5 reasons not to hold your breath for UK ‘growth’

High education levels will save the UK they say - at Peking University this idea is being studied closely

So if you were paying attention the other week it was mentioned for a micro-second of the news cycle that the UK is in its longest period of depressed growth for about a hundred years. Many people still think we are in just another downtown and will merrily swing our way out of it soon. I said to someone the other day that probably the best that Spanish young people (over 50% unemployed) can hope for is to get back to the standard of living their parents had, thinking this would be uncontroversial. She frowned and said ‘No, it goes in cycles – I’m sure it will be fine soon.’ But 50% youth unemployment may not be just another dip. It’s scary, and a lot of the European economies are looking in a scary place right now.

In the UK I suspect we may get a little growth within the next few years and it may look like a recovery for a while. But fundamental changes have happened in the UK and in the world. While in the short term growth is not happening because the government is cutting spending in a recession, in the long term the picture is even more grim. Here’s five reasons not to hold your breath for ‘growth':

1. I can’t tell if the politicians are deluded or lying but they ought to know that the ‘high-skilled’ economy to replace lost industry isn’t going to cut it. A friend pointed out last night that it is pretty colonialist to think that Chinese or Indian people are only going to do the grunt work. I heard about a law dept being outsourced the other day. Accountants, designers, programmers, scientists – they can all go. The outsourcing course has been set and if we follow it to the end the only jobs remaining will be those that absolutely require a physical prescence here.

2. I can’t tell if the politicians are deluded or lying but the high-tech innovation-driven economy is not our saviour. Quite the opposite: it is screwing us. It creates a few jobs, yes, but destroys thousands of other jobs as it goes. We can’t just look at the creation of paper value – we have to think about the ratio of ‘value’ creation to job creation. Instagram just sold for a billion dollars. It has 13 employees. At some point we’ll have to accept that our technology is going to make full employment impossible.

3. Meanwhile the price of oil is only going up. We can dig up half of canada if we want but there will never be enough. This is true of other resources too but energy drives everything else. Demand is going up, supply is becoming more difficult. That makes everything else expensive and strangles growth. It is going to do that for the forseeable future.

4. There will be some growth of course but what there is of it will be very unequal, as it has been for the last 30 years. This is to do with how our economy has been structured – by all major political parties in the UK. Most of us will not benefit from growth, and in fact we haven’t for a while. It’s true we got cheaper holidays and better phones but now we need two salaries to buy a house where one would do it before. This structuring of the economy can be changed of course but there is zero political will to do it. Neo-liberalism won and we didn’t.

5. The final problem is that in the absence of productive industries and of internal markets not totally reliant on imports, what growth we do get will probably be bubble growth – either re-inflating a finance bubble (very possible given the rules haven’t been tightened since the last cock-up) or re-inflating the housing bubble. Both of these benefit certain people, some of whom get to have dinner with Dave, and for a time it may look like real growth. In the long run either type of bubble will pop in a spectacular manner and will screw the economy, particularly those of us who don’t get to have dinner with Dave.

This might sound pessimistic and it might seem like I’m being gloomy for the fun of it, but I’m not really down about it and – unlike some people – I think it’s too early to say our civilisation has peaked. This is just the situation we’re in, and the sooner we understand it the sooner we can set about dismantling the ideas and institutions that – largely out of short-term self-interest – brought it about.

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One Response to 5 reasons not to hold your breath for UK ‘growth’

  1. Tim says:

    I think about twice as many people that study in China get PhDs in computer science each year than people in the US do. But a lot of people move around. So, the team I work on in the UK has 2 people from Sri Lanka, 1 person from Uganda, 1 person from India, 1 person from Malaysia, 3 people from the UK, 2 people from Spain, 2 people from Ireland.

    Definitely a big motivation for using computers is to automate tasks – and the consequences of this are deliberately (by me at the least) that people don’t have to do those tasks anymore. In theory it should mean that people don’t have to “work” all the time… but at the moment that means they also don’t get pay. Big problem.

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