Economania

A recent survey conducted by the think-tank More In Common asked people in various regions to sum up Britain in one word. In Lincolnshire they used the words “shambles”, “depressing”, “chaotic”, “fragile” and “desperate”. In the West of England the respondents characterised the country as “expensive”, “gross”, “divided”, “fractured” and “rapidly going backwards”. OK, that last one was three words, but we get the drift. So, in summary, to the question, “What do you think of it so far?”, the people of Britain have answered, “Rubbish!”.

This survey may give the current government pause for thought. A little less than a year ago, as at time of writing, the Labour party returned euphoric to government after a break of 14 years. Great promises had been made prior to the General Election and the newly appointed Chancellor of the Exchequer summarised her prime mission as one to ‘grow the economy’.

Almost 12 months down the line, the initial euphoria seems to have evaporated as the grim realities of the British economy, and indeed the global economy, make themselves apparent. The Joseph Rowntree Foundation issued its 2025 report on poverty in Britain. This summarises data gathered during 2023/24 in the run-up to the General Election. The contents are depressing.

More than one fifth of the population (21%) were in poverty in 2022/23. That is 14.3 million people. Of that total, 8.1 million were working-age adults, 4.3 million were children and 1.9 million were pensioners. These results show little change on the 2021/2022 period. Child poverty has increased slightly. The report notes that it is over 20 years since there was a prolonged fall in poverty in the UK, this occurring during the earlier years of the last Labour government.

At time of writing approximately 112,600 households are in temporary accommodation. This number includes 145,800 children. Of the total number of families in temporary accommodation, 16,790 have been in that position for over 5 years.

Child poverty is particularly pernicious since it irreparably damages the life-prospects and outcomes for those affected. A report published by the JRF in 2013 (auths: Cooper and Stewart) demonstrated the corrosive effects of poverty on children’s development. If Britain is to have the economic future to which Rachel Reeves aspires then the destructive effects of child poverty must be tackled if we are to have the skilled workforce needed to generate that economic activity.

At last count approximately 8 million people in the UK are living in sub-standard housing; 1.5 million of these are in housing which is so bad it is detrimental to their health, both physical and mental.

As far back as 1978 Bernard Nossiter noted the tendency of the British economy to inadequate aggregate production and more so to low productivity when compared to our European neighbours and other developed countries. It seems that almost fifty years on, little of great substance has changed.

The current government, though it enjoys a massive majority in the House of Commons, is skating on thin ice. The turnout for the 2024 General Election was only 59.8%, the lowest since 2001 (58%) and the second lowest since 1885. Labour took only 33.7% of the votes cast, which means that barely 20% of the total electorate actually wanted this government. Moreover, it tells us that about 40% of the electorate think voting is a waste of time.

If all of this were not bad enough news for the current government then the recent by-election and local government elections would seem to confirm the opinions expressed by the respondents to the More In Common survey. Reform has taken another parliamentary seat and it has swept the board in many local authorities. Whatever one might think of this, it is clear that the days of the comfortable political duopoly is now over.

The principal cause of the political flowering of Reform and its voluble leader is the same as that which propelled one Donald J Trump to the White House, not once, but now for a second time. Dissatisfaction among a growing proportion of the electorates, both here and in the US, with the consequences of globalisation and what is called the Washington Consensus, have sparked a backlash against what is perceived as an elite and that elite’s global economic project.

People happily bought all of the cheap shiny goods produced by China. Bill Clinton, as he campaigned for the presidency in the 1990s, reminded himself daily that, “It’s the economy, stupid!”. Clinton had learned from Juvenal, writing over eighteen centuries earlier, the maxim that, “The two chief concerns of the (Roman) people are bread and circuses”. Ironically, as the people bought more cheap imported goods, they unwittingly imported their own increasing poverty. Perhaps the election of Trump is an expression of buyer’s remorse.

It was in 1989 that John Williamson, a British economist working in Washington DC, announced the Washington Consensus, although the principles therein expressed had been forming since the 1970s. It was these principles that informed the globalisation embraced so fervently by the IMF. Clinton’s Treasury Secretary Robert Rubin was a cheerleader for the Washington Consensus.

