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.
Philip Augar, a financial expert, tries to explain how his country could have become so dependent on banks and loans, while bestselling author Tony Parsons says that the upheaval the United Kingdom is experiencing is as serious as the fall of the Berlin Wall.
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.
Akhtiar, 31, wears his hair slicked back with gel, has dark rings under his eyes. Part of his job is to make sure that the jobless receive their unemployment checks. The situation in Washwood Heath has been so bad for the last three months that Akhtiar and his colleagues have been working on cases every day until 7 p.m., and they recently began coming in on Saturdays.
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.
An Economy Dependent on the Bloated Financial Sector
In good times, investment bankers were treated like celebrities in Great Britain, and dubbed, like their counterparts in the United States, "masters of the universe." Children dreamed of working at Goldman Sachs, and the London City, the world's largest financial center, was the shining center of the British economy, the capital of excess.
It looked as though Great Britain had created an economy of the future, but in reality it had become dependent on an increasingly bloated financial sector. Even though it generated only 8 percent of gross domestic product (GDP) in the best of times, the financial sector provided the government with a quarter of all corporate taxes. The number of Britons working in the financial sector grew from 4.4 to 6.5 million in the good years.
The papers were filled with tales of excess, like the account of a banker who, after having completed a successful deal, handed his American Express "Black Card" to the bartender at the Baglioni Hotel and paid for everyone in the bar, for the entire evening. The bill included 851 cocktails and six magnum bottles of Dom Perignon. At the end of the night, the man readily paid the £36,000 ($51,000/€40,709) tab and even handed a waitress a £3,000 tip. The year was 2005, and in those days the banker's magnanimous gesture was considered cool.
But the country's once-powerful bankers sounded significantly more subdued as they ate humble pie before the Parliament's Treasury Select Committee in London at the beginning of February. Lord Dennis Stevenson, the former chairman of the HBOS banking and insurance group, told the committee: "Our shareholders, all of us, have lost a great deal of money," and "We are profoundly, and I think I would say unreservedly, sorry at the turn of events."
The current widespread loathing of bankers has reached levels reminiscent of the year 1720. That was when the South Sea Bubble, one of the first speculative bubbles in history, burst, and a parliamentary inquiry suggested sewing the guilty into sacks filled with poisonous snakes and tossing them into the Thames River.
But how could the banking sector in Great Britain have grown at such a dizzying pace in the first place?
Philip Augar is a financial expert who worked in investment banking for 20 years and made a lot of money in the process. A former head of the global securities division at NatWest and a former managing director at the Schroders investment bank, he left the industry in 2000. Since then, he has written books warning against the excesses of the industry and possible collapse of the markets.
Labour's 'Light-Touch Regulation'
As the River Cam flows past the lattice windows of his large house in Cambridge, Augar says that the British financial sector, built on an extremely shaky foundation, has developed into a monster over time.
More than 20 years ago, then Prime Minister Margaret Thatcher broke apart or privatized ailing traditional industries like shipping, mining and automobile manufacturing. Thatcher made it clear that the future, in her eyes, lay in a deregulated financial industry that would emulate the United States, which she considered Britain's role model.
US investment giants like Goldman Sachs, Merrill Lynch and Morgan Stanley set up shop in the British capital, and major continental European financial institutions like Deutsche Bank and Credit Suisse made London a center of their investment banking businesses.
When Tony Blair came into power in 1997, his Labour government did not reverse any of Thatcher's neoliberal reforms. On the contrary, Labour even loosened the reins on the financial caste a little further.
Its approach was one of "light-touch regulation," which removed onerous restrictions and reduced taxes on capital gains. London became the private equity and hedge fund capital of the world. According to Augar, bonus payments jumped from £1.7 billion ($2.4 billion) to £8.5 billion ($12.1 billion) over 10 years of Labour government.
"The effect the financial industry had on the economy was like a big stone thrown into the water," says Augar. The waves of artificial affluence spread to include lawyers, consultants, shop owners and restaurants. Most of all, however, they drove up the real estate market, where prices almost tripled in only 10 years, making people feel rich.
"Rising house prices," says Augar, "gave the consumers confidence to spend money, to borrow money. Actually, the whole boom was based on debt." This conclusion helps to explain why the British economy is now in so much trouble. Now owing more than 1.5 trillion ($2.1 trillion), the Brits lead Europe in private household debt.
