The pain of an economic downturn is not a new phenomenon. The poorest will need immediate financial help to keep heads above water. But with learning from past mistakes and empowering people to help themselves, a credible medium term recovery strategy can reinforce resilience and determination to re-emerge into growing prosperity. Is not today’s inflation really about the price of energy and Putin’s war? So, is attacking these problems directly rather than using standard tools like interest rates the real answer?
“THINGS ARE GETTING BETTER ALL THE TIME”
Improvement and better wellness are the long-term trend of life for most people, by most normal measures, both globally and in the UK. That is evidenced by overall progress of say the last 50 years, during which there have been difficult times, but they have eventually been overcome, for example in relation to greater longevity, health and income as well as reduction of poverty. A Sunday Times article of 31 July “Here is the real news: things are getting better all the time” addresses that theme. The book “Factfulness”, a Sherbhert favourite and a recommended read, demonstrates how human beings tend towards the pessimistic view of life because they do not have the facts. There are of course existential global worries, less existential but relevant national and local negatives, and, what tends to concern us most individually, the short and medium-term challenges and risks which threaten our prosperity and that of our loved ones, such as the cost of living rising.
The last of these risks stay front of mind, not least because current news tendencies are to focus on suffering and possible future risks, and to enlarge under a negative microscope the possible dreadful events that could unfold. How often in the pandemic did the story of what “may” or “could” happen, the worst scenario however unlikely, masquerade as expectation. That deception continues: the words “crisis”, “the grim new reality”, “recession” and “energy poverty”,” heat or eat”, “broken” were prominent in just one day’s journals of 5 August. This barrage of negativity focus reinforces underlying natural worries and a distorted view of life in the UK and elsewhere.
The economic history of the UK and all people is surely one of ups and downs, then flourish, then make-do, then tighten the belt and have less than before, then recover and grow again. Staying calm and working together through adversity are perhaps part of the answer, as the UK people’s main response to the pandemic demonstrated. The pandemic was a bit like a war; and in fact as the UK and the rest of Europe are involved in the terrible Putin driven war today, and the global shortages of energy sources and materials create hardships, the UK and many other countries perhaps should consider the present state of affairs akin to war time conditions and respond accordingly resolutely and resiliently in unity, preserving precious resources out of prudence; but without invoking emergency powers and imposing extreme dictats which shackle freedoms. It is relevant also that most countries of Europe are suffering similar pains as the UK.
A challenge for everybody is remaining cheerful, and that is essential. The Observer Magazine of 7 August had an article reminding us that “Being cheerful on the outside can help you – and others – feel it on the inside…. even in tough times” and “cheerfulness is a resource you can use….it isn’t flighty or dependent on good fortune. It’s a decision you make, to walk through life with good humour, humility and optimism”. Facing challenges and harsh realities with cheerfulness should not be mistaken for boosterism, a term so often used to denigrate optimism.
FORECASTS, PERSPECTIVE AND UPWARD TRAJECTORY
During the Conservative leadership election, the debates and differing opinions of the two candidates, which seem to be healthy and reasonable discussions, have been portrayed as eating themselves alive, tearing chunks out of each other, like a civil war unfolding. Is not the expression of sometimes different approaches to tackling say the economic challenges taken by Liz Truss and Rishi Sunak merely an argument where each side maximises their position and minimises their opponent’s? There is much quoting of forecasts but of course, as was again so patently exposed in the pandemic, economists and epidemiologists having many widely differing analyses and views, predicting the future with unprovable assumptions, and so often wrong. Naturally the Bank of England and the Treasury are obsessed with downside risk, as there is only flak to be gained from anything rosy if it does not bloom. But even their visions of the next 18 months, while painful, should not be considered depression. The reliability of forecasting and of opinion polls is notoriously shaky. The Treasury and IMF economic forecasts for the UK in recent years have proved so obviously wrong. Is there some truth in the Liz Truss view that “a forecast is not destiny”? Presumably if people take preventative and mitigating action which has not been assumed by the forecasters the outcomes could be quite different.
