The Crash To Come: Why Britain Can’t Cope with Another Economic Crisis

RISE – Scotland’s Left Alliance has published a detailed new report into the state of the British economy. With the current sharp focus on the contradictions and crisis of the British political elite, the reports is timely and sure to cause discussion across the landscape of the Holyrood elections.

The paper, written by Sheffield University economist Scott Lavery, analyses four areas of British economic ‘imbalance’ – a substantial current account deficit, growing levels of household debt, wage repression and high levels of inequality, and the over-concentration of economic activity in London and the South East – that render the UK particularly vulnerable to sudden global economic shocks. Commenting, Cat Boyd said:

“This report is the most thorough analysis of the UK economy any Scottish party is likely to publish in this election.

“With economic power concentrated in London and the South East, household debt levels fast approaching their pre-recession peak, long-term wage stagnation, and rampant inequality, Britain’s economy is the worst equipped of any in Europe to cope with the effects of another serious global downturn.

“George Osborne’s policies have made the situation worse, that’s why his ‘long-term economic plan’ just keeps on getting longer.”

Britain is clearly deeply unstable, but can an alternative be created north of the border drawing on fres economic and organisational models?

Read the report here:

http://issuu.com/risescotlandsleftalliance/docs/crash_to_come_final__519821_/1?e=19440239/34316003

Comments (33)

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  1. Dougie Blackwood says:

    Much of the attached paper is self evidently correct. There has been a reduction in the general wealth and financial stability for those at the bottom of the economic pile while those at the top have increased their share of the nation’s wealth to an unsustainable degree. This cannot continue without either another crash or a radical change of policy.

    As it stands there is no likelihood of our present government changing tack. The recent budget attempted to increase the pace of separation between rich and poor but fortunately the wheels are coming off. This does not mean that they will see the light as in a damascene conversion; more likely they will find another way of continuing the march of inequality.

    Pensioners that retired with a company pension in the last 20 years are relatively well provided for. Those retiring now are managing less and less well every year. I expect this area will be one where the next axe will fall. I fear that my works pension may be seen as enough to keep the wolf from the door and I might lose the old age pension that I contributed to from every pay packet for over 40 years.

    Make no mistake, the Tory government will find a way that their pals in the city will support to reduce outgoings and reduce the amounts of tax that those at the top pay into the pot. A kite was flown to start taxing all income that is paid into pension pots rather than being tax free and taxed on withdrawal. This is the wheeze that the board members of almost all the big companies use to reduce the overall tax on remuneration and it rapidly shot down prior to the budget as “too harsh”; try to squeeze some more out of the welfare budget was tried instead.

  2. Steven Milne says:

    Marxists have been predicting the imminent demise of capitalism since 1867. I am reminded of the boy who cried wolf.

    1. John Page says:

      This may or may not be right…….but do you not agree that the current dominant economic policies are not sustainable either in terms of the earth’s ecological boundaries or in terms of social inclusion?
      John Page

      1. Steven Milne says:

        I believe that the rejection of centra planning in favour of the free market has led to massive increases in living standards in China, India and Eastern Europe in the past 25 years and that capitalism will adapt to today’s challenges, as it has to many challenges in the past, and will continue to provide everyone in society with a choice of goods and services and a quality of life which is far superior to what any alternative economic theory had ever achieved in practice.

        1. John Page says:

          ……….and the ecological boundaries?

        2. Gralloched says:

          The ” free market ”
          Where can we observe that in operation ?
          ” an immense increase in prosperity “?
          Where ? Define ” prosperity ” ?
          Is this the ” conspiracy against the people ” that Adam smith warned us against ?

          1. Steven Milne says:

            Prosperity is generally defined as GDP per capita. I was born in 1969 and in my lifetime have witnessed a massive increase in prosperity and quality of life in the UK measured by car ownership, home ownership, foreign holidays, consumer goods, computers, TV’s, phones etc etc.

    2. Chic McGregor says:

      It has collapsed in the past, but the difference now is there is no (sane) big reset button of having a World War.

