JThe UK economy has been stagnant for much of the year. The recovery from the deep crisis of 2020 has run out of steam. 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 consecutive quarters. But official estimates showing zero growth in the last three months of 2022 meant it was a very close thing. While the full impact of rising borrowing costs has yet to be felt, neither the Chancellor nor the Governor of the Bank of England would be betting against a recession at some point this year.
Britain is the only G7 country where activity has yet to return to pre-pandemic levels and, on current trends, it will be some time before it does. Growth hasn’t been dazzling elsewhere in the developed world either, but the UK’s performance has been particularly poor. At the start of 2025, the last possible time when a general election could take place, the economy will likely be even smaller than it was at the end of 2019.
Some will wonder what it is. There is a strong degrowth community in the UK that argues that the goal of policy should not be ever higher levels of growth, but a stable economy that stops putting so much pressure on the carrying capacity of the planet.
Well, over the last three years the UK has been going through a process of downsizing. The 16-year period of steady and robust expansion from 1992 to 2008 is now a distant memory. For all intents and purposes, the economy has come to a steady state. But it would be overstating 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 rating their life satisfaction as very high is well below pre-pandemic levels.
This is hardly surprising. The standard of living is falling because wages are not keeping pace with prices. Consumers who have savings draw on them to maintain their consumption habits. Those who have no savings are forced to tighten their belts.
There is, however, more than that. Certainly the pandemic has left its mark through supply chain bottlenecks and an increase in business bankruptcies, but there have also been long-term scars on both the economy and on the social fabric of the country. The workforce is smaller because the number of people classified as long-term illness or early retirement has increased.
Meanwhile, evidence is mounting of the long-term consequences of quarantining the country during the lockdown. There were warnings at the time that keeping people under some form of house arrest would lead to increased loneliness, mental illness, domestic violence and childhood obesity; a growing gap in academic achievement between students from rich and poor homes; an increase in hospital waiting lists and an increase in undiagnosed cancer cases. All of this happened. Just last month, for example, a House of Commons Library report expressed concern that the estimated school absenteeism rate for the current school year was 7.8%, compared to 4 .8% in 2019-2020.
The wealthiest households in Britain – as elsewhere – have survived the pandemic reasonably well. This part of the population has been able to work from home and has actually been hiding money as their spending options have been reduced during the lockdown. The value of their homes has increased and they have also been the main beneficiaries of rising stock prices. The super-rich have made the most of the asset price boom driven by historically low interest rates and central bank money printing. Globally, the shutdowns have resulted in more billionaires and more people living in extreme poverty.
The answer to this is that there was no alternative but to take drastic measures, in order to afford a respite before the arrival of vaccines. A unique narrative in which policymakers had no choice but to impose lockdowns has gone largely 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 a citywide quarantine, let alone a nationwide one. . 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 minimize chains of transmission in humans” were those introduced in China. Western politicians duly accepted the advice. Only Sweden, among the developed countries, has gone its own way.
The WHO may have been right to say that Covid 19 represented an unprecedented challenge. Yet over time, the harms of the lockdowns have been harder to hide. A pair of avowed leftists, Green and Fazi express bewilderment that the liberal left hasn’t made more noise. As they note, an aggressive form of authoritarian capitalism has meant that the poor everywhere have suffered enormous losses while the rich have become infinitely richer.
Britain’s flirtation with recession and a new era of austerity, along with semi-permanent economic stagnation, are the consequences of a policy response to the pandemic that has been far-reaching and far-reaching. considerable gravity. Given that the price paid for containment has been colossal and continues to rise, a period of deep reflection is in order. The argument that there was no other solution should be closely examined.
The Covid Consensus by Toby Green and Thomas Fazi is published by Hurst