Our present economic system is based on wealth creation from trading commodities, rather than meeting needs. Economic growth based on GDP is linear (exponential) and profit-based, requiring increasing consumption rather than a cyclic system which would trade resources more sustainably, returning more fairly shared benefits to all of society. The credit bubble has burst causing a major recession. Unemployment stands at 2.2 million having risen 100,000 per month for four consecutive months. There are worries of a ‘lost generation’ of young people (under 25s) entering the work market with no hope of ever having work. The tax base has collapsed and income tax rises are predicted to pay for the problem.
Petroleum oil has been the main economic driver since WWII, creating an opportunity for fiscal credit based on an assumption of the availability of an endless supply of cheap energy to fuel the economy, repaying the debt as profits roll in. Global oil production is now peaking and can no longer be relied upon as an economic staple; as predicted we are on the cusp of a growing gap between production and demand. The age of cheap oil and speculation is closing in and with it the forecasts for growth of the economies at all levels need to be re-evaluated.
Growth-based global economics has resulted in money pouring out of local economies, while the lion’s share of trading profits have been pouring into millionaires’ pockets, international banks and trans-national corporations (TNCs). The World Trade Organisation (WTO) has developed a set of rules that prevent impacts on local economies, environment or social consequences being a barrier to trade, while protectionism of the local economy is touted as being bad for international development. Major international players have played havoc with small traders and local employment, sucking dry local economies across the UK and further a-field. As Colin Hines (who spoke at a TTT event in February 2009 ) puts it in his book Localisation – A Global Manifesto ;
“Globalisation – the ever-increasing integration of national economies into the global economy through trade and investment rules and privatization, aided by technological advances. These reduce barriers to trade and investment and in the process reduce democratic controls by nation states and their communities over their domestic affairs. The process is driven by the theory of comparative advantage, the goal of international competitiveness and the growth model. It is occurring increasingly at the expense of social, environmental and labour improvements and rising inequality for most of the world.”
Unfortunately key decision and policy-makers are trying to continue with the same system. The Turner Review, set up on behalf of the UK Financial Services Agency reported back in March 2009 . Amongst its key proposals were the following:
- The quality and quantity of overall capital in the global banking system should be increased, resulting in minimum regulatory requirements significantly above Basel rules. The transition to future rule should be carefully phased given the importance of maintaining bank lending in the current macroeconomic climate.
- Additional powers to the IMF to challenge conventional intellectual wisdoms and national policies.
2009 Global Economic Crisis hits the UK
The UK finds itself in an increasingly bewildering and alarming economic situation. The news gets worse every day, and keeping a sense of the bigger picture is difficult. Some of the key trends include:1
- The UK’s deficit on trade in goods and services was £3.6 billion in January 2009, compared with the deficit of £3.2 billion in December 2008. Exports fell by £0.8 billion, and imports fell by £0.3 billion.
- The national unemployment rate has risen to 6.5% for the three months to January 2009. The unemployment level and rate have not been higher since 1997.
- The number of people out of work and claiming benefits was 1.39 million in February 2009, up 138,400 over the previous month and up 595,600 over the year. This is the largest monthly increase in the claimant count since comparable records began in 1971.
- The redundancies level for the three months to January 2009 was 266,000, up 86,000 over the (previous) quarter and up 154,000 over the year. This is the highest figure since comparable records began in 1995.
- There were 482,000 job vacancies in the three months to February 2009, down 74,000 over the previous quarter and down 203,000 over the year. This is the lowest figure since comparable records began in 2001.
- Source: Office for National Statistics [↩]
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