It is easy to become depressed by the immediate predictions of gloomy prospects, but essential to avoid it. Tougher times should be something that is expected in any life. Dark clouds need to be dispersed not preserved, or the rain allowed to fall, to be endured. Depression about the future is the opposite reaction to what is required: that is recognising serious problems and doing the best to mitigate them and solve them, facing the challenge and creating hope. See Sherbhert article Can-do Approach Will Revive the UK
Is not what matters how the UK public and Government and businesses and institutions address the challenges as in a war: either by complaining, striking and blaming, with self-pity the driver, or alternatively working together to protect the future and learn from the mistakes which created today’s actuality, not wasting energy with debate on where blame lies. Wars are won by those who unite not those who divide. In the course of debate, Truss and Sunak and their supporters vaunt their own opinions as if they are absolute truths: all their proposals carry risks. The truth of how best to mitigate the current pains may lie in a combination of their remedies. And the circumstances are dynamic, so that something may seem to work one day but later may need to be changed: that is not a u-turn, the pejorative so liked to describe a change of mind, but maybe it is learning and reacting rather than blindly sticking with a mistake! Most important perhaps will be the engendering of an attitude throughout the populace of unified determination, hope and even confidence that the nation will pull through and create an upward not downward trajectory. Credibility will be born out of fulfilled promises, and that is the challenge for a new PM and all those in leadership positions.
Maintaining a perspective on negativism is essential today. Sherbhert recommends “Factfulness” a book by Hans Rosling. Written in 2018, admired by Bill Gates and others, its hypotheses include that people, through instinctive biases, are almost naturally inclined to think that things are or will be worse than they are. It evidences with data how the world is generally on a progressive path, with hiccups on the way, not a straight-line destiny, but demonstrating that past performance gives hope for tomorrow. Hans Rosling urges people not to over worry when they do not know the real facts. The real mega risks he lists are Global Pandemic, Financial Collapse, World War 111, Climate Change and Extreme Poverty. Interesting that a year later after he wrote the book the Covid pandemic began; also, that the Russian invasion of Ukraine under Putin, the modern Hitler, is now threatening global peace and prosperity: combine that with China’s autocrat Xi’s sabre rattling around Taiwan, and there is talk of world war, and even a nuclear weapons catastrophe. Huge financial disruption is with us, and, given the above, the war on extreme poverty will stall and perhaps go backwards for some time.
Is it perhaps essential that, whatever the short term measures to meet inflation and financial pain in the UK a new Prime Minister takes, mitigating those mega global risks must drive strategy and decision making for the medium and long term? Is it lack of longer-term strategic thinking which has perhaps made so serious the cost of living issues faced today? For example, when it comes to over reliance on a single source of energy and single source suppliers.
HOUSEHOLD NEEDS, STRATEGIC PLANNING AND CREATING STABILITY
While political and media hype about millions starving in the UK or freezing to death in October (surely not October!) sap hope and create an unhelpful and irrational mood, the sharp and unforeseen rise in the cost of living in the UK has highlighted the fragility of UK society. There is not extreme poverty, but it has become clear that millions of people in the UK have nothing or very little in reserve. That over 40% and rising of UK adults pay no income tax highlights how earnings for so many households are dangerously low, and where there is no income bar state benefits how quickly, as costs rise, panic can develop. Even numerous households which have reasonable incomes seem to have few if any reserves. Life lived on low interest rates perhaps encouraged a “just in time” approach to budgeting, with dependence on credit for a lifestyle, which perhaps is unaffordable when the tough times come?
The fast steep rise in the cost of power, still so fuelled by oil and gas, makes many households’ profit and loss account descend into red. Is it not a simple truism that either those households receive bail outs from Government, or their bills will not be paid? That is the only possible immediate response to be targeted at the most needy. But bail outs are not a strategy, just a temporary stave off. If creating self-responsibility and resilience is desirable, and it surely is, there is a risk of creating a bail-out culture whenever there is hardship. A good strategic aim would be policies to ensure that bail-outs are not needed again. In Sherbhert article (Resilience part 3) a book “Poverty Safari” by Darren McGarvey was recommended. The author grew up in the most extreme urban poverty and it is a story of deprivation in the UK and how to overcome, recognising that self-help, not blaming others, is key.