    3. John Page says:

      ……….and when everybody in China and India and everywhere else has the TVs, cars, air travel etc what about those planetary boundaries? And what about the 6th Great Species Extinction?
      Saying that capitalism has been the most successful economic system so far is a sign of dangerously narrow and short term thinking. Capitalists are driven by the next quarterly results of the corporate vehicles which have assumed powerful lives of their own to reveal to the Stock Markets but the ecological threats the Earth faces require long term strategic thinking on behalf of humanity and all other species. You seem to be arguing that because attempts to centrally plan economies in the past haven’t supplied the baubles of consumerism that we should trust the free market when all the evidence is that unfettered markets lead to profound inequality and ecological disaster.
      The really important changes in the lives of my siblings and I (born in the 40s and 50s) came from state planning and they were decent houses, schools and the NHS
      Drop the lazy attacks on Marxism and analyse the current state of the world from the viewpoint of sustainable development which cries out for recognition of social inclusion and planetary constraints.
      John Page

      1. Crubag says:

        Planned economies haven’t been any better at managing ecological impacts of industry.

        Arguably worse, because to control an economy you need to control the people – there were no environmental NGOs in the East bloc to raise concerns. Those governments didn’t allow criticism.

        1. John Page says:

          So we should not take any steps to steer the economy in the face of unfettered growth, species extinction and climate change (which is already upon us) because those commies were baad.
          Is it possible to have a grown up discourse without resorting to pointing at bogeymen?
          There are 3 options
          1 deny there is a problem
          2 say there is nothing that can be done because its human nature to support capitalism
          3 do something about it

          Which one do you think is the most appropriate?

          John Page

          1. Crubag says:

            You link environmental damage to capitalism, but the same and worse happens under planned/centralised economies, they’re just better at silencing peopke.

            Industrial society, under whichever political system, will have environmental effects. As did agricultural societies before them.

            I think the only way forward is increased awareness leading to changes in behaviour.

    4. J Galt says:

      We’re not in “Capitalism”, we’re in Corporate Welfare-ism.

      The days of small scale community business/craftsmen(women) “good” free enterprise are well over.

      And don’t give me the usual “increased living standards in my lifetime/cars/holidays/flat screen tellies yada yada yada” shite.

      When I was at school in the 60s ONE wage was sufficient to provide for the vast majority of families I knew – now it’s at least TWO and one of them has to be of the 10 hour day/6 days a week neo-Victorian norm.

      1. Wul says:

        I agree,

        Capitalism says that if a business fails it goes down the tubes. Bankers failed and were bailed out, rewarded and given another seat on the gravy train.
        What we have is capitalism for the masses and state-backed socialism for the elites.

        It is unsustainable and together with state-socialism for big landowners, rentiers, corporate agri-business, property developers and sporting estates it will bankrupt us.

        We are supposed to feel enraged about an asylum seeker (who is not allowed to work) getting £50/week for food and turn a blind eye to a toff getting subsidies to feed his clucking pheasants.

      2. c Rober says:

        you also forgot working benefits with those two wages.

  3. Dave says:

    It hasn’t happened yet so it can never happen -hmmm.

  4. Chic McGregor says:

    The UK has the worst trade balance in the developed World bar none. Check the OECD stats if you do not believe me. Even the stats massaged by the UK itself or the CIA World Handbook say this.

    The OECD figure is around -$200 billion per year.

    Scotland is at break even with the rest of the World, although the massaged internal figures for the UK show a net imbalance in trade between Scotland and England in England’s favour.

    i.e. we are expected to believe that despite Scotland’s huge per capita resource advantage in food and drink oroduction and energy generation and in manufacturing, that Scotland is one of the very few countries which runs a trade deficit with England.

    As the American’s say, go figure.

    1. Alf Baird says:

      Scotland’s trade performance is rapidly deteriorating, as Margaret Cuthbert explains here: http://reidfoundation.org/portfolio/scotland-and-international-trade-organisations/

      Essentially the UK is dragging what is left of Scotland’s economy down with it, and the longer we remain tied to Westminster the worse our trade position will become. Scotland is not internationally competitive, in large part due to high energy costs coupled with a serious lack of investment over the last 30+ years in strategic transport infrastructure like major seaports, the latter now owned by offshore private equity ‘funds’, as are our main airports and energy firms: In other words, privatisation of key utilities resulted in Scotland losing international competitiveness. see for example: http://reidfoundation.org/2016/01/sort-out-our-ports

      The reason UK trade data shows Scotland buying more goods from England than we sell in return is simple: current logistics arrangements means most retail goods sold in Scotland have to come north from logistics centres in England. These goods of course are not ‘produced’ in England, they come from overseas and enter the UK via ports in England. If Scotland had a trade and maritime policy it would be able to do something about this – but Holyrood and the SNP don’t seem too bothered as far as I can see. Pity, as without trade growth we are unlikely to see much in the way of economic growth again.

