Osborne is blowing bubbles

CHANCELLOR George Osborne last week claimed that the economy in Britain is on the road to recovery — on the strength of growth of just 0.6 per cent in the last quarter. Needless to say it is only the elite one per cent of wealthiest people who have had any sniff of this change of the tide.

Capitalist economist expert Ha Joon Chang last week said that Osborne’s description of the economy was “near-Orwellian”. He said: “The fact that even Labour accepts the UK is ‘on the mend’ shows how low our expectations of economic performance are.”

The truth is that the British economy has grown only 2.1 per cent during the three years since the Con-Dem Coalition came to power in May 2010. This compares very poorly with the two per cent growth that the economy had managed in just four quarters between the third quarter of 2009 and the second quarter of 2010.

Osborne and Cameron are blaming this on problems in the Eurozone but in many eurozone countries, including France and Germany, output has more than recovered to pre-crisis levels — while the British economy is still 3.3 per cent less than it was at the beginning of 2008.

But during that time the population of Britain has grown by three per cent so that on a per capita basis people’s income is 6.3 per cent — on average — lower than it was five years ago.

But we know that there has been a huge polarisation of wealth with the very rich getting richer and the poorest getting much poorer. The comfortable lives of the elite one per cent are based on levels of impoverishment and destitution among the disabled, the long-term sick and those on low wages that are driving people to suicide and leading to a rise in the death rate.

Around 600 more people a week have died in the early part of 2013 compared with the last five years, adding up to around 10,000 people, The Times reports. Overall there was an increase of five per cent in the mortality rate between early 2012 and early 2013 — up by 23,400. Severe poverty and mortality go hand-in-hand.

But even this minimal rise of 0.6 per cent is likely to be unsustainable. It is at least partly built on an asset bubble — house prices rising in London because foreign speculators are investing in buying luxury apartments — while working class Londoners are being thrown on the streets as rents rise beyond their reach.

Asset bubbles like this, fuelled by cheap credit, have allowed the stock market to rise. But the bubbles can only last as long as the credit is cheap and the Government is keeping them inflated with regular quantitative easing.

The combination of cheap credit and quantitative easing is of course effectively robbing savers and pension funds in a way that would provoke outrage anywhere else. But as soon as these factors disappear the property speculators will be off like locusts to find rich pickings elsewhere and the bubbles will burst, leaving the economy lower than ever.

Osborne is hoping he can stave this off until after the next general election and, with the aid of the right wing press, convince voters that he has rescued Britain’s economy.

The real scandal is that the Labour leadership is letting him get away with it.