Whose Recovery Is It, Anyway?
by Robert Gordon
Posted: 27 Jan 2014
The recovery is here! After years of financial crisis and recession we can stand proud as the UK becomes one of the first - and most successful - European economies to recover from recent hardship. Growth forecasts are beating all expectations, and the job market is recovering so quickly that the Bank of England has to back-peddle on unemployment projections that look now to be a year or more off the mark. This is all taken as a sign that what we're doing is working, that we need to stay the course and ensure that the 'fragile recovery' becomes a new boom. All this whilst everyone on the political spectrum, no matter where they sit upon it, is lining up to take credit for being the driving force behind such great news. Don't you just love it when elections start coming around again?
This recovery is being mirrored globally, and the World Economic Forum last week saw more than a touch of 'back to business as usual'. Except, that is, for the increasing wealth inequality facilitated by our global economic system. Pope Francis implored those attending the lavish ski resort to 'ensure humanity is served by wealth, not ruled by it'. At the same time Oxfam's well-publicised report "Working for the Few" pointed out that over two-thirds of us live in countries where the wealth gap is widening. When just 85 people can amass as much wealth as 3.5 billion we really have to pause for a moment and ask ourselves what, exactly, do we think is recovering here?
Economic growth can bring about widespread improvement in living standards, but it doesn't necessarily do so; and the improvements it does bring aren't always sustainable and are certainly not evenly distributed. When we measure recovery primarily in terms of monetary output and work-centred productivity then we quickly begin to overlook the aspects of social wellbeing that aren't tied to corporate account balances or consumer purchasing power. Worse then this, the narrative of economic recovery that we currently have is one that firmly serves the interests of those who already have wealth - and were worried about losing it. Not those already marginalised and exploited by a global system that often undermines true advancements in human potential and shared happiness. This is not a recovery for the people who need it most, but a recovery for those who - in the end - will lose little while costing the majority of us quite a lot.
Here in the UK there are a number of immediately apparent examples that show that 'economic recovery' is an ambiguous phrase that overlooks the day-to-day reality of millions. The first, and most discussed, disparity is that there has been no recovery in terms of real earnings - despite what recent jubilant statistics might be claimed as pointing towards. Our inflation-eroded earning potential has been falling steadily since 2009, and real households' disposable income saw a drop in 2013 compared to the previous year with an overall decrease of 2.3% in the last five years. The 'economy' is recovering, and it's good news to hear there are more jobs (for some) - but those who have them are earning significantly less.
With such a drop in real earnings we should be suspicious of any boost in retail activity, as the indication is clearly that people are saving less to spend more. Economic recovery should not be fuelled by debt but by productivity, and private debt after a number of years of plateau is now increasing again to record levels whilst productivity limps along disappointingly. Austerity measures must also be taken into consideration and are acutely felt in the public sector, where over 600,000 jobs have been cut (and counting). Additionally, changes to taxation, benefit programmes and cuts to public services have disproportionately affected women and the poorest earners. To use just one example, significant strain continues to be placed on single-parent households. This accounts for 2 million lone-parents of which a shockingly disproportionate 90%+ are women. No improvement here, then.
The second major issue is that any indicators of recovery are going to be massively skewed by the economic leviathan that is London. This is one of the most vibrant, exciting and energetic cities in the world; and it brings with it the economic output that comes with being such a hub of commercial activity and innovation. However, having so much of the national economy tied into one location means that it becomes incredibly easy to falsely attribute recovery across the board - when really what we're talking about is a localised recovery that leaves a lot of people behind.
Before the financial crisis London accounted for 22% of the UK's growth in Gross Value Added income - as of 2011 the figures sat at around a third of all goods and services and is likely even higher than that today. This disparity is predictably also seen in the new housing market boom, with London doubling the growth seen at the national average. Indeed, if you remove London and the south-east from the equation, average prices have risen only a single percent above inflation - and in many areas around the country aren't enough to mitigate the impact of inflation in real terms. Even within London there is disparity as many areas and demographics see increased hardship whilst the recovery happens to everyone else but them. Considering how much the recent growth statistics depend on the housing and construction market the recovery is massively skewed to London, and that's when we ignore the idea that an economic recovery based on another housing bubble is hardly one that we can rely on. Indeed, there's something about such an approach that starts to sound all too familiar.
Our obsession with a narrowly defined concept of 'economic growth' is holding us back from focusing on the areas and people who need to be focused on the most. Returning to the recent call from Pope Francis, we have failed to hold 'a transcendent vision of the person' and the subsequent degree of collective social responsibility that such a vision would encourage. We have decisively let down the millions of people in the UK who struggle to make ends meet and who suffer daily because of the inefficient and short-sighted mechanisms of wealth distribution that have accrued over decades of corporate and political manoeuvring. A flourishing economy is an important and positive goal to strive for, but we need to redefine our indicators of recovery and pay dutiful attention to the increasing number of people overlooked by current measures.Recovery should not only positively impact corporate balance sheets or government spending reviews, but must focus on the plights of those who find life in our modern, developed society to be a difficult undertaking with little hope for improvement. To take a cue from Martin Luther King Jr.: why are there 13 million people living in poverty in the UK, and why has their earning power been decreasing at the same time that access to vital services erodes away? Because until we can openly answer and discuss that question we really have to think...just whose recovery is it, anyway?
The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.