This tweet summarises the state of play now forecast for the UK economy as of this morning:
The collapse in the UK services, manufacturing and composite PMIs - key measures of activity in the economy - are unlike anything you’ve ever seen before. Well, unless you’ve just seen the ones for France and Germany. Not just worse than the financial crisis. Leagues worse. pic.twitter.com/bfJZqgF7U0
— Ed Conway (@EdConwaySky) April 23, 2020
I confess that the only thing that surprises me is that people seem surprised about this.
When we are paying 4 or more million people, maybe, to do nothing and there are 2 or 3 million more people unemployed, plus massive underemployment elsewhere, what else did anyone expect? Candidly, why were they so sanguine, optimistic or naive (pick your term of choice)?
I have not been optimistic about this at all since sometime in mid to late February, when I realised just how hard some businesses were already being hit, most especially then in the hospitality sector.
And still money is not really reaching business. Support, so far, is just £2.8 billion by way of loans, mainly to large businesses. For the rest, who also employ most people, the support has been very weak or non-existent.
On top of which we now know that the scientific advice - clearly stated by Chris Whitty at the daily briefing yesterday - is that lockdown has to last at least for the rest of this year, and as I heard him, for at last twelve months. The scientists are going to refuse to give the politicians an 'out' on that one.
The truth is we are going to have to rethink our economy in a way we have never done before.
I'm doing tax right now. I may need to do the economy too. Because it seems most so-called experts do not get this. Which is pretty depressing. Expertise is meant to, in my opinion, let you think outside the box. That's very clearly not true of a great many right now.
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Dean Baker is trying to think outside the box, it’s going to be rough ride, we are in emergency mode right now,maybe the detail cannot be done until we are out of that emergency. But I feel the world is ripe for major changes when we do.
https://rwer.wordpress.com/2020/04/22/debt-and-deficits-with-the-coronavirus/
Good article
I thought so too.I like his views as he was one of the leading voices warning of the 2008 financial crash,not that makes him infallable.
I have read his free book,it’s well worth a look. He is the only one I have seen advocating stopping patents and copyrights and replacing it with state funded research. No idea if that is feasable but he is very convincing.
But the idea ties in with your own ideas on the rentier economy we have built. This is another form of rentier behaviour that does us all no good.
Precisely….
Very closely aligned there
I understand Dean Baker may be an advocate of ‘evolutionary economics’, a heterodox school of economics that borrows ideas from evolutionary biology, and emphasises adaptive efficiency. I have not studied evolutionary economics and hesitate to comment (perhaps I shouldn’t, but that wouldn’t be very ‘evolutionary’ of me, would it?); trial-and-error, after all is the natural stochastic method of deciding between survival and extinction in thenatural world. I like the emphasis on adaptation, which requires more emphasis on fewer fixed assumptions, over-simplified concepts and over rationalised prescriptive models than the ponderous edifice of mainstream economics allows.
It is strange at this difficult time, just how much opportunity for new ideas seem to be bubbling to the surface.
Indeed…
I only read Dean’s work occasionally but invariably like it
Complex system (Evolutionary economics and biology being examples) show that systems become ever more rigid as “error correction” systems lock in a particular behaviour.
Periodically and “annealing” event occurs where the error correction systems are neutralised. This is when rapid changes happen. ( Think mass extinction events followed by species “explosions”)
We are going through an annealing event, so it isn’t surprising that innovation has never looked so likely.
In a sense evolutionary economics is returning to its roots. Adam Smith and the literati’s economics and social theory was essentially evolutionary.
And yet the Dow Jones is only 20% down from its peak.
There seems to be a whole world of denial going on!
You are right Ken
It’s utterly bizarre…
One thing is very clear to me, those in the government who really understand the scale of the economic carnage, don’t look forward to the lockdown ending, because much like with a flood, the true extent of the damage is only visible when the waters recede. The end of the lockdown, will be the end of the ridiculous belief (although the most prevalent one amongst both Conservatives and Labour politicians) that things will quickly return to normal, with little more than a few beats having been skipped.
Already we’ve had the idiot Raab rule out any kind of UBI measures, with Starmer very much in agreement.
I agree
That is the era I am now really worrying about
And the FTSE is 2,000 points higher than its low point after the banking crisis of 2008.
What are those traders on ??
They “are on” the idea of vast quantities of QE coming their way. It’s a giant rigged casino ,enter at your peril.
Might the Dow be reflecting the vulture funds?
Are companies using savings to prop up their share values?
Hedge funds?
There are lots of seen ‘unseen hands’ at work here – think about 2008 and what we learnt then.
Remember that those who operate there are not normal people – they do not think like normal people at all.
It is reflecting the rents
The excess profits companies earn under gov’t granted licence
Banking, oil, minerals, copyright, planning etc
Some aspects of land ownership
The capture of the state for private gain
“Are companies using savings to prop up their share values?”
What do you mean?
Savings = daved costs = propped up share value?
Some may be doing that
Once again, I will offer my solution ( yes it is imperfect, but I challenge anyone to offer better!)
