Is the recession almost over?

Posted on August 16, 2009

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Recently, some ecomomists and financial experts have predicted that the recession is drawing to a close and will soon be at an end. I will disregard the question of whether or not, given the economic debacle such ‘experts’ created for us, these optimists can be trusted, and instead focus on whether or not this claim has any justification in reality.

The BDO Output Index for the UK has predicted that the recession will end sooner here than it will in Europe, claiming that the speedy introduction of a fiscal stimulus package and bank recapitalisation scheme accounts for the relatively swift recovery. The National Institute of Economic and Social Research has suggested that the low point for the British economy came back in March, and that the British economy would be the first to come out of recession. If such predictions could be trusted then it would without a doubt be a positive one for the government, and Peter Mandelson was quick to seize on such positive forecasts last month. Yet it seems that the Index’s argument has already been disproved, with reports in the last few days that France and Germany have already exited the recession. So far, so incorrect for the optimistic economists, then.

There are those that are not prepared to admit the recession is at an end but can at least declare it to be softening. The IMF is a case in point. The prevailing opinion, however, is that the recession is set to continue, and some more pessimistic experts have even suggested that the worst could be yet to come. Begbies Traynor’s Red Flag Alert suggests that the recession is still in full swing, with the most-affected sectors being Financial Services, Property Services and Construction. The likes of Retail, Advertising and Manufacturing also remain seriously affected. Though the recession does appear to be slowing in some sectors, for a large percentage it continues unabated. Given the negativity of such findings, it is wholly inappropriate for the likes of Mandelson to be giving struggling families false hope. Positivity is necessary to stimulate the economy, but barefaced lies are not. It could even be that the recession is not softening at all, but rather tightening its grip. Research has demonstrated that business leaders are less confident than they once were that Britain is on the way out of the recession. Indeed, there is a genuine fear that Britain could be heading for a “double dip” recession.

Not all government ministers are spouting false optimism, with Harriet Harman for once correct in expressing caution over the state of the economy. What is overwhelmingly clear is that there is huge disagreement and confusion over the scope and durability of this recession, and that nobody is sure how long it will last. The sensible money, however, appears to be on it continuing for a little while longer at least, and we must hope that fears over a “double dip” recession are wide of the mark. In the mean time, ministers should stop jumping on any positive forecasts they stumble across, and focus on steering the country through it. The real danger for all leftists is that a continuing recession could lend more weight to calls from readers of the Daily Mail in the minds of otherwise progressive people: “cut all the billions of foreign aid to zero, don’t renew any work permits for non-EU workers, no more legal appeals for asylum seekers, give British workers priority for council housing, put British workers first”. In the face of confusion over the recession and the possibility that it may drag on longer than many expect, let us focus on not letting economic recession translate into social regression.

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Posted in: Politics