It isn’t only that large swathes of the UK and EU are sinking deeper into poverty, mass unemployment and inequality, as the Red Cross rightly notes; it’s also that the UK economy remains profoundly dysfunctional and incapable in its present form of yielding sustainable growth. Regional imbalance has reached drastic levels, and not just since the crash of 2008-9. Outside London and the south-east there was no private sector job creation in the decade to 2008 when growth appeared still strong.
Today many of these regions deliver the basics of food, electricity and medical care, but almost no private sector entrepreneurial activity. The average size of a British-owned manufacturing company in the regions is now about 14, largely subcontracting workshops which hardly ever develop into large-scale companies. Almost no new major British companies have emerged during the past two decades and many that have managed to grow over long timescales have been swallowed up into global multi-nationals with their strategies now dictated from abroad.
Of course there are some companies that do make a crucial contribution to the UK economy. But they are too few and too fragmented to bring about any more than a sickly recovery and a weak investment base. So why isn’t all this being questioned? Why is attention so wilfully distracted by the Tories (and some in other parties) from the real causes of decline to such peripheral issues as EU regulation?
If there is to be real and genuine growth, there has to be a strong and stable foundation of demand. Yet none of the three political parties is arguing this with the force and persistence that is needed. Austerity still rules, and any voices calling for stimulus of the real economy (as opposed to generating housing bubbles) are marginalised. Even Mark Carney, the new BOE governor, was sidelined when he modestly advocated nominal GDP targets, i.e. establishing a goal for growth and inflation combined.
Real growth means creating ownership and financing structures that permit, indeed encourage, companies to grow as well as then staying British and not being bought off abroad. That is incompatible with a prolonged squeeze and a reflex dismissal of the public sector which, with the private sector still flat on its back, is the sole source of leverage to turn around an ailing economy.
What instead we are seeing is an extremely slow and anaemic recovery with no chance of any substantive follow-through once the economy returns to 2008 levels of output next year. For the trade balance remains unchanged despite a massive 25% devaluation of sterling, and company investment has suffered a 34% collapse together with real wages 9% below their 2008 peak and still falling. Till those fundamentals are addressed and corrected, there will be no recovery worth the name.
