Last week on BBC News it was reported that there had been complaints about the way they were reporting the Economy, ad talking us into recession. The complaints didn't come from the Government, but from viewers. Indeed, over recent weeks and months the News has been full of stories of economic woe. On the Business news on News 24 this morning even one of the presenters complained about the fact that the Business Correspondent had yet again come out with another dollop of gloom and foreboding. "But we're only reporting the facts", came the reply.
But, is that all they are doing. Take this morning. The correspondent echoing what had been reported in many of the morning papers said that a survey by the British Chambers of Commerce was forecasting that Britain was just one quarter away from recession. Is that true? No it isn't. The technical definiiton of a recession is two consecutive quarters of economic growth. Now remember that what this report is based on is not actual economic data provided by the Office for National Statistics, but a survey by the BCC - and they have no axe to grind do they? Has there been two consecutive quarters of negative economic growth? No, so far there hasn't even been one, so how can we be just one quarter away? In addition, the BBC presenter seamlessly conflated two different economic statistics to come up with the "facts" they were just presenting. What he reported on, and what the survey detailed was not economic growth i.e. how much the economies National Income has changed by, but was the views of some - not all - of their members who were surveyed about their level of orders. But two quarters of decline in orders is not the same as two quarters of decline in output of the entire economy. For one thing, as I have blogged about in the past there are many manufacturing businesses that have full order books, some going out at least 6 years into the future. The reason is that they are supplying rapidly growing economies in China and Asia. So depending on who was surveyed that could be understated.
Let's look at the reality of the situation. Almost a year ago, the world was hit by the worst financial - I stress financial not economic - crisis since the 1930's, in the form of the Credit Crunch. In addition to that we had oil prices risng to historically high levels, and they have continued to increase. Oil price rises have been matched by huge rises in the prices of other commodities such as iron ore, coal, and food. In most other periods the Credit Crunch alone, the first run on a British Bank for 150 years and so on would have been enough to send the economy spiralling down along with the rest of the world. In fact, despite all the above the US economy grew in the Fourth Quarter of last year by around 5%, and continued to grow though at less than 1% in the First Quater of this year. Both the UK economy and the European economy grew also. The german economy which is the most important economy in Europe has been actually growing more powerfully rather than showing signs of weakness. In China and Asia, economic growth continues to roar away at around 10% pa. plus. And in the resource rich countries in the Middle East, in Latin America, and even in parts of Africa the soaring demand and prices for raw materials and food has been lifting growth rates to record heights.
In any other period we would not be searching round for evidence of recession we would already be deeply immersed in one. The fact is that the soaring prices of commodities, the rising price of food and so on, is an indication of the strength of the worldwide economic boom, and the fact that the liquidity that was pumped into their economies during the downturn of the 80's and 90's by the US, Japan, Britain and others, which formerly went into asset price bubbles, is now being soaked up in rising commodity prices.
So why all the Merchants of Doom? Perhaps, a number of reasons. Firstly, it is undeniably true that economic growth has slowed down, even though it has not slowed so much as to go into reverse. After a period of rapid growth a rapid slow down is sometiems called a "growth recession" i.e. there is growth, but it feels like a recession compared to what happened before. I hate the term. Economics like any science should aim at precision. But, in reality growth has not slowed that much anyway. Look at the recent UK Retail Sales data, which whatever the BCC Survey might have found, showed that actual sales rose 8% during the month. Partly, there is a US/Euro centric element to this too. Its certainly, true that the older sclerotic economies such as the US and UK are experiencing low growth at the moment, and compared with China's 10% that seems VERY bad. But, that does not make it a recession, and its a fact of life that everyone will have to get used to that the balance of power is shifting decisively Eastward to China and India. I only hope that British people in a couple of decades time when they have to go in search of better jobs in Inida, don't come across the same kind of racism people from the Sub-Continent have experienced here!
According, to another survey, this time by the online Stock Market group Internaxx forecast that China would become the world's leading economic superpower within just five years, overhauling the US.
