Larry Elliott's Guardian article this morning is well worth reading in full. As he notes:
The service sector has just about regained all the ground lost during the recession of 2008-09, but the same cannot be said of industrial production and construction. After declining gently in the eight years leading up to the recession, industrial production subsequently contracted by 12% and after a double-dip downturn is now 15% below its peak. Construction has shown a similar profile. Activity flat-lined in the four years before the crash, dropped by almost 20% and is still 15% down even after the recent pickup.
That's not the sign of an economy that's out of recession. Far from it in fact, for as he notes (and as I have done likewise, often):
There are four ways in which an economy grows. Companies can decide they need new kit (investment); Britain can sell more overseas than other countries sell here (net exports); the state can play a bigger role (government spending) or households can spend more (consumption).
Right now I share Larry's view. Investment is pretty flat, export prospects are poor, government spending is under continual threat and so growth is based on consumer spending. This is, because wages are growing at a lower rate than prices, funded by increased consumer borrowing whether on mortgages or as worryingly, unsecured loans at high prices reflecting considerable vulnerability.
This is not surprising: this is exactly what the Office for Budget Responsibility forecast in 2011. This is the basis for Osborne's economic growth plan for the UK and it is coming to pass. If in doubt look at this graph based on 2011 OBR data, prepared by Duncan Weldon now of the TUC in 2011:
Household debt is the foundation of Osborne's recovery plan.
As Larry Elliott concludes:
Most likely, growth will be dependent on easy money, rising debt and a temporary fall in inflation prompted by falling food and commodity prices.
Osborne hopes this will deliver for him. But there is a problem. It is this scenario that delivered the UK's bigger than average economic crash in 2008 and right now we're heading there all over again. And that's deeply worrying.
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And yet, the right always insist that excessive levels of debt, public and private, are the fault of the last government, or ‘socialists’ in general. Odd that! As usual, the right will do anything but admit their responsibility for the mess we’re in.
if I remember rightly, average household debt is around £7000 and with continued wealth transfer via housing bubbles this will get worse. The idea this Government is for ‘hard working people’ (as their pathetically trite slogan goes) is risible to the point of transparent piss-take!
“After declining gently in the eight years leading up to the recession, industrial production subsequently contracted by 12% ”
Isn’t that a key: even during the growth years, even under Labour, industrial production constantly declined. Labour’s idea was simple: let the city grow uncontrolled to fuel uncontrolled spending on the public sector. Nothing else mattered. No Keynsian saving up for a rainy day, no prudent worrying about what problems may be stored up: just carry on sending the cheques, no questions asked, and we’ll spend them, no questions answered.
Of course household debt will grow: no politician dare speak the truth that people ought to live within their means (whereas they are all willing to speak the lie that countries must live within their means). What matters is economic growth, and only the headline figure at that.
An entire economy based on eradicating industrial production, the mass importation of cheap labour and having people spending money they don’t have on foreign stuff they don’t need and on the most obvious housing bubble in history. What could go wrong?
Given that there is a lot of “hidden” inflation at present, it you ally known to hidden, and then compound it with rising debts then it means increasing risk. Also at what rates of interest? If this debt is paying market rates as opposed to managed rates and is being turned over you have all the longer term effects of compound interest. There are not many household budgets that have a lot of scope to take the strain of all this. So when it all goes bad it will go very bad.
The ensnarement of the vast majority in debt is legalised extortion.
Taxation allows their admission to a fairer society, a more equal playing field, where they have a chance to progress.
The absence of taxation, ensures that the opportunity to advance is restricted to those that are able to enter a different playing field, one attached to Eton and their kind.