In the last few days the Guardian’s economic editor Larry Elliot wrote a piece asking just this question. Its five years since the global economic crash and things really haven’t returned to normal yet. Whatever your politics there is a conviction that economic growth will return through the market or through an economic stimulus package. You may disagree about the route but the destination is not in doubt – or is it? Growth has not returned, or at least not at the rate or with a consistency that politicians and economists might like. The US has recovered the most, but even there there is a long way to go until normal service is resumed.
Since the war we have been used to ever rising living standards year on year, with steady economic growth of around 2% a year. Larry Elliot is asking a question I have been thinking about and worrying about since writing the economics chapter of “No oil”. What if economic growth really is over? The last time we were asking this question was in the 1970’s. Larry suggests that maybe they were right but we managed to delay it for 40 years by “financial de-regulation, personal debt, globalisation, exploiting the environment”. Look where this got us!
There is one common thread that links then and now which Elliot implies, that’s energy. In the 1970’s we had two oil shocks. In the UK the miners went on strike. Since we relied on coal for at least 40% of our electricity (plus lots of buildings were heated by it) we had power cuts. I can remember my mum lighting the oven (you could do that without electricity in those days) and some candles, opening the door and us all sitting round it to keep warm. I think this is why I’ve been so concerned about energy ever since. We had another oil shock in 2008 and by historical standards the oil price is still high (especially given the state of the world economy). Both times the oil shock pushed up the price of food and other commodities, depressed living standards and caused inflation, although inflation is far lower now than then. The squeeze on living standards is worse now though since a mixture of high unemployment, globalisation, de-unionisation and de-regulation over the last 20 years has meant median wages in the US and UK have not risen in that time. Since 2008 living standards (apart from those at the very top) have fallen in absolute terms. As we wrote in our book for the first time in the US and UK surveys showed people do not believe their children would be better off than they were.
The next post will look at the implications of this.