“Nationalise 2020”, Make EVERY transaction in 2020 be with the government.
Restart the “Mixed” economy on the basis of the economy as of 1st Jan 2020.
The equivalent of restarting a saved computer game.
But that’s impossible
Thinking outside the box means changing the status quo which, I imagine, is why there’s strong antipathy to it from within Establishment circles.
The Stock Exchange levels are reasonable if you include an “Asset Inflation” factor. Its not the assets that have lost value it is the $ and £ they are measured by.
It make acquiring assets even more unobtainable from income.
Capital does not expire, a day available to work is lost each day.
There is hope yet Richard…
1) https://www.rt.com/uk/486533-universal-basic-income-post-lockdown/
2) Remember some of my previous commentary about ‘encouraging’ the prompt release of £ from financial institutions
3) Bring on Edward de Bono as a Special Advisor to stimulate fresh economic thinking
4) Engage in extensive public infrastructure works across the UK. Provide opportunities for all
5) Government to sell ‘Corona Bonds’ to citizens to raise more £ + Massive sale of REALLY favourable Gilts, encourage confidence in the UK
6) Emailed
To peek outside the box, we need to face: “1. The Arctic is overheating 2. The Great Barrier Reef is dying 3. Rainforests are collapsing 4. Permafrost is thawing 5. Antarctica is unstable 6. Habitat destruction’s accelerating 7. Emissions are increasing 8. Extinction is here.” Ben See @BenSee
Ben is a literature teacher who appears to be more in touch with climate and ecological realities than most of us have the stomach for. Meanwhile, most of the media wants to cheer us with speculation about football matches, motor sport and the Olympics. In another post Ben said, “1. I’m optimistic 2. A 2020s sea change may happen 3. Action brings hope; act if you can 4. Tomorrow promises possibilities 5. Solidarity won’t vanish 6. Geological Time isn’t worried 7. Relieve suffering, feel good. Who knows exactly what history the future holds.”
If the human biosphere is to stand a chance, manufacturing aircraft and motor vehicles looks like a dead end. I judge that the gamblers and insider traders of the City of London are unlikely to provide a remedy.
Meanwhile, “Just three weeks into the lockdown, the Food Foundation said that 1.5 million Britons reported not eating for a whole day because they had no money or access to food. Some 3 million people in total were in households where someone had been forced to skip some meals. More than 1 million people reported losing all their income because of the pandemic, with over a third of them believing they would not be entitled to any government help.” https://www.theguardian.com/society/2020/apr/11/uk-hunger-crisis-15m-people-go-whole-day-without-food
Last month, Professor Tim Lang, our nation’s food guru, said “Britain’s food supply system doesn’t work” with regard to diet, health and inequality. He tells us “Of the six million hectares of cultivatable land in Britain, only 168,000 hectares are used for fruit and vegetables. As a result, we have to import vast amounts of crops we could otherwise be growing. Much of the remaining land is used for crops to feed livestock or for processed foods.” https://www.theguardian.com/environment/2020/mar/22/tim-lang-interview-professor-of-food-policy-city-university-supply-chain-crisis?fbclid=IwAR1sr8xFmGnXabyZegiGFb6VVVbs4U0wqpTeUvdlMsEM7LHr8R7Qum_BvwA
There are some similarities with the situation in Cuba when the Soviet Union collapsed in 1991. The state lost access to oil, fertilisers and export trade markets and faced a rapid economic collapse — plus an immediate crisis – that of feeding the population — starting with 80% less food. The country transitioned from a highly mechanized, industrial agricultural system to one using organic methods of farming and local, urban gardens. Their model is based on conservation, co-operation and community. Lawns, road-side verges and thousands of unthought-of patches of land were brought into use. FARMING BECAME THE BEST PAID PROFESSION and in terms of food the nation thrives. https://www.permaculture.co.uk/news/0209111070/view-cuban-permaculture-film-power-community-how-cuba-survived-peak-oil
As well as electric bikes, wind- and solar-farms, we need greenhouses. Our nation needs to grow food.
I trust Tim
But he’s an old mate of mine, form long before we were colleagues at City
If the current health and economic shock doesnt change opposition to the search for suitable alternative economic models, the impending international famine will force it. Our current economics will need a back to the drawing board approach with ultimate gusto.
Richard,
I offer “out-of-the-box” thoughts and you immediately say “impossible”, “ridiculous”.
It would be more helpful if you gave a few reasoned responses, so these problems can be addressed. Better would be your ideas you think are “possible” or not “ridiculous” so we can critique them.
I am a successful “Disrupter”. I am used to vested interest asking for innovation, in order to shut them down before they have been refined into a good idea. I didn’t put you as one of them.
You ask how we could rebooting the economic system. I answered, in a similar way to how we reboot a computer system.
