Socialist Worker

British economy is heading for a slump that is ‘off the scale’

by Charlie Kimber
Issue No. 2700

Cheap credit from the Bank of England in London propped up the economy after the last financial crisis

Cheap credit from the Bank of England in London propped up the economy after the last financial crisis (Pic: Guy Smallman)


The British economy is ­heading for a recession ­forecast to be deeper than the 2007 financial crisis—and one of the most severe since 1900.

The crucial question is who will pay.

Analysis in the Financial Times newspaper suggests the fall in annual production this year will be greater than any year in the Second World War or in 1931. 

That was a year of ferocious economic depression.

Natwest economist Michelle Girard says there “is little doubt that it will be off the scale”.

More than nine million workers are expected to be “furloughed” under the government's job retention scheme (JRS), according to the Resolution Foundation.

This sees workers laid off for an indefinite period with up to 80 ­percent of wages funded by the state. If the nine million figure is ­correct, the take-up will be three times what the government estimated.

Up to nine million other ­workers may not be eligible for the JRS, according to an Institute of Employment Rights briefing. 

Job cuts have been brutal across the globe. A record 6.6 million US workers filed for unemployment benefit last week, bringing the total number to almost 17 million over the past four weeks.

About four million workers in France have been temporarily laid off in the past two weeks. 

The International Labour Organisation (ILO)—a United Nations agency—last week described the impact worldwide. 

It said, “Four out of five workers in the global workforce have been reportedly impacted by Covid-19 such as having lost jobs or working less hours.

“81 percent of the global  ­workforce, 2.64 billion people, are currently affected by full or partial workplace closures.” 

Unemployment 

The ILO said the eventual increase in unemployment for 2020 would depend on economic ­developments and policy measures. 

Corona crisis shows need to break from chaos of capitalism
Corona crisis shows need to break from chaos of capitalism
  Read More

But it warned there was a “high risk that the end of year figure will be significantly higher than the ­initial ILO projection of 25 million”. 

The World Bank said the ­coronavirus pandemic will plunge sub-Saharan Africa into its first recession in 25 years. Global trade in commodities that many of its economies rely on has contracted. 

Growth in the region is ­forecast to fall from 2.4 percent in 2019 to between -2.1 percent and -5.1 percent. 

That’s far below expected ­population growth of 2.7 percent. 

The result—unless there is huge shifts in wealth and power—will be unemployment, poverty, starvation and deaths.

The same analysis said  growth in many Asian economies will slow by almost 4 percentage points this year—at best. Ergys Islamaj, a World Bank senior economist, said, “It could increase poverty across the region.”

The crisis shows the need to break from the chaos of ­capitalism and have a democratically planned socialist economy to meet human need. 


Don’t let lockdown help our rulers get away with new wave of austerity cuts 

Just like after the financial crisis in 2007, there will be a massive struggle as governments expect ordinary people to foot the bill for bailouts. 

After the Tories’ cheers for the NHS fade away, they would like to reimpose public spending cuts. Chancellor Rishi Sunak has already said that the money for the bailouts will have to be paid back. 

But coronavirus has shown the failings of capitalism and fuelled discussion about the alternatives.

Ruling classes should not be allowed to get away with austerity cuts as they did a decade ago.

An article in Bloomberg News last week said, “The immediate effect of Covid-19 is to dampen most forms of unrest. 

“Both democratic and authoritarian governments force their populations into lockdowns, which keep people from taking to the streets or gathering in groups. 

“But behind the doors of quarantined households, in the lengthening lines of soup kitchens, in prisons and slums and refugee camps—wherever people were hungry, sick and worried even before the outbreak—tragedy and trauma are building up. 

“One way or another, these pressures will erupt.”

Resistance can shape what happens after the coronavirus crisis.


No help for ‘self-employed’

Those who don’t qualify for the Tories’ job retention scheme include one million people on zero hours contracts and around one million agency workers. 

But there are also five million people working for someone, but not under a contract of employment.

This includes bogus self?employed people, such as Uber drivers, working for someone who is not the client or customer of their business. 

The Institute of Employment Rights added, “A significant gap exists for those forced to stay out of work to care for people who would otherwise be provided for by nurseries, schools, day care centres and other public services. 

“While it is possible for these workers to be furloughed, it is unlikely they will be.”

 

 

 

 

 

Click here to subscribe to our daily morning email newsletter 'Breakfast in red'


Mobile users! Don't forget to add Socialist Worker to your home screen.