What is a recession? The BBC has helpfully put this page together to explain, but I prefer to look at a very (non-economic) example. If I buy some wood, turn it into a box, and sell it, the difference between the money I made selling the box and the amount I spent buying the wood, that’s the value I added to that box. If we add up all the “value-added” for every business in the UK, we get a picture of growth, how much all our hard work adds to the value of, well, stuff.
Except for the past six months, it hasn’t. Recession is defined as when that growth is negative. We are, to use a simplistic analogy, buying in more wood than boxes being sold.
This is uncomfortable for many reasons. To carry my box analogy on, now I have too many boxes, I don’t need to make as many, so I can “get rid” of a few staff. Less people are being paid, less tax going to the government. More people on Jobseeker’s Allowance, more money to pay out. Not ideal when the Government are still trying to pay off their debts.
The Chancellor of the Exchequer, George Osborne, has made it his point of principle that austerity, i.e. cutting the money Government spends so it has more cash to pay off debts, is his goal. Which you may think is fair enough in principle, but is getting him in plenty of trouble with what he’s cutting, how fast he’s cutting, and the effects it’s having on the likes of you and me. And when the result is that our country is in a recession, many will accuse him that his policies mean the likes of you and me don’t have enough cash to buy those wooden boxes, hence he’s making our country worse now the Government needs to spend more money on Jobseeker’s allowance and the rest.
I think I am far from qualified to discuss the merits or faults of the deficit reduction plan, insofar that most arguments on this matter are political or emotional in nature as opposed to facts (again, just my opinion). There has been much pain, with redundancies, cuts in benefit, business and people falling into bankruptcy. That the data should show how bad thing shave been over the past few months should come as no real surprise; we keep hearing how businesses are failing, houses are repossessed and everything seems to get more expensive.
The question is though, how do things look for the future? Can the economy, can we, move to a place where things a little less painful, where people are working, business are stable, public services funded? For me though, it’s almost as much an emotional and psychological issue than a political one.
And, personal stories of pain and bad luck aside maybe, just maybe, today’s announcement should just be a brief acknowledgement of the past, and a time to start looking for good things going forwards.