The ‘UK recovery’ isn’t really the UK’s at all – it’s the richest 10%’s, and represents the revival of the kind of grossly unequal, unstable and ecologically catastrophic economy that got us in this mess in the first place.
George Obsorne was on the telly talking about growth, and he looked very pleased with himself. Not a last-minute hormonal spurt making him finally tall enough to ride the log flume at Alton Towers, not the sudden, much-delayed maturation of his long-lost empathy glands making him go home and rethink his life – growth of the dry, dead-behind-the-eyes economic variety.
The Office of National Statistics has reported that the UK economy grew by 0.8% over the last three months. Compared to the sluggish expansion we’ve seen in the six years since the financial crisis, that’s relatively fast. More significantly, it’s taken us above where we were in 2008 – for the first time, the UK economy is now bigger than it was before the financial crash knocked it off its steady upward trajectory.
For the Conservatives, this is of huge symbolic importance – it lets them claim that their much-maligned economic strategy has defied the naysayers and ‘worked’. We’re now back at ‘pre-crisis’ levels. With next year’s General Election looming, the Tories will no doubt do everything they can to spin that undeniable mathematical fact – that the economy is getting bigger again – as proof that the UK is ‘recovering’ under their careful stewardship.
They’ll probably do quite well at convincing people, because modern politics, at least as ordinary people have been taught to understand it, is all about ‘growth’. In the strange, skewed, simplistic worldview we get beamed at us from every conceivable outlet nowadays, ‘growth’ is universally, unassailably good. A growing economy is good. One that isn’t is bad. ‘Getting back to growth’ is the irresistible imperative of mainstream politics – it’s not about which party has the best ideas or the nicest values, it’s about which one will result in the most growth. Elections, accordingly, are about as meaningful as picking a brand of lawn fertiliser (even if the one in the red packet remains ever-so-slightly better than the one in the blue).
But if we waft away the cultural fug that surrounds it, what is economic growth? What does it actually boil down to? Essentially, it’s more people spending more money on more things, more people selling more goods and services, and more money being paid out as wages and accumulated as profits than there was before. That’s it. A country’s total economic output is totted up, then expressed as its GDP, Gross Domestic Product.
With UK GDP growing 0.8% in the space of just a few months, some forecasters are predicting that it will be up 3% on 2013 by the end of the year. And that sounds lovely. More wages, more businesses doing well – how can that be bad?
For quite a few reasons, as it turns out – not least the ecological spanner in the works we’ll get to later. Firstly, distribution. GDP just counts up the country’s economic output – the whole of the UK, from Land’s End to John O’Groats. But the whole of the UK doesn’t have to be growing for the ‘national’ economy to be growing. It’s entirely possible for most areas of the country to be economically stagnant or in decline, while just one region enjoys stratospheric growth – and as long as that growth exceeds the rate of shrinkage elsewhere, the country’s still officially ‘growing’ as far as GDP’s concerned. The same goes for social class – the vast majority could be getting poorer, but as long as the very richest are getting richer, faster, that’s still ‘growth’, even if the benefits are restricted to a tiny minority.
And then there’s the thornier issue of what actually constitutes ‘good’ economic activity. GDP is amoral. It doesn’t care what kind of economic activity is spurring growth. It’s just interested in whether there’s more or less of it than there was last year. It’s just there to count. Earlier this year, parts of Somerset were devastated by floods. Given the eye-watering price tag required to repair people’s homes, dredge the rivers, shore up and extend flood defences, rebuild vital infrastructure and the like – and all the people the reconstruction effort will employ – the floods were good for growth. Disease is good for growth. Death camps create jobs. Factories making chocolate fireguards would contribute to UK GDP.
Look at the UK’s ‘recovery’ in close enough detail, and you’ll see both these factors at play – one area of the country growing (surprise, surprise, the richest parts of London and the South-East) on the back of activities that are socially useless at best, socially damaging at worst, while everywhere else bar Scotland declines.
Late last year, analysis by the Guardian made the unevenness of the recovery startlingly clear. Between 1997 and 2006, London and the South-East enjoyed 37% of the UK’s total growth in output. From 2007 onwards, this jumped to 48% – which obviously entailed the vast majority of the rest of the UK growing less.
If you want some clues as to exactly where this south-easterly growth-spurt is coming from, it’s a good idea to look at who and what the big banks are lending money to. The answer, funnily enough, seems to be ‘each other’.
Lending to individuals, to small businesses, to manufacturing, to other ‘productive’ industry, has all fallen. The only sector of the economy getting more now than it was pre-crisis is the financial sector – which, crucially, includes real estate. It’s another grim symptom of how warped our understanding of economics has become – we only really see ‘debt’ as something that’s a problem for individuals at one end, governments at the other. But banks and bankers borrow colossally to buy things, and invest in things, and fund the socially useless, privately lucrative speculation that drives up the prices of housing, food and whatever else the financiers decide to try and leech money out of. And where in UK finance overwhelmingly based? London, and the twin reality-proof bubbles of the City and Canary Wharf.
So this jump in interbank lending suggests there’s an upsurge of activity going on in the banking sector. For confirmation, we can look to a study jointly published by the Confederation of British Industry and accountants PricewaterhouseCooper – in the last three months of 2013, they found, 10,000 more people started work in the banking sector. They predicted 15,000 more would start in the first quarter of 2014.
Earlier this year, Osborne and Mark Carney, the Canadian bloke they’ve got in to replace Mervyn King as boss at the Bank of England, claimed that 280,000 jobs were created in just three months last Autumn – 450,000 in 2013 as a whole.
So finance aside, where else are they coming from? Thousands of people giving up on trying to get stable work and going self-employed – many of whom will end up earning less than the minimum wage. Thousands of minimum wage, zero hour contracts. But 76,000 of them, it turns out, are in estate agency – apparently due to rising house prices. But that’s very strange. Because almost everywhere in the UK, house prices are still well down on where they were pre-crisis, if you ignore inflation, and not growing very quickly at all. Almost everywhere – except London and the South-East. In London, property is surging at a ludicrous rate (house prices up 10% in the last year, and 10% in a single month in some boroughs) largely thanks to financial speculation – a study by research firm Savills suggesting that as many as 85% of central London new builds have been bought up by foreign investors in the last year.
In short, then, ‘the economy’ is recovering. Unfortunately, it’s the exact same economy we had before – the one that saw the UK’s fortunes ‘hitched to a few industries in one corner of the country’ while letting ‘other sectors like manufacturing slide’ to quote a 2010 speech by one David Cameron.
The Prime Minister’s criticisms of the status quo were bang-on, but didn’t go nearly far enough. That economy let the so-called Masters of the Universe, a feral elite at the top of the banking sector, squeeze millions out of exploiting and manipulating the wants and needs of ignorant, vulnerable ordinary people. It saw the already rich rocket to untouchable new heights of power, and wealth and influence, while an increasingly large wedge of the population, much bigger than just the post-industrial ‘underclass’, slid further and further towards poverty. It turned London into a ‘giant suction machine, draining the life out of the rest of the country’ (Vince Cable), gobbling up resources, investment and people, while swathes of the North and post-industrial pockets in the West and the South were scrap-heaped along with the millions who happened to live in them. And it’s this economy, right down to the massive over-reliance on London-based finance and the property market in the South-East, that’s being brought back to life.
Here’s Part Two.