Thoughts on the Economy as we Prepare to Vote

Thoughts on the economy as voting in the general election approaches

A key factor we are being asked to consider as we prepare to cast our vote this month is that of Britain’s economy. While many Christian might rightly want to question the entire structure of the global economy, we are right to also take a pragmatic approach and consider what is at stake in the next five years, whoever wins power on May 7th.

The financial crisis of 2008 continues to overshadow most policy areas. The Labour Government of Gordon Brown prevented the banking crash from destroying the economy only by massive expenditure to shore up the system – meaning a huge growth in national debt. When the Coalition Government under David Cameron took office, it declared its firm commitment to reducing the debt – but debt remains intractable.

Balancing government expenditure against debt reduction is a juggling act. Health, education and pensions have been largely protected, leading to greater spending reductions in other areas. Welfare cuts have proved worryingly acceptable to the general public, as the concept of the “undeserving poor” reappears. Whoever wins this month will face the need for further debt reduction – and the low-hanging fruit has already been picked.

Meanwhile, the financial sector, which was at the heart of the crisis, has resisted calls for significant changes to its practices. The conditions for another bubble, which may then burst, have not disappeared, although they may have been mitigated.

A big underlying question is whether the economic consensus of the last 35 years is the only viable model, or should there be more scope for fiscal policy aimed at regulating supply and demand (Keynesian economics)? Alternative approaches have not yet gained enough momentum to overturn the dominant consensus.

Issues

Debt, cuts and diversification: the squeeze on benefit recipients is causing real hardship which also impacts on future generations (although some areas of welfare expenditure, such as pensions, have not been part of the debate about cuts). Cuts to the Civil Service reduce the quality of advice and support to government. Reducing military or policing costs creates other risks. Reliance on the City of London as the powerhouse of the national economy has exacerbated economic imbalances between the South East of England and the rest of the country and left most of our eggs in one basket – the same basket that broke in 2008.

Employment: after 2008, unemployment did not rise as fast as was feared. This is good because unemployment is destructive of the human spirit. But the fastest multiplying jobs are often too badly paid to sustain a decent standard of living – nor do they generate much tax-take, so they don’t ease pressure on public expenditure.

Banking: compared to most developed economies, Britain has few banks and those we have remain “too big to fail”. This contradicts a basic principle of the market economy which claims (in theory) to abhor the emergence of monopolies and cartels. The development of challenger banks, community finance initiatives, credit unions and other players in the financial sector may be one way to challenge the quasi-monopoly of the banks, most of whom have been reluctant to provide services to poorer communities.

Inequality: material inequality has grown since 1979 and continues to widen. Taxation which would significantly constrain very high incomes is considered politically impossible. The country is divided between the poor, the relatively well-off but insecure, and the extremely rich 1% (or less). Widening inequalities are known to generate numerous social problems. But in a global economy, where the rich can move their money (and themselves) to other tax regimes, scope for action may be limited.

Distributional justice, and power: economic questions often centre around distributional justice – who should get what share of the national cake. Yet while corporate power has accumulated, work remains precarious for many and consumers have limited choice about who supplies their needs. It will take more than one Parliament to rebuild a more competitive economy, resuscitate other sources of wealth such as manufacturing, and sort out the big economic issues facing us.

Questions to Consider:

  • How far can the UK government choose its own economic policy directions, and how far must it be subject to global market pressures?
  • How can we get a proper balance between debt reduction, stimulating the economy and protecting the vulnerable? Can we create an economy where social and environmental goals – not just profit – become the driving force for creative and entrepreneurial activity?
  • How might our own spending decisions – what we buy, where we bank, how we support ethical companies – affect the economy at large?

 What all this reveals is that grassroots economic decisions have the power – over time – to affect the future shape of our economy. The system we live under may not generate the sort of world Christians pray and long for, but unless we think about our own economic priorities, where retail politics dominates, those of our political leaders will not change unless votes can be found in it.

Canon Simon Butler