What Recession? Recall the 1930s…

To hear Western leaders talk, you would think their countries were out of recession. GDP numbers are climbing, aren’t they? So why are governments getting deeper into debt, unemployment is rising and real wages declining? Think back to the 1930s: we ain’t seen nothing yet.

The UK jobless rate is predicted to rise to 9% during 2011, adding another 200,000 people to the dole queue. And yet according to the Chartered Institute of Personnel and Development (CIPD), its annual employment barometer does not mean the country is heading back into recession. Notice the subtle implication – that Britain is no longer in recession.

Forecasters mix prejudice into their economic analyses. For the most part, they desperately want to reassure the political class that they are on the side of the angels. So they spin their prognoses to provide the optimistic gloss on depressing statistics.

The picture is further confused by crude theorising. Take the case of house prices, the source of national fixation. The consensus view is that prices will decline in Britain over the next 12 months. But understanding the trends stops at a line drawn on the map linking the river Severn with the Wash: below the line, covering London and the South, the picture is rosy. Above the line – unmitigated gloom. This is the caricature of British society – a North/South divide.

Complexity in the Real World
As I explain in Ricardo’s Law (2006), if you draw a straight line from London northwards to the border with Scotland, and plot the regional statistics along that line, a pattern emerges. The profile is of a downward slope which repeats itself not just in the realm of economics, but also other indicators of health and wealth. The good things are concentrated in London, and they decline ineluctably towards the top of the British Isles.

There is a systemic logic to the discrimination that segregates people into the Haves and Have-nots. Whether it’s unemployment rates, affordability of housing, size of household savings, risks of cancer, educational opportunities – all the statistics can be broken down to reveal this pattern of prejudice that operates within society. Some people are more equal than others.

The Welfare State was supposed to equalise people’s life chances. In fact, as far as the operating mechanism that drives the capitalist economy is concerned, nothing has changed since the 1930s. The table below is the profile of regional variations in unemployment four years after the 1929 stock market crash. The official line was that Britain had recovered from the ensuing disaster. In reality, while life was tough in London, it got tougher the further you drove up the Roman Road towards Hadrian’s Wall in the North Eastern corner of England.

Regional Unemployment Rates, England (January 1933)

Region Unemployed % of Insured Workers

London 14.2
South Eastern 17.2
Midlands 20.2
Northern 28.9
North Eastern 29.8
Source: Rodney Atkinson, The Failure of the State, 1989, p.41.

Few of the disgruntled workers of Britain joined the Fascist Brown Shirts. It was the same economic story in Germany, but with a different political outcome. There, Hitler deployed his ranting to good effect, mobilising the unemployed to support his solution to the Depression.

It would be irresponsible to push comparisons with the 1930s on the strength of a few indicators like unemployment. My analysis goes much deeper, but the results have not yet been published. So my prognosis will be postponed until I fully document my conclusions. I must warn, however, that we should pay no attention to the assurances from politicians who claim to have taken control of events. They haven’t, which is why we are staring over a precipice.

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