  5. JohnEdgar says:

    Better together? Better self-government. Referendum2. The UK aka English political scene at present, compared to Scotland, is becoming more unstable. With Brexit primarily an English issue within the Tory party and Labour scrapping over Corbyn, let’s leave them and their increasingly dysfunctional Commons and Lords. It is an ancien regime. The “estates” and class rigidities south of the Tweed will continue. The so-called and misnamed Mother of Parliaments with its symbolically crumbling building unfit for purpose tells it all.
    These economic reports highlight the results of the macro management driven by Westminster. They manifest the symptoms. Independence enables Scots to have for the first time since 1707 full macro autonomy and let our politicians grow and develop. We don’t need being better together “with that lot”. We can be better ourselves.

    1. Alex Beveridge says:

      Very neatly summed up, John.

  6. Willie says:

    If there was a free market then life could be much better for everyone everywhere. But there is no such thing as a free market. It is an illusion, a myth and in its place is rigged market with abusive self interest. But despite all of this do the people vote for socialism. Well, of course they don’t. Only very small numbers vote for socialism and even then they tend to fall out and split with a regularity that you could near set your watch by. The recent maneuvers by Rise, Respect, Solidarity and the SSP is testimony to that. However, if you don’t take power then you can never exercise change. The SNP by comparison are a generally left of centre democratic party who as a grand coalition have taken power. They have moved policy leftwards whilst managing to move from opposition, to a minority government, to a government with a majority. This is no mean feat in the teeth of an establishment who has used every means possible to restrict their progress. But progress has been real, very real, and we have the opportunity to do more. We need to consider that very carefully as we move to vote in May. Fragmentation is our enemy, Solidarity is our ally and if socialism was truly just around the corner then the people would have voted for it a long time ago. Let’s not throw our progress away on the fairy tale promise of utopia tommorow. We know where we want to go, and it’s how we achieve it.

  7. David Sangster says:

    Marx recognised that Capitalism would never collapse as long as there was a constant supply of surplus labour, and that is what we have. The labour force has responded by, in effect, job sharing, accepting zero hours contracts and low wages. What little growth there is in the system directs wealth to the rentier class, as expressed in Picketty’s neat formula “r>g”. Don’t for a moment suppose that the rich aren’t concerned about ecological disaster. They are hyper-aware, and they intend to survive. That’s the Policy.

  8. john young says:

    Steve how much more “growth” can mother earth sustain,how much more “material things” do we need or is necessary,I see nothing but war/destruction/misery in this capitalist utopia that you so vehemently adhere to,sad really.

  9. Scots Anorak says:

    Any chance of a pdf version of the report?

  10. MBC says:

    Terrible sound track.

  11. Mitchie says:

    Neo liberalism (in it’s current form) is NOT ‘the unfettered market’ it is a market distorted by over concentrated capital.

    1. Alf Baird says:

      The UK is a global cash-dumping casino for what might be termed ‘self-regulated’ capital, with many privatised former utilities retaining regulatory powers and merrily exploiting local/regional monopolies ad infinitum. Most privatised UK utilities are now owned by offshore private equity funds, including energy firms, airports and ports, e.g.: http://reidfoundation.org/2016/01/sort-out-our-ports/

      This largely explains why Scotland is no longer internationally competitive, and why export trade is falling (i.e. high utility prices, and ageing infrastructure). Most responsible nations generally retain a good measure of public control over their strategic utilities. The UK does not. Scotland is paying a high price for that.