There are other factors in play. We are now coming to the end of the upward half of the current Kondratieff cycle which began sometime around the turn of this century. The last time we experienced such a moment was in the early 1970s; Richard Nixon decoupled the dollar from gold and effectively sounded the death-knell for the Bretton Woods era; the world was hit by an oil crisis and its attendant global financial and economic impact; war erupted in the Middle East; Britain was plunged into economic turmoil, being beset by inflation, stagflation and a three-day week. As the seventies progressed Britain’s economic situation deteriorated, all resulting in a major political swing and the beginning of the Thatcher imperium.

In the US, wage-growth among ‘blue collar’ workers has been almost stagnant since 1979. They most certainly did not benefit from globalisation. At the same time, pay differentials have increased dramatically. The Gini coefficient for the US in 1967 was ca. 38, a much higher figure than that for European countries. By 2014 it has climbed to 47, indicating a massive rise in pay inequality. In the UK we have seen similar changes. The Gini coefficient for the UK in 1977 was ca. 25; by 2023 it was 33. That said, the UK Gini coefficient has fallen since 2007/08, the year of the global financial crash, when it reached a peak of 38.

Britain is an increasingly impoverished country, but that poverty has hitherto been disguised by a thin veneer of ostensible prosperity. We have now reached the point where that poverty is becoming plain for all to see. Forty-five years of neo-liberal economic policy, the so-called free market, the Washington Consensus and globalisation have run their course. The markets were not free. The markets were rigged to the detriment of the great majority and to the benefit of a small minority.

Readers of a certain age may remember ‘le choc Allais’ in the 1990s when the French Nobel Laureate economist Maurice Allais expressed his opposition to globalisation and asserted that countries should only trade with others of a similar level of economic development. He was roundly condemned by his contemporaries at the time since his views conflicted with the Washington Consensus and neo-liberal schools of thought.

In Bristol one sees an aspect of Britain’s increasing poverty in the legions of people who live in caravans and other old motor-vehicles, mostly on Clifton Downs but also at other locations around the city. Their numbers have quadrupled over the last 4-5 years. There are now and estimated 600-650 caravans and other motor homes within the city. The residents of Clifton - one of Bristol’s wealthier suburbs, where property prices hover around the seven-figure mark - have risen in protest and have demanded the removal of what they see as an eye-sore and a social nuisance. They seem oblivious to the irony that the rising prices of their well-appointed homes have created the very situation about which they are complaining - a property market in which the less fortunate cannot even dream of buying a house, or now even renting one.

Rachel Reeves has few options. Britain is burdened by debt; government debt stands at about 95% of GDP; private debt is around 113% of GDP. There is little scope for further tax rises, the last having caused howls of outrage, so additional cuts in government spending appear inevitable – all of which will depress the economy further. Inflationary pressures still threaten, so the prospect of significantly lower interest rates seems remote. Reeves will need to buttress the British economy against the turbulence issuing from the Trump White House.

Finally, the gold price continues on its upward path and has been doing so for the last 12 months, being now over 37% up on this time last year. The rising gold market suggests that the market is already factoring in the approaching global economic turbulence.

We are approaching, or are perhaps even at, a point where political and economic cycles, both national and global, have come into synchronisation. Bretton Woods was been consigned to history. The neo-liberal Washington Consensus is about to join it. The next two years are going to be very interesting.

Sources
More In Common (cited in The Observer)
Joseph Rowntree Foundation
Statista
Economic Policy Institute (US)
BBC News, Points West
Nossiter, Bernard. ‘Britain – A Future That Works’, publ. 1978, Andre Deutsch.
Shelter
Allais, Maurice. ‘La mondialisation: destruction des emplois et de la croissance’, (publ. Juglar, 1999.

Chris Waller - Permission granted to freely distribute this article for non-commercial purposes if attributed to Chris Waller, unedited and copied in full, including this notice.

Members can discuss this and other articles on the economics forum at International Mensa.