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Recovery is futile if it’s led by the finance sector

Finance is fragile. Images_of_Money

The politics of recession and recovery dominate discussions about the British economy. Every new set of figures published or set-piece moment like the budget sparks another debate on whether the UK has finally recovered from the 2008 financial crisis. The sheer variety of opinions demonstrates the difficulty of discerning whether the economy is moving out of – or into – a prolonged stagnation.

Duelling facts can only tell us so much. Whether the UK is in recovery or not depends on who you ask and, more importantly, the political stake they have in the answer. We have grown accustomed to Westminster’s adversarial politics showcasing regular sparring matches between George Osborne, Ed Balls and Vince Cable as they battle over how best to interpret the most recently published set of economic indicators.

But there is very little acknowledgement that these are all merely surface disagreements because, whatever spin politicians put on new economic figures, Britain’s political elite are in lock-step in their support of finance-led growth both past and present.

Financial fix

Finance-led growth in the UK was always intended to be a temporary fix rather than a new economic model; a result of interaction between banks and government policies pursued in the face of British economic decline.

In short, finance-led growth relies on cheap credit to fuel consumption and bolster growth in every manner of asset-class (stocks, property markets, debt securities and derivatives). This helps explain certain transformations in the British economy in recent years. But it is a deeply uneven process, experienced differently across the UK.

More importantly, finance-led growth is the root cause of the 2008 financial crisis and our current economic malaise. Our problems stem from the political elite’s inability to face many unanswered questions: can (and should) the UK economy be restored to pre-crisis levels? Are we encountering a much deeper crisis related to wealth and income inequality, gender inequality and/or resource depletion and ecological limits?

It is increasingly clear that the UK needs to move away from short-term fixes, and develop a long-term solution to the model of finance-led growth responsible for the 2008 crisis, not least because growing inequality, a widening gender gap and the ecological limits of growth are substantial barriers to a lasting “recovery”.

But these problems won’t be addressed as political and economic elites frame issues in a way that constrains debate. For example, equating positive economic performance as merely achieving more economic outputs than last quarter silences alternative voices for whom economic priorities mean something else entirely.

Take, for example, the National Income and Products Accounts (NIPA). These measures of economic activity were developed in the 1930s. Their usefulness is limited, however, in that it is always the case that the cycles of growth, crisis, recession or recovery become visible only in retrospect. With GDP figures we cannot know where we are in the cycle because it will only be visible at some future date.

Because of this it is widely accepted that GDP growth measures are inadequate indicators of economic activity because they exclude unpaid labour in the home and cannot account for more important measures of human progress like well-being.

Recovery does not speak for itself through strategically selected indicators of enhanced production or growth. Rather it is something that needs to materialise through how people actually experience the economy. To think about a single recovery rather than multiple experiences is therefore to silence some people’s interactions with economic life.

We are already seeing right now that GDP growth can exist at the same time as a cost-of-living crisis. This is because of the uneven (re)distribution of the burden of recession and gains from recovery. Women, especially those with care responsibilities for children, elderly or disabled family members are taking a particularly heavy share of the costs of austerity. Women also get a much a smaller share of the benefits of recovery.

Addressing these problems requires more than just a return to growth, and it requires more extensive debate than generally permitted by the news or election cycle.

On one hand economic recovery can be a positive notion when the UK returns to health and strength. On the other hand, recovery could mean that we do not learn from our mistakes or address the challenges of the future – negating any notion of progress. To consider a return to pre-crisis growth a success does nothing to rethink the central economic issues that face British economy and society. The debate needs to move on.

It is no longer enough to think of a “recovery” from finance-led growth. We need to discover potential futures for the UK economy. Thinking this way means exploring the wider social crisis of growing inequality and falling standards of living as well as new ways out of long-term predicaments such as the ecological limits to growth.

We need to break with this growth obsession and allow multiple voices to be heard once again.

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