You ask how universities can survive. I answer with innovation, using all the tools available, not just “face-time”. Yes, Video isn’t as good as in-person, but everyone is adapting to the situation, universities should too. ( And contrary to your assertion, the undergrads in my village are NOT getting taught on-line currently)
Peter
Let’s be real here
I am a disrupter
But I know that running away to a small commune is not disruptive – it’s running away for a privileged few
And pretending we can flick a switch and restart is simply not possible
So I was presuming I’d get – and have got – many real world suggestions
Richard
My Norfolk Redoubt isn’t me running away, it is my insurance policy. More fool anyone who is relying on our government to provide them with long term security. They certainly prepared for this crisis well!!!!
That I am testing the ideas I propose there, in a small “petri-dish” is I think sensible.
You know I am not saying rebooting is “flick a switch”, but a way to simplify and make the reboot understandable.
The only other ideas I’ve seen on this blog are rehashes of old socialist policies that have repeatedly failed.
Then you neither know history, and cannot differentiate from it
That claim simply does not stack
There’s clearly no shortage of ideas on how a new, sustainable, GND-syle economy could be designed and implemented. Many have been around for decades. Books have been written!
Both the exponentially growing ecological crisis and this particular pandemic should serve to focus the attention of governments as to the urgency of the situation and – as you say – to ‘think outside the box’. The prevailing insurmountable problem is how to get a government elected that both understands the issues and with a big enough majority to implement the requisite policies at macro and micro levels. On that score there is no chance. In this country hard-line Tories are prepared to jeopardise the future socio-economic well-being of the nation via a combination of ignorance, hubris and ideological myopia.
If, as you imply, the economy could unravel at an unprecedented rate, what’s the political answer? A coup d’état? I don’t think so. I suppose the economy might deteriorate to a point when civil unrest becomes a threat to the government, resulting in continuing emergency policies just to keep the pitchforks at bay. This could bring enough temporary stability, buying time for the formation of a credible opposition that just might stand a chance of winning the next election. A lot of ‘ifs’, ‘buts’ and ‘mights’ with no certainty.
Because of the ever-shortening window of opportunity triggered by the COVID, I don’t see how these desperately needed changes can be implemented in time to avoid the negative outcomes that have been studiously and forensically predicted and are currently materialising. Long-term planning is now a luxury of the past. In reality mass street demonstrations, as discussed earlier, seem to be the only viable option that might force an early GE. But I’m desperately clutching at straws.
We have to live in hope
I am quite sure XR is back
And I happened to see someone very recently ex-military on my walk tonight and we chatted from a safe distance
They apparently believe that deaths will have five 0s in the total and a significant digit at the start. Actually, we even agree on that that was likely to be
It’s going to get a lot of people very angry
The fat lady has not sung yet
Difficult to have mass protests if we are social distancing!
They are doing it in Israel, amazingly
I am getting increasingly frustrated at television news and radio allowing speakers to voice opinions about government borrowing. I have heard George Osborne on radio saying the UK will have to repay debt. No one has asked any of these people who is lending to the Government. Sovereign nations are not lending, private institutions are not lending because the same economic factors are affecting them equally as the UK.
Can someone in news organisations, interviewers etc next time they are told that the UK will need to repay this borrowing please, please ask who do they think has lent anything to the UK. Name one organisation or country that has transferred funds to the UK that will need to be repaid. There is no borrowing in the sense that some body has given the UK some loan.
This has to be the moment where an understanding of Government finances is realised. The media are letting us down by not asking the obvious question. Who is going to be repaid. Name them if you can. I suspect Osborne and his ilk will struggle to put a name to a single creditor.
The ignorance is staggering
Alas, it may be more than ignorance!
Can you really believe that anything will change for the better for the bulk of the population. We have a right wing government with a large majority. They are not going to relinquish power without a fight. The will direct all the resources of the state towards suppressing anything that looks like redistribution or a reduction in inequality. The police will be beefed up. Dissent will be punished. A large mass of people who were punished during Thatcherism voted eagerly to support this lot and the only guy who was arguing against it was rubbished by the media and sadly, you. One moment you were all for nationalisation, the next, you were against it. You say you are a disrupter but the evidence during the last election and since doesn’t support that.i think blood will flow before anything changes in this poxey country. The only point we agree on is that nothing will be the same again. No, but it certainly won’t be better.
If you think the world is black and white and that there is always just one solution to any problem of course you will despair
I know the world is not like that
Even nationalisation has many nuances. I reflect that in what I say
And yes, I do think change is possible
I didn’t elaborate on my post a few days ago:
Plant, nurture and prune.
It is about allowing people to get on with stuff (plant) and for government(NGO and councils etc) to think about what it can do to encourage/enable (nurture), the final bit – (prune) is about giving some shape and refinement to what has been started.
At every stage the question is ‘how can I/we make this better’. It removes the command/control basis that is current government action and instead enables people to get on with their projects.
It might e.g. decide to look at young offending and actually put some funding into earlier support/intervention with troubled children – rather than building more prisons.
It might change the basis of NHS compensation claims, by bringing in an Air Accident Investigations Branch type approach that tries to establish why things went wrong rather than encouraging a culture of cover up.
It might encourage greater transparency in all areas of government – sunlight being the best disinfectant.
Anyway, we won’t be needing any of this as the Great Brexit (non)Job Creation Programme gets underway.