Originally published @ 10:22 pm, Sun 3rd Jan 2010
Will Hutton today asserts that unemployment would have been half a million higher if the Government had followed Conservative responses to the economic recession. That’s around 750 jobs per Parliamentary constituency.
Key points are – http://www.guardian.co.uk/commentisfree/2010/jan/03/uk-economic-recovery -
ï this will be a year of a steadily improving economy;
ï over the last nine months, the stock market has recorded the third biggest rise since 1693, [and is likely to] be the biggest sustained rise for 317 years;
ï the Office for National Statistics reported that unemployment as measured by the numbers applying for the Jobseekers' Allowance (JSA) had fallen 6,300. (Though he notes, it is only a one-month fall.) In no post-war recession has unemployment ever fallen so quickly, just 20 months after the rise began. (It took 40 months before the first fall in the early 1980s.)
ï Unemployment has risen much less than anybody expected [during this recession];
ï for example, the claimant count rate has been decelerating since the spring – from 25,000 a week to 3,000 a week now.
ï [From a study] of banking crises, the average rise of unemployment in countries experiencing major systemic banking crises since 1930 is 7% of the workforce. In Britain, this would have meant an unemployment rise of around 1.75 million. Unemployment will certainly carry on rising in 2010, but the eventual rise will be around 1.25 million; serious, but not as cataclysmic as it could have been.
ï “Companies and workforces have moved heaven and earth to protect jobs. Part of the story is wage freezes, wage cuts and working fewer hours, but top companies have decided that they would rather cut investment in plant than cut their investment in people. In a knowledge-based economy such as ours, skilled workers who know the company, its operations and its customers are ever more valuable, expensive to fire and expensive to replace when times get better. Business investment on the other hand can be deferred.”
ï The Labour government ... has poured resources into the Jobcentre Plus network to increase its capacity.
ï 55% of new claimants are leaving the register within three months and 73% within six months – only fractionally lower than in normal times.
ï 30%-plus devaluation, ... the largest since Britain left the gold standard in 1931. ... Imports are relatively expensive and are dropping fast, while in 2010 exports will start to accelerate, especially as the world economy, led by Asia and the US, rebounds.
ï The industry we have left is highly competitive; it had to be. Growth in Britain from the dark days of the 1991 recession to the end of a disastrous 2009 has still averaged a solid 2.1%.
ï Two more sources of vital stabilisation are the £200bn of cash printed by the Bank of England to flood the stricken financial system and the £178bn budget deficit. Again, these are unprecedentedly big, but faced by near banking collapse, no other response was possible.
ï The Bank of England has had to be radical about avoiding a calamitous contraction of the money supply, and the government has had to be no less radical in maintaining public demand as private demand risked going into free fall. The banking system has been bailed out ...
ï “How would a Conservative government have fared? It is difficult to imagine it would have been so aggressive. I doubt it would have spent £5bn on trying to cap unemployment; it would never have implemented the timely and targeted VAT reduction; its hesitations over bailing out the banks could have seen a bank collapse; it would have been a reluctant endorser of quantitative easing; it would have tried to cap the necessary rise in the public deficit. Had it been in power, Rogoff's and Reinhart's projections would been borne out – and nearly half-a-million people more would have lost their jobs.”
There more analysis in the article itself.
Talking on the doorstep, it’s a bit harder to be optimistic about the efforts being made to keep experienced workers in jobs, given some of the concerns I hear is of the “casual-isation” of workers.
On the other hand, the article doesn’t mention the international co-ordination agreed (and often led by Gordon Brown) so that such initiatives weren’t strangled by other countries choosing to deflate their economies to attempt to balance their government budgets.
But the Labour Government has worked to save jobs, businesses and mortgages and been very radical to do it.
Meanwhile, David Cameron keeps on about debt – “Today, there is one issue that looms larger than any other in British politics: the amount of government borrowing. ”
And people still say all the parties are the same.
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