The economic news is so unremittingly bleak that any sane Chancellor would now be changing course before the country tumbles into the ditch (i.e. a double-dip recession). Not Osborne. But the real clincher isn’t just the appalling rise in joblessness for 18-24 year olds to more than a million or the total rise in unemployment to the highest level for 17 years, or even the slashing of the growth forecast for this year from 2.5% to just 1%. It’s the de-industrialisation which last year produced a UK deficit in the trading of goods of £98.8bn, by far the UK’s worst performance ever. The last time Britain ran a surplus in traded goods was in 1982, almost exactly the 30-year span of the neoliberal era. No country can survive a mounting gap between exports and imports on this scale. The UK’s current economic course is simply unsustainable. So what should be done?
Three fundamental changes are needed. First, Osborne’s obsession with scorched earth austerity should be urgently replaced by a public sector-driven jobs and growth policy financed by quantitative easing, not supplied to the banks because they would selfishly use it to consolidate their own balance sheets and not for lending to SMEs, nor to the big corporations which are already awash with funds, but to create jobs directly in housebuilding, energy and transport infrastructure, and IT and equipment for the new green digital economy. If spent in this manner, QE of £30bn, far less than is being proposed at the present time, would create 1.5 million jobs.
Second, what lies behind the untenable balance of payments deficits is the hollowing out of UK industry over the last 30 years. When Thatcher came to office in 1979 manufacturing accounted for 30% of Britain’s national income and employed 6.8 million workers. By 2010 it was down to just 11% of the economy and a workforce of only 2.5 million. That has to be reversed by putting far more resources into improving productivity and skills training, protecting strategic sectors from foreign takeover, restoring key supply chains which have been broken by over-ready selling-up, incentivising the increase in market share over short-term profiteering, and helping SMEs to upgrade to higher tech so that they are less exposed to Asian competition.
Third, control of the money supply should be taken away from the commercial banks, which are responsible for the exponential increase in consumer credit and housing asset bubbles over the last 30 years, and returned to public control in order to ensure that priority is given to industry and exports rather than foreign speculation and tax avoidance, to long-term investment over short-term profiteering, and to productive rather than unproductive allocation of capital.
