2007 - 2022

Mass Unemployment, Indyref 2 and Corona Economics

George Kerevan on the ominous economic forecasts, looming mass unemployment and what effect it might have on our constitutional future.
ACCORDING to this week’s report from the OECD – the authoritative thinktank funded by the main industrial countries – the UK economy is projected to contract by 11.5 per cent in 2020 – the worst COVID-19 induced recession anywhere on the planet.  By way of comparison, the downturn forecast for the US is half that of the UK – despite the equally high and equally avoidable American death toll.  The OECD forecast is, of course, only an educated guess.  But it suggests that the UK economy is hanging on a very shoogly rope.
I’m usually suspicious of catastrophic economic forecasts.  Some minds of a socialist bent have been predicting the collapse of the global and British economies for a long time, but somehow Armageddon never arrives. For sure, the workers suffer and there is the odd year when the bankers don’t get their fat bonuses.  Yet the capitalists are not given to suicide and (so far) have always found a way of righting the ship.  Sadly, oft times this has involved war, mass unemployment and general mayhem.  But somehow the system reboots.
This crisis, for instance, has seen every main capitalist economy print unlimited amounts of money to shore up the status quo.  This new cash is simply invented by central banks.  Most of the new money is being pumped into the financial markets to buy existing government bonds.  This leaves a dearth of assets for capitalists to invest in, so they are forced to buy company shares. Hey presto, this week global stock exchanges have gone into overdrive, despite the OECD predictions of doom. On Tuesday (9 June) the US Nasdaq index of high-tech shares hit an absolute record high, despite the recession.
True, things are not quite so rosy in London, where the FTSE share index is dominated by mining and energy companies.  These are likely to be hit by the global downturn – we don’t need as much oil or metals if the economy is underperforming. That said, even the FTSE 100 index is up on the start of June.  Stock markets are only a sophisticated form of gambling and those big players with cash to hand are still willing to put on bets.
The interesting development concerning central banks printing money lies in Frankfurt, where the normally conservative European Central Bank has thrown caution to the winds.  At the start of June, the ECB actually expanded its massive £1.2 trillion purchase programme, as a way of shoring up the ailing EU economy.  Unlike the supine Bank of England, the ECB is using its newly printed cash to buy company debt as well as government bonds. This effectively puts cash into the big European companies (ignore the mechanics for now).  But then, the EU is a machine designed to protect the direct interests of big German industrial capital.  Which explains why the ECB is planning to buy the bonds of Lufthansa, the German airline, even though these are rated officially as “junk”.
The European and German economies were already in poor health before the pandemic.  But Germany’s swift response to the crisis means its economy is already recovering from the lockdown.  Together with the ECB monetary injection, the result is that the German economy is springing back quite quickly.  The OECD forecast is that the likely German downturn in 2020 is only slightly worse than for the 2009 recession following the banking crisis.  That does not mean Germany is over the worst – it is stuck with an industrial structure (e.g. diesel cars) that is rapidly becoming obsolete.  Which is why Berlin may decide to cut the UK lose in the current trade negotiations, concentrating new investment on the continent.
Another largely unnoticed move by the ECB is that it bought all of the new bonds issued by Italy in April and May. Translation: the European Central Bank (which is essentially controlled by Berlin) has been printing cash to lend to the semi-bankrupt Italian government, during the pandemic.  This is unprecedented. The ECB is also putting cash directly into French and Italian company bonds, shoring up manufacturing across the EU.  This represents a significant increase in the control of the ECB over the European economy.
Which suggests to me that it is highly unlikely an independent Scotland will be allowed into the EU without having to join the euro currency zone and accept the economic tutelage of the ECB.  Yes, I know a member state can remain in euro limbo (witness Sweden, which keeps its own currency) but little Scotland will have to show willingness to conform.  Besides, SNP insiders such as Alyn Smith (and, I suspect, Andrew Wilson and Angus Robertson) are passionate supporters of joining the single currency as soon as possible.
What of the Scottish economy post COVID-19?  Taking the OECD forecast as a benchmark, I doubt is we will see a return to anything like normal before the end of 2022.  The Scottish economy is particularly vulnerable to COVID-19 shocks in the hospitality and tourism industry, and in oil.  Plus, the FM seems reluctant to follow the Tories at Westminster and unlock as fast as possible.  Again, extrapolating from the OECD forecasts, we could be looking at an unemployment rate of around 10 per cent over the next few years, which will depress ScotGov tax receipts into the bargain.  Which means that any second IndyRef will take place against a background of economic weakness.
I venture this prospect might make Nicola (or her successor) reluctant to push the button for a second referendum.  We’ll have the usual warm words, of course, but I fear the actuality will be to parley any SNP victory in next year’s Holyrood elections into increased powers, not a fresh referendum.  Specifically, I predict the FM will demand greater borrowing powers and that Boris will grant them, as a way of placating Scotland while simultaneously pushing the cost of the borrowing on to the Scottish electorate.  You have been warned.