In addition to the impact it has had on the economy, the process has also changed British society. "Great Britain developed from a nation of savers into a society of borrowers," says Augar, "and from a nation of investors into one of traders, no longer oriented toward long-term profits but interested only in short-term gains."
The words of Prime Minister Gordon Brown, who only last year insisted that the United Kingdom was better prepared for the global crisis than most other countries, sound like a mockery today. Few Britons still believe that Brown is the right person to lead the country through the crisis. According to recent surveys, only 28 percent of citizens would vote for Labour in a new election, while 48 percent say they would choose the Conservatives and their leader, David Cameron.
Mervyn King, the governor of the Bank of England, has warned his fellow Britons of difficult times ahead and what may be "the worst recession" since World War II.
Many countries have entered into long recessions in the wake of a banking crisis. Japan, for one, never quite recovered from its crisis in the 1990s, and now it finds itself plunging into yet another deep recession. The situation in Britain is exacerbated by the fact that the country's real estate bubble has burst.
British taxpayers have already had to bail out two banks, the Royal Bank of Scotland and HBOS. Two mortgage lenders have also been nationalized, and the government, like other governments around the world, is considering a plan to guarantee all toxic securities.
In Great Britain, new borrowing will comprise 9 percent of GDP in the coming year. According to the Institute for Fiscal Studies, it will take the United Kingdom until 2030 to bring its national debt back to pre-crisis levels. Some are already referring to London as "Reykjavík on the Thames."
The negative numbers have also weighed heavily on the British pound, which has lost 17 percent of its value as a result of the recession, the currency's sharpest decline since 1992. Major US investor Jim Rogers warns: "I don't like to say it, but I wouldn't invest any more money in Great Britain."
Instead of being the "sick man of Europe" it was in the 1970s, Great Britain, as the Times of London predicted, is fast becoming the "sick man of the world." The country is firmly in the grip of deep uncertainty.
"We have become a 'fear nation,'" says author Tony Parsons. "Everyone is afraid: the people, the banks, everyone."
A '21st Century Dickensian Society'
Parsons, 55, is sitting in the Café Rouge in London's exclusive Hampstead neighborhood, home to the rich and bohemian alike. More millionaires live in Hampstead than in any other community in the country. Parsons, the author of the bestseller "Man and Boy" and one of these affluent residents, writes about Britain's prosperous middle class. He is familiar with its soul and is an avid consumer himself, as evidenced by the Prada windbreaker hanging on the back of his chair. But, as he points out, this is the first year he has decided not to buy a new BMW X5.
"What is happening now is like the fall of the Berlin Wall," says Parsons. "People look at this ideology and realize that it hasn't worked. We cannot have unregulated capitalism. We cannot tell these people to do as they wish, and hope that a lot of money comes out in the process."
But it's too late now. Parsons says that he has never known of so many people in his social circle who have lost their jobs. "Thatcher had riots in the streets with 3 million unemployed. Gordon Brown, or David Cameron, will experience the same thing." And those who do have money, like Parsons himself, will soon be pleased about the security guards they have in front of their houses. "We have a Gurkha in our neighborhood, a former elite soldier. Perhaps it'll be like South Africa here soon."
Parsons, who comes from a working-class background, is familiar with poverty. Perhaps this perspective is what makes his vision of the future seem so dark. The picture he paints is one of a country returning, as a result of the crisis, to social divisions that have always been deeper in Britain than elsewhere in Europe.
"We have always had two nations in this country, that of the haves and that of the have-nots. Some live like Roman emperors, and they will continue to do so. Others, at some point, got used to the fact that they could go on holiday twice a year. Those days are now gone. I believe that we will soon return to a kind of 21st century Dickensian society."
Parsons believes that there are people in prison who have caused far less harm than the bank directors who recently apologized on television. He characterizes the bankers' public mea culpa as a highly unsatisfactory charade, one without true remorse.
"I know, of course, that it won't change anything if we put their heads on a stick in front of the Bank of England. But we should do it anyway. Maybe it would make us feel better."
Clarification: The editors have changed one sentence in this story: "Two million people have already lost their jobs, a number that could rise to 3 million by the end of the year" to "2 million people are already on the jobless rolls" in order to clarify that those jobs have not necessarily been eliminated as a result of the current financial crisis."