The Bank of England, via its Monetary Policy Committee, has issued its latest report. Like every other report from the Bank for the last few years, this most recent document has sought to revise all previous estimates for the economy downwards. Once again, the representatives of capital are feeling pessimistic.
The Republic chain of clothing retail shops has become the latest high street company to go bust, with several thousand jobs at risk. Meanwhile, the Bank of England, via its Monetary Policy Committee, has issued its latest report. Like every other report from the Bank for the last few years, this most recent document has sought to revise all previous estimates for the economy downwards.
Sir Mervyn King, the outgoing Governor, got the ball rolling by informing us that inflation will remain higher than expected until at least 2016. Certainly it will be higher than any expected average salary rises, resulting in a continuing fall in living standards.
A think-tank, the Resolution Foundation, has confirmed what this means by issuing a report in which they warn that living standards will not return to pre-crisis levels for at least ten years. Even then, it would need average earnings to rise by at least 1.1% per year from now onwards in order to achieve this goal. However, for many workers pay rises are a thing of the past and the bosses are doing everything in their powers to ensure that this remains the case. We should remember that even in periods of economic growth, the bosses have to be forced by the application of trade union power to give any concessions whatsoever, be it pay rises or extra holidays or a cut in the working hours.
The Bank of England has confirmed that the UK economy remains weak and that “risks are weighted to the downside.”
One process that has been baffling economists in the City of London has been some of the recent sharp rises in share prices. Sir Mervyn, no doubt remembering some of the huge jumps in shares that occured before the 2008 crisis, felt obliged to say something this time:
“If there is irrational exuberance (of the financial markets) it’s often evident clearly after the event, and I think there’s very little we can do by way of actions to prevent that… I am concerned that some of the optimism of financial markets, welcome though it is to have that degree of optimism, may not be consistent with the speed at which the underlying data are likely to change in terms of trade positions and growth, particularly in other countries in the world.”
This was in sharp response to those Tories who, noting the rise in share prices after the last Budget, believe that shares represent the real economy. In fact the real economy is not the gambling casinos of the stock exchange but factories, shops, goods, sales and the workers who actually produce this wealth. Here the picture is very different, with many firms still struggling to make ends meet. No wonder the Tory-loyalist newspaper The Telegraph has been moved to refer to the latest Bank of England assessments as “gloomy”. The word is that Britain is suffering a “contraction” – anything to avoid the dreaded R word: Recession. Certainly the high street crisis is set to continue with the administrators of both HMV and Blockbuster announcing the first round of shop closures, and even the supposedly healthy John Lewis chain announcing job cuts. With the eurozone “lurching” deeper into recession and even the German economy struggling, things are not looking good for capitalists both here and abroad.