It is amazing how many media pundits are making predictions about the present recession. Most do not even bother to present evidence to back up their scenarios. And yet somehow there is a consensus that it will last through 2009, things will get worse, house prices have a further 15 % to drop and that unemployment will reach three million.
These figures might as well be a guess. We are actually in an unprecedented situation. There is no accurate way of predicting the what will happen. Depending on future government interventions (unknown at present even to the Civil Service) and the feelings of many ordinary individuals it could be that house prices drop more or less than that. Anyway we will not know that the bottom of the market has been reached until well after the event. Given that many of our bigger companies are now wholly or partly foreign owned we may suffer disproportionate job losses.
Both figures are actually only of interest to minorities but provide the media with easy tales of disaster. It must be a small minority of the entire house owning population who want to sell and retain the capital accrued. Anyone selling to buy another property will perhaps receive a reduced amount for their sale but the purchase should also be similarly reduced so any effect of lower prices is of little consequence in terms of a place to live. Negative equity is only a problem in limited circumstances such as an inability to meet the monthly payments. Similarly a million extra unemployed is very hard on individuals but is only about about 5% of the working population.
The unpredictability of the future course of the recession is especially true as this government along with other Western administrations flounders in a mire of short-term emergency initiatives which so far have had little effect. If they continue to try this measure and that the effect becomes even more unpredictable. For instance, the reduction in VAT has done little or nothing and yet the plan is to return to the normal rate either before the recession ends or we are in the process of recovery. While the reduction may have had little effect the increase will surely come at an inopportune time which could well set back any recovery by several months. The scale of government, really taxpayer, debt is such that it will dampen economic activity for decades. Most of this money has gone to prop up a failing system, namely the banks, without any visible plans to institute any kind of meaningful reform to isolate the riskier forms of lending and borrowing. There are now some signs that there will be a change of direction in the next few weeks. As we know no details the outcome is unknown. What is more, this is a recession that is having an effect across the world, not just in the capitalist West so that the multiple influences on the eventual outcome are almost as complex as our weather system and we all know how accurate predictions of long hot summers have been in recent years.
How many of us can remember the day to day effect on our lives of previous recessions, in the eighties and nineties? I suggest very few, because we adapted to whatever changes came in our circumstances and got on with our lives. The memories of those times have generally faded. Of course for any soothsayer or forecaster to say any such thing about the present crisis would instantly reduce their sales potential, be it of newspapers or government policy. In fact it is only too plainly visible that Gordon Brown is reveling in his role as world saviour and will certainly never make the mistake of a previous Labour prime minister by saying “Crisis, what crisis?”