Cooking the Books 2: Is Brown’s luck running out?
When Gordon Brown boasted at last year’s Labour Party conference that “no longer the country of mass unemployment, Britain is now advancing further and faster to full employment than at any times in our lives” he must have realised that he was giving a hostage to fortune.
Or perhaps, since he also claimed that “no longer the stop-go economy, Britain is now enjoying the longest period of sustained economic growth for 200 years”, he had deluded himself that, as the thus self-proclaimed best Chancellor of the Exchequer since 1805, he really was able to control the levels of production, prices and unemployment in Britain.
Whatever the reason, last month’s business headlines must have begun to shake his confidence in his infallibility. “Inflation at its highest point for 7 years”, reported the Times (13 July) and, the next day, “Questionmark over UK growth as jobless claims rise”.Reporting on this Gabriel Rozenberg, the Times’ Economics Reporter, wrote: “Fears that the slowing economy is triggering a sustained rise in unemployment have intensified after the number of people claiming jobless benefits rose for a fifth
month in a row . . . The last time the count rose for five consecutive months was in 1992 . . . The Government’s preferred survey-based measure of unemployment fell by 4,000 in the three months to May, the Office for National Statistics said. But analysts said that at 1,426,000, the measure was still 43,000 higher than in August last year. Employment fell by 72,000 in the same period, the biggest drop since 1993″.
What amounts to “mass” unemployment can be a matter of opinion, but 1,426,000 unemployed (plus many more on incapacity benefit or paid to do nothing on various “job creation” schemes) would have been regarded as such in the 50s, 60s and 70s. Another indication that Gordon Brown’s luck at having been Chancellor during an unusually long period of recovery may be beginning to run out was the headline a couple of days previously “Manufacturers bear the cost of surging oil prices”:
“Surging oil prices have forced up manufacturers’ costs by the fastest rate for 20 years, tightening margins, official figures showed yesterday”. This led, reported Gabriel Rozenberg (Times, 12 July), to input prices going up by 2.3 percent between May and June. “The rise meant thatmanufacturers’ costs for goods have risen 12.1 percent in the year to June, the largest annual rise since March 1985, but weak consumer demand has made it difficult to raise prices”. Output prices actually fell 0.2 percent in June. As one analyst put it, this was “good news for high street goods inflation, but not for profits”.
Since capitalism runs on profits and responds to changes in the rate of profit (rather than to consumer demand, as the popular defence of capitalism claims), this could be a serious development. Anything more than a merely passing fall in profit margins is bound to translate itself sooner or later in falling production, rising unemployment and falling consumer demand. When this happens, Brown will discover that governments don’t, and can’t, control the way capitalism works and that he hadn’t discovered a magic formula for preventing the boom-slump cycle and engineering sustained growth.