The UK economy is flatlining and has been for the best part of a year. Recovery after the deep slump of 2020 has petered out. Higher inflation, higher interest rates and higher taxes are all exacting a toll.
Technically, the strict definition of a recession has not been met because the economy has yet to contract for two successive quarters. But official estimates showing zero growth in the final three months of 2022 meant it was a mighty close thing. With the full impact of higher borrowing costs yet to be felt, neither the chancellor nor the governor of the Bank of England would bet against a recession at some point this year.
Britain is the one G7 country where activity is still to return to its pre-pandemic levels and on current trends it will be some time before it does. Growth has not exactly been stellar anywhere else in the developed world either but the UK’s performance has been especially poor. By early 2025, the last possible moment when a general election could be held, the economy will probably still be smaller than it was in late 2019.
Some will wonder what the fuss is all about. There is a strong de-growth community in the UK that says the aim of policy should not be ever-higher levels of growth, but a steady-state economy that ceases to put as much pressure on the carrying capacity of the planet.
Well, for the past three years the UK has been through a process of de-growth. The 16-year period of constant and robust expansion from 1992 to 2008 is now a distant memory. To all intents and purposes the economy has arrived at a steady state. But it would be stretching the truth to say that the country is a happier place because of it. The number of adults rating their satisfaction with life as very high is well down on pre-pandemic levels, according to the Office for National Statistics.
That’s hardly surprising. Living standards are going down because wages are failing to keep pace with prices. Consumers who have savings are dipping into them in order to maintain spending habits. Those without savings are being forced to tighten their belts.
There is, though, more to it than that. To be sure, the pandemic has left its mark through supply chain bottlenecks and an increase in the number of business failures, but there has also been long-term scarring both to the economy and to the nation’s social fabric. The workforce is smaller because the number of people classified as long-term sick or who have taken early retirement has increased.
Meanwhile, evidence is mounting of the long-term consequences of quarantining the country during lockdown. There were warnings at the time that keeping people under a form of house arrest would lead to rising loneliness, mental illness, domestic abuse and childhood obesity; a growing school attainment divide between pupils from rich and poor homes; an increase in hospital waiting lists and a rise in undiagnosed cases of cancer. All of which have come to pass. Only last month, for example, a report by the House of Commons Library expressed concern that the estimated rate of absence from school in the current academic year was 7.8% – compared with 4.8% in 2019-20.
The better off households in Britain – as elsewhere – survived the pandemic reasonably well. This part of the population was able to work from home, and actually stashed money away as its spending opportunities were reduced during lockdown. The value of their houses went up, and they were also the main beneficiaries of rising share prices. The super-rich did best of all from the surge in asset prices driven by record-low interest rates and central bank money-printing. Globally, lockdowns resulted in more billionaires and more people living in extreme poverty.
The response to this is that there was no alternative but to take draconian measures, in order to provide a breathing space before the arrival of vaccines. A single narrative in which policy makers had no choice but to impose lockdowns has largely gone unchallenged.
But as Toby Green and Thomas Fazi note in their book, The Covid Consensus, the idea of entire countries being placed in lockdown was something entirely new. They note that in a report on pandemic preparedness produced by the World Health Organization in November 2019 there was no notion of city-wide, let alone country-wide quarantines being conceived of. The word “lockdown” was not mentioned once.
By late February 2020, the WHO had changed its mind, noting that the only measures “currently proven to interrupt or minimise transmission chains in humans” were the ones introduced in China. Politicians in the west duly accepted the advice. Only Sweden, of the developed countries, went its own way.
Perhaps the WHO was right that Covid 19 represented an unprecedented challenge. Yet as time has worn on the harms from lockdowns have been harder to hide. A pair of self-confessed lefties, Green and Fazi express bewilderment that the liberal left has not kicked up more of a fuss. As they note, an aggressive form of authoritarian capitalism resulted in poor people everywhere suffering enormous losses while rich people everywhere became immeasurably richer.
Britain’s flirtation with recession and a new era of austerity, alongside semi-permanent economic stagnation are the consequences of a policy response to the pandemic that was far-reaching in its scope and severity. Given that the price paid for lockdown was colossal and is still rising, a period of deep reflection is needed. The argument that there was no alternative should be closely examined.
The Covid Consensus by Toby Green and Thomas Fazi is published by Hurst
