Thursday, 12 February 2009
Hard times ahead?
Ed Balls, the Children's Secretary, who was Mr Brown's chief economic adviser for a decade, has said: 'The economy is going to define our politics in Britain in the next year, the next five years, the next ten and even the next 15 years.
'These are seismic events that are going to change the political landscape.'
Speaking at a Labour conference in Yorkshire, he continued: 'This is a financial crisis more extreme and more serious than that of the 1930s and we all remember how the politics of that era were shaped by the economy.
'We now are seeing the realities of globalisation, though at a speed, pace and ferocity which none of us have seen before. The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years as it will turn out.'
Most labour politicians that I’ve ever encountered, and in my time a few, do not possess a sufficient competent understanding of how the British economy really works.
This charge cannot, however, be levelled at the Ed Balls, a former Financial Times journalist who worked at the Treasury for ten years.
So Hard times ahead then: Ed Balls believes this economic crisis could equal the Great Depression of the 1930s.
Ed Balls's warning that the world has entered its worst recession for over a century needs to be taken very seriously indeed - and all the more so because he is the closest confidant of the Prime Minister and therefore privy to all the latest inside information.
It is fewer than three months since Chancellor Alistair Darling used his autumn financial statement to forecast a slight recession with a soft landing. Official Treasury figures, approved by Darling, predicted it would last for the first six months of this year followed by economic recovery.
Less than a month ago, even, senior ministers claimed to be detecting signs of economic recovery. Baroness Vadera, the trade minister, talked of 'green shoots', while housing minister Margaret Beckett foresaw an improvement in the property market.
But Ed Balls had a very different view this week. 'The reality is that this is becoming the most serious global recession for 100 years,' he said.
This means we are potentially facing conditions worse than the Great Depression of the 1930s, with all that entails in terms of mass unemployment, poverty, starvation and - equally potentially - the rise to power of the Far Right.
Everyone must pray (as if that ever did any good) this is not the case. But as things stand, Balls's analysis looks far more acute than that of any other Government minister, including the Chancellor of the Exchequer, whose training as a provincial solicitor is hardly the best background for playing the role of national finance chief in a crisis.
Ed Balls has spotted - parallels between the events of the past six months and the start of the Great Depression of the 1930s are so close they must border on the uncanny.
The start of this latest global economic meltdown can be dated with absolute precision to the moment in September when Wall Street crashed and the investment bank Lehmann Brothers went bust.
That financial crisis had immediate knock-on effects around the rest of the world, and Britain was among the first countries to suffer. The Great Depression of 1929 arrived in precisely the same way.
Industrial production has gone into freefall; there has been a very swift contraction of the money supply, and a terrifying surge in personal and corporate bankruptcy.
The huge question now is whether America, Britain and the rest of the world really will follow the same terrible course as in the 1930s. If they do - as Ed Balls believes - then the decade ahead will be grim beyond belief, with terrible consequences for each and every one of us.
Worryingly, exactly the same trends are at work. Unemployment and economic depression have returned to Europe with a virulence not seen since the 1930s.
"We march on starvation, we march against death,
we're ragged, we've nothing but body and breath;
From north and from south, from east and from west
the army of hunger is marching."
- Hunger Marcher's song, 1932
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