I've not been able to post anythingfor a couple of weeks due to work and other pressures, but there have been a couple of items that have been in my mind that merit comment. The first is why all the debt we are burdened with is slowing down the recovery and will continue to do so without some radical action. The second, which I will put in a separate post, is a reflection on how difficult it will be to 'rebalance' the economy.
So firstly, Robert Peston has pointed up how much debt there is in the UK. In his two Sunday night programmes 'The Party's Over: How the West Went Bust', and particularly the one on 11 December he shows how we are struggling as compared with the way, for example, China is working and saving hard in the first programme. This isn't just about government debt that so worries the Chancellor, but all the debt both corporate and private. And what Peston in a blog on this particular issue is saying, is that 'the aggregate indebtedness of the UK - that's the sum of household debts, company debts, government debts and bank debts - had risen to 492% of GDP, or almost five times the value of everything we produce in a single year'. This is up from 481% at the end of 2008. You can look at the numbers in Peston's article, but essentially what it is saying is that household and business debt has come down very slightly since 2008, financial debt has actually increased (though this isn't so bad because this has resulted in debt being swaped from shorter-term to longer-term) and government debt has increased from quite a lowish figure to somewhere near the average for similar countries, because debt has been shuffled from the private to public sector. The government kept spending when everyone else stopped, and as Peston says, if they hadn't we'd have had an even worse recession.
The upshot of all this debt is that we will have a pretty thin time of it over the coming years (perhaps 1% growth p.a. instead of the 3% of the 16 boom years before the crash) as we gradually pay down the debt, which inevitably takes spending out of the economy, thus reducing demand. Alongside this has been the emerging realisation, beside all the smoke and fireworks of Mr. Cameron's EU veto is that the regime Germany wants to impose on the rest of the Eurozone will lead to precuious little growth in the coming years because there is no space for expansionary fiscal spending.
At the tail end of Newsnight on 12 December was a discussion with Gillian Tett (the FT's US Editor), Richard Koo (Chief Economist of Nomura Bank) and Amartya Sen. It focussed on Koo's analysis of Japan, whose companies' balance sheets were 'under water', as he put it, and the 'lost decade' or more since the 1990s. Part of the discussion centred around whether social cohesion is possible with 1% or less growth. He pointed out that unemployment never rose above 5.5%, largely because others took on debts to enable companies to pay down their indebtedness. Japan now has one of the highest levels of government debt in the world, but this isn't seen as a threat because most of it is held by Japanese individuals rather than banks around the world. The question seems to be if we don't think we can increase government spending, can we hold society together with little or no growth - or even as in some parts of southern Europe austerity and inevitable contraction?
This is the point at which the Euro-crisis and indeed the wider economic crisis is no longer an economic or even a political issue, but a social and ethical issue. The point was also made (I think in the same Newsnight discussion) that the question is also about how the pain is shared around. At the moment the pain is being taken largely by the poor, and to some extent, the so-called 'squeezed middle', largely because of inflation out-stripping wages.
There is much debate about the causes of the summer riots, and it is a minefield I hesitate to enter, with those condemning it as pure criminality shouting loudest. In the first instance that may be true, but if we look beneath the surface there is a group of people (not just the opportunists) with little hope who see a world whose values are predicated upon consumption of status symbols they can't hope to share in. That's not to condone what happened, and I have great sympathy for the shopkeepers and others who suffered because of the looting, but if we reach a situation with youth and other unemployment continuing to rise (there is a report this morning saying hiring intentions are flat for the next three months and perhaps beyond) then there may come a point at which discontent will rise up. Rowan Williams's recent comment on the 'Reading the Riots' research is rich in the sense of the way in which so many young people in the poorer parts of our country do not feel in any sense that they are valued. This surely ought to be a huge challenge. In a very small way, the Tolladine Project here in Worcester, in which I have some small involvement, is trying to begin to do something about that with some of the children on the estate. It is very early days, but by having our church open and by making contact in other ways through our new community missioner and others, we are trying to say that we will not turn those children away and that they are to be valued for who they are. At times that is challenging and it means that for us as adults we have to adapt what we do or to go out on a limb when we would be more comfortable doing things differently. This is a long way from the kind of structural changes that Rowan Williams is talking about, but it is the beginning of something that we have been bold enough to say we hope will transform lives through the Christian gospel. That is a very bold claim, but if we believe that Christianity is about more than loving our neighbour, it is about new life, than it is a challenge we must seek to rise to.
I also sense anger and disillusion, though hardly likely to result in civil discontent, amongst many other people I visit in workplaces as a chaplain - perhaps members of the 'squeezed middle'. With living standards eroded by inflation, pension prospects being threatened and anxiety about job security, many are not used to this state of affairs and they are pretty unhappy about it. I wondered in a recent sermon if this was a bit like the early stages of bereavement. We are used to drawing the parallel in redundancy situations, where there is a sense of numbness and/or anger in the early stages before at least some coming to terms if not acceptance. It is only after this that it is possible to see how a new way of living might be possible. I don't want to overdo the analogy, but what I was trying to say in the sermon was this may be an opportunity to rebalance values away from the material and from consumption in itself as giving meaning to life, to something that we Christians would want to point to in the Advent and Christmas message. The Church does, though, have a great deal of work to do if it is to communicate this in a way that can be understood by the many whose lives have given them so little contact with anything that Christianity might say.
We face some difficult years ahead, and alongside that, there is much talk of rebalancing our economy into something that is based on firmer foundations and is more productive. As I said at the beginning, I want to say something about that in another post, but it seems to me, that there is also a need to rebalance our society both in terms of how the pain, but also the good is shared out, and into something where values that drive it are different. There is work to be done here by Christians if they want to connect more than by simply restating basic beliefs. It may be that a book by John Reader, a former colleague of mine, and some others from the William Temple Foundation, entitled 'Christianity and the New Social Order' might help with this. It is on my Christmas holiday reading list! Also on my reading list is a book called 'Debunking Economics: the naked emperor dethroned' by Steve Keen, which advances the theory of debt deflation. If the present orthodoxy isn't working and Keynesian expansion is difficult because of the level of debt (though not all Keynesians would agree with this), then perhaps we need to look to an alternative way out of the crisis.
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