UK economics – brilliant if depressing article from Paul Mason

We don't want you to go into the weekend on a gloomy note, but this article from Paul Mason of the BBC takes the revised economic forecasts for the UK that came out this week and lays out the implications very clearly. For instance:

Instead of a rapid rebalancing, with a sunny uplands populated by cheery manual workers, newly retrained from health or social work, we face a long, slow rebalancing and six more years of fiscal austerity. And the time it takes for the economy to recover to its 2008 level is now predicted to last until mid-2014. This is much longer than the actual depression of 1930-33 in the UK, and not much less deep.

And he points out that UK debt will peak - if all goes well - at 95% of GDP - higher than Germany or France. But things could get worse if there is a Euro crisis, leading to a "debt spiral":

Put plainly - there is a danger that a euro crisis would plunge Britain into the same vortex of downgrades, austerity and low growth that Europe is suffering.

And if you're not thoroughly miserable by now:

Like America, we have an impoverished middle class whose spending power cannot survive a slump in house prices, and which has no pricing power in the workplace to raise its wages relative to profits..

Is there an alternative? The only one he can see is to "raise economic potential through investment: in machines, research and better skilled people; re-orientate to different export markets; and disincentivise the importation of low-skilled operations.... become a high-skill, high productivity economy oriented to the world, not Europe.."

I guess the other option is to re-industrialise, accept a lot of low paid manufacturing jobs (abolish the minimum wage perhaps ), to compete with China as their labour costs increase, and / or become more protectionist - not an attractive vision. But his "raising economic potential" option is not exactly a simple one.

Anyway, do read his whole article. And I'm off to find some good music to feature on Spend Matters over the weekend to cheer us all up...

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