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  1. Jell says:

    I am sure many people would rather follow a ‘transformative programme’ of government, such as Finnish
    Prime Minister Marin’s Government “Programme Inclusive and Competent Finland – a Socially, Economically and Ecologically Sustainable Society and the Government Action Plan.” As part of this ‘action’ Juho Saari, Dean of the Faculty of Social Sciences and professor of social and health policy at Tampere University “has been called upon as rapporteur to produce policy recommendations on how to prevent the growth of inequality and insecurity in society caused by the Covid-19 epidemic”

    I would like to think Aileen Campbell, in her new task, will follow Juho Saari’s work if she is not already doing so . Keep well away from the backward looking neo-liberal economists and politicos who can only think of the ‘old normal.’

    1. Blair says:

      I believe many will look back on the good old days of Margaret Thatcher because at heart she knew that the British system was broken and new the only way was a free market way. The nasty Tories who plotted against her were only interested in power, but Margaret commission was to find a fairer way to distribute power to avoid curruption. The Christina Project commission gave the Lord of Hosts authority to use the EM Space for RI development.

  2. Patrick Hogg says:

    Not a word on the balance of payments and the EU situation vis a vis Brexit? Johnson is the captain on the Titanic and its a Status Quo Song he is trumpeting, Down Down get it on Down……..straight to Hell boys to quote the Clash song! Not a word on the Corporate FACISM that is holding the world to ransom just now for an unwanted not needed gold rush vaccine to suit Gates and co. A person’s life insurance shoots through the roof as soon as you mention vaccines and the tabloids roll out their guttersnipe Mental Hospital lexicon of hate speech that all gathering at Glasgow Green to protest the lockdown etc are all Crackpots…..the lexicon of round them up and off to the Gulags. Yep good point on Sturgeon wanting to be seen to be tougher on us Scots and appeal to her own self image as a strong leader by sliding so far to the Right in politics she almost fell off the floor. R number modelling is as dumb as imaginary ghosts in a game of illusion as there is no bearing to the real world in this sickening game of manipulation given the majority have been asymptomatic and when so cant spread a virus, to the progression of spread of the virus cannot be modelled in the real world but its a great way of conning and controlling the real virus, THE PEOPLE. She is lost in a power bubble that is killing the Scottish economy, the very thing she is charged with saving and protecting, the livelihood of the people who voted her into power, the power she had abused now for months whilst fooled by an elite who bought the WHO, now a captured agency of Mr Gates. If its not popular for votes the lady aint for turning. Schools are back properly in Finland but our kids are to be controlled and the Terror kept alive until the master Gates and co get their ransom, a forced vaccination. Will this be allowed? Coz it looks like thinking ideas that dont suit the controllers of opinion are not allowed these days! God help Scotland as it now sunk to its lowest as the land of mediocrity and self interest self image and is under control by foreign actors whilst most dont and cant even see it whilst brainwashed! As Burns said Where is the soul of Freedom Fled? Immingled with the mighty dead…….

  3. florian albert says:

    George Kerevan writes that the ECB has been ‘printing cash’ to lend to the Italian government and that this increases ‘ECB control over the European economy’.
    The political implications of this are not explored. If this money is lent, presumably it has to be paid back. Italy, like Greece a decade ago, could only pay it back by further weakening an already desperately weak economy. If it is not to be paid back, this will invite a political backlash as Germany and her northern neighbours will be – in effect – indulging in transfer payments to a weaker country in a way that voters in Germany have been promised would not happen.

    It is very likely that Germany will stumble into increased economic unity for the EU but, in doing so, undermine support for the whole EU project in the wealthier countries in North Europe who have – till now – been enthusiastic supporters.

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