      1. Willie says:

        The question of course is how do we reverse this situation of the exploitable private and very often offshore ownership model of our essential utilities. Maybe, indeed very maybe, we should have told Sid we didn’t want to go down that route, but the people voted for the Thatcher privatisation programmes. Well maybe not in Scotland I hear the people cry, but in Scotland we certainly did vote for the Blair and Brown privatisations – PFI, widespread outsourcing et al. Resist and reverse seems to be the answer, but in the absence of a revolution, that the ordinary people wouldn’t support, what then the strategy for taking power to begin this reversal and improve our lot

        1. Alf Baird says:

          “what then the strategy”

          Assuming the state wishes to create a major economic asset (e.g. say a major new seaport, or a new airport in central belt):

          – the state plans and sets out broadly the asset it wants (scale, design, location, capacity etc)
          – the state advertises a concession for private firms to operate the asset, say on a 30 year lease
          – the state builds the asset (or asks the concessionnaire to build it)
          – the operator moves in, invests in ‘superstructure’ (cranes, IT, buildings) and starts operating
          – the operator pays back the state an agreed quarterly fee over the 30 years
          – the state continues to own and regulate the asset (prices, competition, volumes etc)
          – the state continues to plan for future national needs and concessions further assets as required

          This is pretty much the standard ‘continental’ concession approach, with some variations throughout Asia and North America. The mistake the UK made was in selling off strategic utilities on the cheap (including the land and regulation) with no effective state regulation or state planning as to provision of future capacity, investment, control of prices etc. The ‘continental’ model easily allows for better state management of key strategic national assets.

          1. Chic McGregor says:

            Hi Alf,

            I am well aware of the situation where for example, Scottish farm produce is shipped down to packaging and processing plants in England and then sold back to us at 3 or 4 times the orginal price.

            While the UK is one nation state, this is tolerable, just. But in an independent state that situation would not last long. Scotland would develop its processing, packaging and distribution centers resulting in much increased value added and export earnings and increased tax revenue and other economic benefits from the wages of those employed to do so. A huge boon to the Scottish economy which would amount to many billions .

            After all, no one would expect Netherlands, say, to export raw produce to Germany then but it back at 4 times the price, would they.

            Re Scotland’s trade with the rest of the World, it is about £21 billion in each direction, so we are, just about holding our own there.

          2. Alf Baird says:

            Chic, agree with much of that, especially on the opportunities for value-added activities associated with trade. However a key barrier to trade growth (and economic growth) remains Scotland’s outdated major seaports, and the inertia and ignorance of Holyrood on this critical aspect of the economy is unforgivable given it has the powers to sort this out now – http://reidfoundation.org/2016/01/sort-out-our-ports/

  12. Papko says:

    I dont think the “Agricultural produce” is a good example

    If Scots wanted to buy direct from the Farmer they could buy potatoes , carrots , cabbage , by the 10 kilo bag .

    That most Scots choose to buy vegetables in a Supermarket like Aldi , Asda , Tesco , at vastly inflated prices to what the farmer gets paid ,,,

    Is really a matter for Scots and why they shop at supermarkets ?

    Convenience I suppose ?

    There are economies of scale involved with taking quantities of food , to hubs for processing .

    a similar thing happens with courier companies , they collect parcels , take them to an area depot , then on to a regional hub , then a national one .

    In the case of UPS , a parcel collected in Dundee , is taken to Dundee depot , then to the Scottish depot , then (depending on where its going ) taken to the main UK depot in Coventry ,(central for UK )
    if going to Eastern Europe its taken to a main hub in Koln , and thence sorted .

    Even with Indy , Scots couriers will still use this system .

  13. Ian Kirkwood says:

    Cat,

    If you can identify why it is that collecting Annual ground Rent (AGR) is not just a different way of collecting the same amount of revenue, you will be on track to solving the dual problems of poverty and inequality. Current taxes are a dead end.

    Lavery’s observations are correct: “substantial current account deficit, growing levels of household debt, wage repression and high levels of inequality, and the over-concentration of economic activity in London and the South East.”

    These four areas are solved by collecting AGR. Current taxes CAUSE them.

    Check again how Marx dissociated himself from the Gotha Programme at which Capitalism was identified as public enemy number one. He knew that even capitalists need access to land for their enterprises. Landowners are the controllers. But adopting AGR places all the value of land back into the hands of everyone, achieving the essence of the most basic human right – access to land and natural resources.

    NO AMOUNT OF HIGHER RATE TAX CAN EVER DO THIS.

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