from financial services? We are one of the market leaders in flogging arms, which is why Blair squashed attempts by Robin Cook and others to pay more than lip service to a more ethical foreign policy. Perhaps he had no choice: too many jobs are at stake.
For all the talk of the UK and the euro-zone insulating ourselves from the downturn in the US, we appear to be heading in the same direction. Many people in category one will be hit (no tears will be shed); many people in category two will be hit (a few tears will be shed).
As ever, the real victims will be those on low wages with little job security. Yesterday’s manual labourer is today’s call-centre robotron.
The government’s crime is not its failure to change the rules of economics, but its pretence that it could. We are more at the mercy of external corporate forces than we ever were. Ministers have been careful to keep the rhetoric in check (we’re all familiar with the Chancellor’s “prudence”), but through inaction they have allowed the myth of our Thatcher-inspired prosperity to continue.
Little has been done to put pressure on management to improve performance. Plans to give shareholders more say in remuneration packages were, typically, put back. Manufacturing (what’s left of it) is regarded as an unfashionable offshoot, while everything possible is done to curry favour with the City. Again, perhaps, the government’s bequest from the Tories gave it little choice. The flight of capital to Frankfurt, the home of the European Central Bank, that was feared a few years ago had to be avoided at all costs.
We will now pay the price for this short-termism. Our over-reliance on one sector (financial services) is desperately unsafe for the national economy; our over-reliance on one sector (housing) is equally unsafe for our personal finances.
And what about the broader, moral, questions? Didn’t Labour at least hint that it thought Gordon Gekko might not be our role model? Have Tony Blair and Gordon Brown even tried to change our economic culture?
As some of our bankers get that visit from human resources, accompanied by the security guard with the bin liner for their possessions, and as some of our home-owners remember how to spell “repossession”, these are thoughts our leaders might ponder.
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