Monday, 2 January 2012

The Danger of the Danger of Disaster

The New Year has seen an overwhelming atmosphere of gloom.

As regards the economy, comment is generally agreed that the euro will be lucky if it sees out the year, with all that implies for the collapse of banking and the British economy.

And today has seen a furore about housing benefit cuts. Certainly, the impact will be significant; the Guardian reports the Chartered Institute of Housing as predicting that there will be thousands more claimants than properties affordable on benefits, raising the possibility that the poor will migrate to ‘benefit ghettoes’ in seaside towns or the north of England.

A Realistic Evaluation
Of course, these are predictions of Armageddon. We all have a fascination with the possibility of apocalypse, but it has not yet happened.

The eurozone has been ‘collapsing’ for months. Sarkozy has been giving it ‘weeks’ for so long that he resembles the little boy who cried wolf. So far, the euro has failed to fulfil the prophecies of its doom.

And – whilst we abhor the government’s housing benefit cuts – it is simply a statement of fact that the housing collapse has not yet happened either. The government believes that the housing benefit cap will not create homelessness, but will bring down rents; given the proportion of benefit recipients within the rented housing market, perhaps they have a point.

So, on both counts, we are not yet experiencing disaster … there is just a significant danger of disaster.

The Danger of the Danger of Disaster
We live in a wealthy society. We define poverty, not in an absolute sense, but as household income below 60% of the median. I know Edwina Currie got her head in her hands when she said so, but it is fair comment that, in a society which defines poverty as the bottom third of the population, the bottom third of the population will always be in ‘poverty’, even if they are relatively well-off.

I want to stress that I do not wish in the slightest to trivialise the real disaster of unemployment, or the significant suffering the government cuts are going to cause. The foul nature of this government is shown in that it has targeted, not those in the top two-thirds, but those in the bottom third … those least able to cope with a significant cut in their income.

But for the rest of the 99%, let’s be honest, we could cope with a degree of economic setback … with a pay freeze … with rising petrol and electricity prices. I have been without money. You cancel the holiday, go for a walk not a trip to the Metro Centre, eat mince not a takeaway, make your clothes do.

I bet that there will be few people reading this who have not already taken stock of how they will cope if things get bad next year.

And that, of course, is where the REAL danger lies – not in the disaster (for it has not yet happened), but in the danger of disaster.

The ‘danger of disaster’ has a danger of disaster all of its own, because of how people react when disaster threatens.

The Consequences of the Danger of the Danger of Disaster
You would have to be an absolute idiot to be taking on a risky financial venture in the current situation.
SMEs (small and medium enterprises) are building up their bank accounts and putting planned expansion on hold.
Employees in the public services are especially nervous, for who knows if their jobs are even safe for much longer?
Retired people have been drawing in their horns for a significant time already, because the low interest rates have cut their income from savings; now they are managing those savings as carefully as possible to last as long as possible.
And all over the country individual families are paying off their cards as quickly as possible, postponing the move to a bigger house in a nicer area, cancelling the new conservatory and the garden landscaping, making the car and the TV, etc. last just that little bit longer.

We are ALL retrenching in preparation for a recession which may happen, and we want to be ready for it if it happens.

The problem with a nation retrenching, and trying to make itself enough room to cope with a disaster, however, is that we stop spending.

Over the past decades, we have created an economy which largely consists of each of us buying stuff from each other. Estate agents, landscape gardeners, double-glazing firms, used-car salesmen, Curry’s shop assistants and Chinese takeaways, ALL rely on us engaging actively in the retail market … and they in their turn are participants in that market. So when we all retrench, we all suffer.

WE RISK FACING A RECESSION, not because any external factors have caused a recession, but simply because we stopped spending with each other in case there was a recession.

The Disaster of the Danger of the Danger of Disaster
And why does this matter so very, very much?
Because not only the Tories’ fiscal and budgetary plans, but Labour’s alternatives, ALL depend on ‘growth and jobs’ to work.

‘Maybe it’s time to prepare for recession’ will become a self-fulfilling prophecy.

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