Anomie in the UK The Steep Decline of the British Economy
As the global economic crisis takes hold, hardly any other country has seen its fortunes wane as brutally as the United Kingdom. Once a model economy, the country has been overcome by a deep sense of uncertainty.
It is a gloomy February in Great Britain, yet another month in which the economy is shrinking and the pound is faltering, and yet another month of record growth in unemployment.
It is a month that has seen Ed Balls, the Secretary of State for Children, Schools and Families, refer to the current recession as the "worst in 100 years," and which has witnessed the heads of the country's largest banks appear on television to apologize to the nation for the harm they have caused.
Meanwhile, Britons are asking themselves how things could have come to this.
Ash Akhtiar, who works for an employment agency in a Birmingham suburb, says he wants to see someone pay for all of this. David L., a banker who, fearing for his job does not wish to see his name in print, is considering buying a gun to protect his family.
The current mood in Great Britain is gloomy. Long Europe's most successful economy, Britain's fortunes have since plunged more than those of almost any other European country.
Unemployment is rising twice as fast as the European average. Two million people have already lost their jobs, a number that could rise to 3 million by the end of the year. According to the International Monetary Fund (IMF), the British economy will shrink by 2.8 percent in 2009, the greatest projected decline among the seven largest industrialized nations.
Ironically, for a long time it seemed as if Great Britain had done everything right. Didn't former Prime Ministers Margaret Thatcher and Tony Blair bring deep-seated reforms to the country? The British experienced a 16-year economic boom and it seemed as if they had successfully transitioned into a post-industrial, globalized service economy driven by a rapidly growing financial sector.
And now it is precisely those investment bankers who practiced their modern alchemy in the glass towers of the City of London who have plunged the country and the world into the biggest economic crisis since the 1930s. Great Britain was at the root of this worldwide economic downturn and is now especially hard-hit by it. What began 18 months ago as a financial crisis in London and other cities has now taken hold of the entire country.
It began when the British real estate bubble burst, first for residential and then for commercial property. The investment banking sector fell apart at the same time. The country has been in a deep recession since the fourth quarter of last year. Consumption and industrial production are in serious decline, while the value of the British pound has fallen against the euro.
Ash Akhtiar is one of the few people working overtime these days in Washwood Heath, a run-down suburb of Birmingham.
Akhtiar is standing outside, smoking a cigarette, in front of a two-story brick building that houses the offices of Jobcentre Plus, the modern British employment agency founded by former Prime Minister Tony Blair. He is waiting for his clients, the workers at LDV, a manufacturer of small trucks.
'You Can See Desperation in their Eyes'
The LDV plant, only a kilometer down the road, stopped producing trucks in mid-December. There are no buyers anymore for the brand-new fleet of white panel vans parked outside. LDV has already laid off 95 workers. With the plant idle, hundreds more are waiting at home, still collecting their wages.
Britain in Crisis.
More and more people are losing their jobs, and more and more are coming to see Akhtiar. "You can see the desperation in their eyes," he says. "They realize that things are different now, and that they won't get new jobs after only a few weeks."
In the West Midlands region, home of the British automobile industry, unemployment is rising rapidly -- by 20 percent between October and December of last year alone. Few carmakers with plants in the region -- Aston Martin, Jaguar, Land Rover, Honda -- are operating at full capacity these days, and hardly any are still in British hands. Thousands of jobs have been cut, and tens of thousands of workers are working reduced hours or have been furloughed temporarily.
The British welfare state, its reach narrowed by a succession of reforms, only offers about £60 ($85) a week in unemployment benefits to those who have been laid off. The unemployed are often forced to give up their apartments or homes because many are deeply in debt and can no longer afford to make their monthly mortgage payments. Someone in Great Britain loses his home once every seven minutes.
Akhtiar says he is furious over the economic crisis. The bankers who drove the country to economic ruin, he says, were able to have their companies nationalized and yet they received bonuses of millions of pounds in taxpayer money. He says that many of his clients are also furious with the bankers, and that someone needs to take responsibility and pay for what has happened. But he doesn't know who that should be.
Akhtiar raises an important point: Whose fault is it, exactly?
Nothing but Bad News
A shabby pizzeria in London's Mayfair neighborhood, where only a few tourists might have been seen a few months ago, is filled with bankers today. Their Blackberries are on the tables in front of them, just as they used to be when they served as status symbols, as evidence that these bankers were having lunch at the center of the world. But there is one difference: Their conversations, once loud and pretentious, are now whispered.
David L. speaks quietly, even when he asks for a glass of tap water with his pizza. He still has a job, he says, because he took his customers' £200 million ($284 million) out of the market just in time, in the summer of 2007, when the first tremors began to make their way through the global financial system.
The fact that he still has his job is the one bit of good news David L. has to report. The other is that World War III hasn't broken out yet. Otherwise, he says, he has nothing but bad news.
His real job is to spread confidence. An astute investor, he was long considered one of the stars in the private banking department of a powerful British financial institution.
But nowadays fear has taken hold within the bank, where 20 percent of David L.'s colleagues have already been let go. If the bank continues to do this poorly, he says, another 30 percent will probably lose their jobs soon. "When that happens," he says, "I'll be gone, too."
Ten years in the financial industry have made him a wealthy man, with a house in the exclusive Kensington neighborhood, four children in private schools and a wife who wears handmade Manolo Blahnik shoes.
Nowadays, says David L., he sometimes feels nauseous with panic. He imagines a future in which many people are poor and angry, people who could even break down his door in Kensington and enter the house. He has even been thinking about ways to protect his family.
- Part 1: The Steep Decline of the British Economy
- Part 2: An Economy Dependent on the Bloated Financial Sector
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