Post-Recession, the Search for Quality of Life Begins
Last October the UK economy was expected to have grown once again, and the recession therefore to be called to an end, but it’s taken yet another three months for the economy to actually “recover”, with 0.1% growth in the last quarter.
There was grimly ironic celebration at this news from various quarters, considering the weakness of the growth could so easily slip back into another contraction next quarter; the sad little percentage highlights the pathos of recession semantics. A recession is defined as two quarters of consecutive contraction in the economy, so – hurrah! – this means that we can’t be in another recession until at least the third quarter of this year. But of course in real terms, the recession is unlikely to be over for some time yet.
I recently spoke to Christopher Pissarides at the London School of Economics about what he thought was happening to the economy. He gave reasons to be upbeat: “The housing market is reviving and companies that de-stocked will want to build up their stocks again. The policy response to the recession, both here and in America, has been good, Europe is not in as deep a recession as initially feared and China is growing fast. Britain should benefit from these and from the depreciation of sterling.” But overall, his outlook was sober and gloomy, firstly for the immediate health of business.
“No company wants to use up its own funds to invest now, discover that demand is still weak, and find that its bank is not prepared to lend it funds to carry on with its business. So companies are holding back on their cash and waiting until they see either a recovery of demand or until they can be assured by their banks that they will come and rescue them if they need more cash. It’s a chicken and egg situation and something needs to break it.
“Spending power will eventually get back to trend but it will take long to recover the losses suffered. In 1989-90, when the housing market lost a lot of ground too, it took seven years to recover the losses and start showing positive gains again. Nothing tells us that it will be better this time.” One of Pissarides’ peers at the LSE, Richard Jackman, also told me just how far we’ve fallen: “It will take years, probably between three to five years, to restore the economy to the high levels of employment and to reduce unemployment to the levels of 2006 or 2007.”
Secondly, the more general health of society is being seriously affected, and with effects that lag far behind the immediate upward shifts in the economy. On the same day as the recession was announced as being over, a statistic was published showing that a fifth of UK workers surveyed by HR body the Chartered Institute of Personnel and Development expected to lose their jobs as a result of the recession. This figure was part of a wider survey showing that job satisfaction was at an all-time low in the UK, with the CIPD also saying that unemployment figures masked the true impact of unstable work patterns and their effect on families and communities.
“We have learned a lot from the unemployment experience of the last serious recession, in 1980-83, and the costs of unemployment this time will not be as big as they were then”, says Pissarides. “I expect unemployment to continue affecting young professionals for one or two more years, especially those who trained to enter the lucrative financial sector. At the lower end of the distribution, unemployment causes crime and unhappiness and although government measures, such as the welfare to work programme, help a lot, there is still misery to be dealt with”. The psychological effects of the recession are already making themselves manifest – Raphael Healthcare’s Guy Bannister, writing in the Guardian in early January, said that the recession has been provoking substance abuse, suicide attempts and mental health issues in young people affected by it. His comments that are backed up by research last year at the Economic and Social Research Council, that found that the health effects of the recession are markedly worse in the young.
Considering the highs the economy reached prior to this recession, and the psychological effect that had on society with people becoming increasingly blithe about credit and fortune, we can expect the psychological reaction to our current lows to be worse than ever before. While that little 0.1% isn’t worthy of outright derision, it’s a reminder that we need to fill our lives with something other than personal prosperity, as it won’t be coming back for some time yet. And when it does, we need something else to fall back on once the cycle of bust inevitably renews itself. Pissarides posits a serious collective lifestyle change for us all: “Quality of life will not be measured solely by spending power, in the way that the Thatcher and Reagan governments of the 1980s made every one of us think, but by better health, environment and safety from international terrorism.” It may be corny cat-calendar philosophy, but quality of life can’t be measured in percentage points.