Editorial: In the Recovery Position?

The newspapers that have been full of talk about the economic crisis since 2008 have all of a sudden decided that an economic recovery is under way. Government statistics show that after falling sharply, GDP in the UK is just about back to where it was before the slump began. Average wage increases have now almost caught up with inflation, after lagging prices for years.  And on an almost daily basis newspapers like the Express and Mail trumpet the recent rises in house prices, rather like a child excitedly waving about a toy they’ve found in the lucky dip.

We’ve been here before of course. This is how all economic recoveries happen. The big fish that dominate things eat the little fish and get even bigger and stronger as a result. Their growing confidence is such they may even try to gobble up other big fish too – we can see this by the recent attempt from US pharmaceutical giant Pfizer to buy AstraZeneca. Both profits and wages start to rise again and so demand for goods and services starts to pick up. And the politicians that had been so obviously impotent to tackle all the pressing issues during the slump claim that it is their unique foresight and mastery of the economy that has brought about the feel-good factor.

In truth, it is very rare for slumps to be caused by politicians and even rarer for them to have any real, discernible impact on a recovery. Ever since its development in the eighteenth and nineteenth centuries the market economy has always suffered periodic crises and slumps, whether under Tory, Liberal, Labour or Coalition governments. Slumps are part of the market’s internal renewal and survival mechanism, right across the world. Far from governments running the market economy, it is – for all intents and purposes – the ups and downs of the economy that fundamentally influences what governments can really do.

George Osborne hasn’t yet been quite as foolish as Gordon Brown was when he claimed Labour had ‘abolished boom and bust’. But he is still foolish enough not to realise that the economic recovery – such as it currently is – will yet again lay the foundations for profit-hungry over-investment during boom times, and an over-expansion of key industries and services in relation to paying demand for them. And linked with this, of course, more unsustainable financial bubbles too as the ‘innovators’, ‘entrepreneurs’ and speculators move in. These classic market forces will all serve to trigger the next slump – and no doubt the rise of yet another gang of political tricksters claiming, against all the evidence of history, that they can fix it.