TeaThe UK economy is flat and has been for the best time of the year. The recovery after the deep recession of 2020 is over. High inflation, high interest rates and high taxes are all exacting a toll.
Technically, the strict definition of a recession has not been met as the economy has yet to contract for two consecutive quarters. But official projections showing zero growth in the last three months of 2022 meant it was a very 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 will bet against a recession at some point this year.
The UK is the one G7 country where activity has yet to return to its pre-pandemic level and on current trends this will take some time. Growth elsewhere in the developed world hasn’t really been spectacular, but the UK has been doing particularly poorly. By early 2025, the last possible moment when general elections could be held, the economy will probably still be smaller than it was in late 2019.
Some would wonder what’s the fuss. There is a strong de-growth community in the UK which says that the aim of policy should not be ever-high levels of growth, but a steady-state economy that ceases to exert as much pressure on the planet’s carrying capacity.
Well, for the last three years the UK has been going through a process of growth. The 16-year period of continuous and robust expansion from 1992 to 2008 is now a distant memory. For all intents and purposes the economy has come to a standstill. But it would be stretching the truth to say that the country is a happier place because of it. According to the Office for National Statistics, the number of adults who rate their satisfaction with life as very high is well below pre-pandemic levels.
This is hardly surprising. The standard of living is falling as wages are failing to keep pace with prices. Consumers who have savings are investing in them to maintain the spending habit. Those who do not have savings are forced to buckle down.
However, there is much more to it than that. To be sure, the pandemic has left its mark through supply chain disruptions and an increase in the number of business failures, but has also caused long-term damage to both the economy and the country’s social fabric. The workforce is smaller as the number of people seeking long-term illness or early retirement has increased.
Meanwhile, there is growing evidence of the long-term consequences of quarantining the country during lockdown. There were warnings at the time that placing people under house arrest would lead to increased loneliness, mental illness, domestic abuse, and childhood obesity; the growing divide in school achievement between students from richer and poorer homes; Increase in hospital waiting lists and increase in undiagnosed cancer cases. All of whom have passed. Only last month, for example, a report by the House of Commons Library raised concerns that the estimated school absentee rate in the current academic year was 7.8% – compared to 4.8% in 2019-20.
Well-to-do families in Britain, as elsewhere, were reasonably spared from the pandemic. This part of the population was able to work from home, and actually hid money as opportunities to spend it were reduced during the lockdown. The value of their homes soared, and they were also the main beneficiaries of rising stock prices. The super-rich made the best of a boom in asset prices driven by record-low interest rates and central bank money-printing. Globally, lockdowns have resulted in more billionaires and more people living in extreme poverty.
The answer is that there was no option but to take drastic measures to provide breathing space before the arrival of vaccines. A single narrative that policymakers had no choice but to impose a lockdown has gone largely unreported.
But as Toby Green and Thomas Fazzi write in their book, The Covid Consensus, the idea of putting the entire country under lockdown was novel. He noted that a report on pandemic preparedness drawn up by the World Health Organization in November 2019 had no notion of an entire city, let alone a nationwide quarantine. The word “lockdown” was not mentioned even once.
By late February 2020, the WHO had changed its mind, noting that the only measures “currently proven to interrupt or reduce transmission chains in humans” were those introduced in China. Politicians in the West duly accepted the advice. Among the developed countries, only Sweden went its own way.
Perhaps the WHO was right that Covid 19 represents an unprecedented challenge. Yet as time goes on, it has become harder to hide the damage caused by the lockdown. Green and Fazzi, a pair of self-confessed leftists, expressed surprise that the liberal left hasn’t made more of a fuss. As he puts it, an aggressive form of authoritarian capitalism resulted in poor people everywhere suffering huge losses while rich people everywhere became extremely rich.
Britain’s flirtation with a new era of recession and austerity, along with semi-permanent economic stagnation, are the results of a policy response to the pandemic that was far-reaching in its scope and severity. Given that the price paid for the lockdown was huge and is still rising, a period of deep reflection is needed. The argument that there was no alternative should be scrutinized closely.
The Covid Consensus by Toby Green and Thomas Fazzi is published by Hearst