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Is this ‘recovery’ already fading?

There are several signs in the wind that Osborne’s ‘recovery’, which he so relentlessly talks up at every opportunity, is not going anywhere. Carney, Osborne’s man at the BoE, has declared the recovery “neither balance nor sustainable”. It is certainly not balanced, despite all the rhetoric about bringing that about, as the chasm between finance and manufacturing grows ever wider. Nor is is sustainable when its foundation in household credit expansion is clearly limited by the continuing fall in wages and when the real pillars of sustainability – business investment, high productivity and rising net exports remain prominent by their absence.

From another direction altogether which must make Osborne wince, the hedge fund king Soros has been putting his deep pockets where his scepticism leads him, which is not to back what seems the inexorable rise in the US stock market, and by extension the FTSE recovery. This is the man who gambled against the £ in the face of huge self-confident government hype, as now (but then by Tory Chancellor Norman Lamont), and forced it out of the ERM in 1992 and then got it right in predicting the credit crunch 15 years later, so his opinion is worth taking seriously when he’s put a huge bet behind it.

But the whole issue begs the question: what is meant by economic growth? There is the growing polarisation between the 1% and the 99%, between London and the rest of the country, between the swelling army of the lowest paid and the comfortably well-off. So what sense does it make to talk about averages spanning such incommensurables? Moreover, what sense does it make when the economy is increasingly financialised, i.e. ‘growth’ reflects financial transactions which don’t actually make anything while manufacturing, which does, wilts ever further? What this means is that the ONS and OBR figures so confidently peddled every month or every 3 months no longer reflect the reality on the ground.

This was recently confirmed by published data on the car industry, the one manufacturing area which has been acclaimed as a great British success story. UK factories have increased car production by 45% over the last 4 years, but over the same period the average director of the 6 largest car makers have taken home a 19% increase in pay while the average real terms salary increase has been just 2.3% and the wages of the lowest paid third of the workforce have fallen over 7% (according to ONS figures).

So over the last decade employees in the finance industry, overwhelmingly in London, have increased their share of national income from 1% to 15% but not produced anything, manufacturing has continued to shrink mainly because the exchange rate is still too high, the rise in agency workers and temporary contracts even in Britain’s most successful industry (motor vehicles) has pushed down wages despite rocketing sales, and 4m workers still get paid below the Living Wage. Call that growth?

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