Rishi Sunak at the annual Business Council last week (Picture: Number 10 on Flickr)recession
Britain’s economy was declared in a recession last Thursday. The Financial Times newspaper said not to worry—it is merely a “technical” recession.
But for ordinary people recession is more than just a “technical” issue. It means low wages, falling standards of living and crumbling public services.
Britain’s gross domestic product (GDP)—the value of goods and services produced, which is used to estimate the economy’s growth—shrunk for the last six months of 2023.
A recession is when GDP falls for two consecutive three-month periods. The British economy contracted by 0.3 percent from October to December and 0.1 percent from July to September.
Yet one of Sunak’s five pledges at the start of 2023 was to grow the British economy. He has failed.
For ordinary people a recession means they can earn less and spend less. It means less money for schools, hospitals and wages.
The cost of loans, mortgages and credit cards also shot up as interest rates steadily increased. Far from a recent issue, the data demonstrate that the latest recession is part of a long-run decline in living standards.
The Office of National Statistics (ONS) figures show that GDP per person shrank by 0.7 percent across 2023 and hasn’t grown since the start of 2022.
This is the worst performance since records began in 1955.
While GDP shows the overall size of an economy, GDP per person shows the economic output for each individual. This is a better measure for the prosperity of people.
So while the overall size of the economy only began shrinking in the second half of 2023, economic growth per person has been shrinking for two years.
A growing population increases the total GDP figure because more workers means higher levels of production and so higher GDP.
But GDP per person is 4.2 percent lower than what it was expected to be by 2024.
It means a £1,500 loss per household. And wages, when adjusted for inflation, remain lower than what they were in 2008. Britain has been experiencing a squeeze in living standards since 2022 and wage stagnation since 2008.
This is a shambolic picture of British capitalism, showing an economic crisis spanning back much longer than the last six months. This is stagnation nation under capitalism.
And jobs destroyed and public services cut—often the bosses’ and politicians’ solutions to recession—will worsen the situation.
The British ruling class will bring up the “productivity crisis” of British workers and claim British workers are “lazy”.
When bosses talk about workers’ productivity, what they really mean is they want ordinary people to work harder and longer.
The Telegraph newspaper is arguing that people dropping out of work is the problem.
Get back to work—and work harder—is the rallying cry of the ruling class.
But the real cause of the recession is a deep crisis in British capitalism, where the rate of profit continues to fall.
Economic crisis has gripped China as people’s spending and consumer prices tumbled — known as deflation.
The Chinese economy has had deflation since October of last year with spending and prices falling at their fastest rate in n15 years. Prices fell by 0.8 percent in January alone.
Deflation has been coupled with a series of corporate bankruptcies, a collapse in the housing sector, a decline in people’s consumption and rising unemployment. A lack of income growth is behind the low consumption. There has been less money for ordinary people to spend.
Two weeks ago, Evergrande—China’s second largest property developer—was ordered to shut down after being unable to restructure its debts. And this is just the surface.
Most of China’s listed property developers have either failed to pay back investors or been forced into restructuring over the last year. Factories are closing, wages are going unpaid, confidence in economic recovery is low, and there is growing unrest.
In 2023, 1,794 strikes were reported in the China Labour Bulletin—over double the number in 2022. “Factories are shutting down, the real estate sector is struggling, and the population is in decline,” said an anonymous migrant worker to Radio Free Asia. “You can see it in the industrial zones and shops that have closed. This country is rotten to the core.”
China’s government has tried to tackle deflation by increasing its investments in industrial manufacturing and especially into green technologies. recession
The measures are yet to succeed so far.
China’s ruling party’s bureaucrats cannot solve the crisis of state capitalism—no matter how much power they centralise in their own hands.
The Office for National Statistics (ONS) announced last week that wage growth currently sits above inflation in Britain. But this hides a different reality for most British workers.
Real wages remain £12 lower per week than in 2008, as the Trades Union Congress pointed out.
On top of this, 1.1 million workers are on zero-hour contracts, and 2.8 million people are not working due to long-term sickness.
A sickening economy is bad news for ordinary people.
Tory budget cuts, pay freezes, and below-inflation offers have devastated workers’ wages. For ordinary people 14 years of Tory rule has meant 14 years of lost pay.
The headline-grabbing figure masks deeper inequalities.
The only sector that has experienced wage growth since 2008, when adjusted for the rate of inflation, is finance.
And the already better-off workers in finance are the ones currently pushing up the headline rate of wage growth.
Also, the latest statistic only covers the months of October to December 2023.
The average across the whole of 2023 was real wages decreasing for both public and private sector workers.
This is compounded by most public sector workers accepting pay deals beneath the rate of inflation in 2023.
The average rate of inflation across 2023 was 7.5 percent whereas the average pay deal for public sector workers was 5 percent. Over a decade of real wage losses have not been reversed—and workers need to push for above-inflation wage rises.
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