TheWithout lessons, repeating the same failure over and over while expecting a miraculously better outcome, the Bank of England might call for a return to the gold standard. Raising interest rates as the UK faces its longest recession since records began is not a way to repair the damage done by economics and the longer impact of George Osborne’s austerity, nor is it a way to breathe life into a faltering economy.
The 0.75 percentage point increase – from 2.25% to 3% – is the largest since 1989. Millions of mortgage and rent payers will be hit hard, on top of falling real wages and rising costs of everything. An Ipsos survey for Sky News found that more than a quarter of adults have started using credit cards to buy food — and a fifth have borrowed money to adjust to higher prices this year. Inflation has reached its highest level in 40 years.
In two weeks, Rishi Sunak and his advisor, Jeremy Hunt, will take money and life out of the economy by cutting spending and increasing taxes. This rate hike and the coming additional austerity are choices made by those who mismanaged the economy to leave us with a poorer country and bleaker prospects than when these state slackers took over in 2010. They’ll argue it’s all down to COVID and the war in Ukraine, With no explanation as to why Britain is the only G7 country with a smaller economy than it was at the start of 2020. They have lowered living standards for the “poor”, while the rise in the value of shares and property magnified the assets of the “rich”. Higher wages have gone up, and most wages have stagnated.
The UN’s anti-poverty envoy, Olivier de Schutter, warns the government to put pressure on the poor even more. But even if rates are raised with inflation, cuts since 2010 leave 22% of people in poverty, and the UK is on track to be Europe’s most unequal, with the exception of Bulgaria.
Now everything is slowing down – such as construction and services. It is symbolic that the government has refused to bail out the Britishvolt electric car battery plant in Blythe, Northumberland, threatening the future of the auto sector. The hardly left-wing CBI warns of a perilous cycle of service cuts and tax increases.
The histories of the state of public services and their capitalist ramifications make for a bleak reading. Don’t be fooled if the NHS is touted as ‘protected’ while other departments are taking a harder hit: its current budget plus ‘efficiency savings’ does not cover inflation and payment, so its backlog will not decrease. Amanda Pritchard, chief executive of NHS England, says she is in worse shape than she was in the early days of Covid.
School spending in real terms per pupil and teacher salaries will remain well below 2010 levels by the time of the next elections. Social care has “never been this bad”, says Sarah McClinton, president of the Association of Adult Social Services Managers, with 160,000 job openings to fill, because people aren’t willing to work hard for so little. The government and the Bank of England will welcome expectations of higher unemployment, putting an end to the fictional “wage price spiral”, and hope that people will be pushed into jobs paying below subsistence levels. Dirty Britain’s Environmental Protection Office says air and water pollution targets are missing.
It is as if John Maynard Keynes never proved the needless damage done by interruption during a slack, causing a long slack. Expect more false language such as “We’ve maxed out our credit card”. Will people again be deceived into believing that the national debt is the same as the family debt? Keynes called his policy the “paradox of thrift,” as it goes against every intuitive instinct to spend your way out of stagnation.
It’s hard for Labor to explain a policy that challenges the economy’s stifling austerity, but shadow chancellor Rachel Reeves made a good attempt on Thursday when she promised that “her party’s real plan for growth means we can thrive – and not just walk away from a Conservative crisis into a crisis.” The Green Prosperity Action Plan to invest in renewables, insulation – and yes, battery plants – is the Keynesian response.
Let’s hope Dr. Dom exaggerates, but Nouriel Roubini’s book “Giant Threats,” published this week, warns of a new global depression that’s worse than the previous one. He’s earned his title as the only economist who predicted the big bank crash of 2008. Listen to him, and you’ll want to hide under the quilt, as he seems to suggest there’s almost nothing he can avoid, with omnicatastrophes popping up thick and fast. Hope and optimism are rare at the moment, but Labor must continue to promote them with fervor.