So, partly it could be that keeping up with the Jones's factor that comparing ourselves with more dynamic economies we seem to be doing not so well. Secondly, people look at very superficial things to determine whether they think they are doing well and confuse that with whether the economy is in a recession. That simply reflects an understandable lack of knowledge of economics. So, the Credit Crunch, Northern Rock, falling house prices, Building Societies asking that people might like to save some money before they ask to borrow some to buy a house, and so on, make people feel that things are not going to well, because all those things are very visible. But, if you look at those things what do they really amount to.
The only people who lost out with Northern Rock were a handful of shareholders - though we'll have to see if the taxpayer gets their money back entirely in the end. The Credit Crunch does not really impinge on most individuals it is really a freeze on lending between banks. Why anyone sees falling hopuse prices as a bad thing I really don't know. We don't think its a bad thing when we come to buy anyhting else, be it a car, a fridge or whatever, so why is it not a good thing when the price of houses falls??? For all those people who have been unable to raise enough money to buy one, its a very good thing - and remember that could be your kids now or in the future. Even negative equity is not necessarily a problem. The only time negative equity - owing more on your mrtgage than your house is worth - is a problem, is if you have to sell your house. But, as long as people continue to have jobs, and earn wages to pay the mortgage they took out the value of the actual house is irrelevant.
And, personally, I think that Building Societies and Banks, always should have been asking people to have saved money if they want to buy a house. I bought my first house when I was 23, and my wife was 21 back in 1977. Both of us had low wages even for people of that age. Yet, in three years we saved enough to buy the house outright around £5,500 - or the equivalent of about £80,000 today. So I'm sorry, but when I see people driving round in cars, spending loads of money on mobile phones and other things, and then complaining they can't save money to buy a house, I can only say they don't really want a house that much, and probably if they want to keep spending money on all these other things, they would be better renting. Had banks and Building Societies retained the regulations they had before Maggie Thatcher deregulated them the bubble in house prices, and in debt would not have happened, and millions of people would not have lost everything they had.
The media, of course, has to sell papers and so on, and moaning and crises always sell more than an analysis of the facts, so its no wonder that those superficial effects are blown up by the press, and the TV have to follow suit - after all much of 24 hour newscoverage consists of repeating the same News every 15 minutes, and interviewing the same group of newspaper journalists for their "expert" opnion.
But, its also possible to detect other motivations. Take the BCC today in their interview with the BBC. Their spokesman was ,of course, quick to point out that these economic conditions made it vital that the Government did not icnrease taxes on businesses. And of course all those changes that might have protected workers against unscrupulous bosses would have to go too! A few weeks ago at the time of the Tanker Drivers strike, I was watching a discussion on BBC's Newsnight. Those around the table were discussing inflation, and the danger that workers might actually want to see their wages go up to cover price rises. The right-wing pundit, Ruth Lea, who at one time worked for the Institute of Directors, commented that "The tanker drivers might demand this pay rise, but they are unlikely to get it in the present economic climate." This comment was made shortly after a news item with Dave prentiss of UNISO saying that it might be necessar to re-open the Health Service workers 3 year pay deal.
The good thing was that the following day the Tanker Drivers won their pay claim. It comes on the back of similar double digit pay rises in Germany for many workers feeling their own strength again as a result of several years of strong economic growth as the new Long Wave boom gets under way. Government and capitalist pundits do this sort of thing all the time to shape public opinion in the way they desire, even amongst themselves. For example, a whole Branch of Kremlinology developed on trying to detect what the hidden words of Alan Greenspan meant, Central Bankers and Finance Ministers try to influecne Currency markets by talking up or down their currencies, hinting at possible futur action, or possible problems on the way that might need higher or lower rates and so on. It is part of their stock in trade. At the moment the bosses and their whole ideological aparatus must be worried that rising inflation at a time when workers are agin finding their feet will lead as it did in the 1950's and 60's to a resurgent Labour Movement. Part of central Bank's interest rate policies is designed precisely to try to dampen such militancy, and to discipline emplyers against conceding to pay rises to their own employees. All of the Merchants of Doom are playing to the gallery in such conditions.
Workers should not be taken in. This is at best a temporary decline in a powerful - possibly more powerful than the world has ever seen - new Long Wave boom that will last another 20 years. It is more noticeable in the US and UK because of the relative underperformance those economies will suffer compared to newer more vibrant economies. It is an opportunity for workers to rebuild their Labour mvoement and assert their interests as against Capitalism.
No comments:
Post a Comment