There are seriously poor people in the UK: but deprivation does not include having to forego a pair of branded trainers or reducing power usage by for example cutting down on use of digital devices – examples of hardship cited on public broadcasting. It is hard to make intelligent statements about how much of households’ incomes are spent on non-essentials or by paying too much for even necessary things. Maybe there are statistics but what is a necessary item for any household is a subjective judgement and very case specific.
Is it though fair to hypothesise that those running many a household needing bailouts perhaps could run them better, more cost effectively, adapting as costs go up, changing what they buy? Is it unreasonable to suggest that perhaps millions of people could be much better at making consumer choices and analysing their spend and adjusting? Should it be a long-term strategic goal not just to lift children out of poverty but to drastically reduce the households unable to weather an economic downturn? It is clear that education and skills training, including in managing personal affairs, needs a massive uplift, so that people can self-help via better work. But today and going forward would it be perhaps progressive, or would it be nannying, to provide lessons nationwide to struggling households in money management, shopping and energy preservation? Some food bank operators are already providing some of this education but it seems sporadic rather than a National rollout. This should not be left to charity. Should not strategy include minimising the numbers on universal credit and upgrading abilities to earning higher incomes? – in fact that already is declared Government strategy, but it needs implementation.
At a different level the arguments rage about how to beat the “cost of living crisis”, and taming inflation. Some say interest rates must rise considerably, a standard response to inflation and weak currency. But is not the current big rise in domestic and business cost at least as to half down to the price of oil and gas? Putin’s war on the world is a major influence on those and other commodities. How will interest rates douse those flames? Is it a good question to ask whether today’s inflation is a bit different to history’s and may require more novel or focussed responses? If oil and gas and food price rises are excluded, the calculation would be far less dramatic. So, should solutions primarily focus on those constituents?
Is rationing energy inevitable in some countries unless international stability can be restored, and is it not perhaps the right answer? The EU is planning for that. In any case, it will be a big mistake if people and leaders simply aim to restore energy sources and supply lines to the same flawed system pre-Putin’s war. In these extraordinary circumstances where post-Covid recovery supply disruption together with Putin’s, and perhaps Xi’s, personal ambitions, are testing the world’s resolve, Government needs to look at a new model to reduce the risks of repeated shocks. When it comes to energy, using every resource available, including mining gas by fracking, nuclear as well as wind and solar, and maybe harnessing wave energy, insulating properties, is a necessity. The wind only blows, and the sun only shines some of the time. Is it the case that the poorest, having to feed cash meters, pay the highest rates for energy – should that not be reversed so they pay the cheapest rates as a simple route to help them?
Today’s domestic financial pressures are to some degree due to a lack of sound strategic energy policies and reversing that is a short term essential. Cannot Government contract to buy more gas and oil from say the U.S.A. rather than leave it just to the giant oil and gas companies’ business decisions? A food strategy, which incentivises domestic farming, could drive the UK towards perhaps 80% self-sufficiency. Maybe nuclear fusion or hydrogen will rescue the world when it comes to power, but they are hypothetical today. The country has water and just needs not to waste it; and while the water companies must stop and be made to stop leaks, every household and business with common sense can make savings and should do so, not waiting to be restricted by law. The same is true with energy, including car fuel. The UK needs houses and simply needs a determination to actually build them wherever that need is best served. If availability of food, water, energy and shelter can be put on an evidently sound footing that would be a good start. Is not the complete defeat of Putin and his acolytes an essential prerequisite to stability in the UK and across the world being established?
DISPERSING DARK CLOUDS
An activist group is urging people to refuse to pay their energy bills even if they can. That is not helpful. If people despair however, they might follow such urging, concluding they have little to lose. But such divisiveness is unjustified. Seeking to collapse basic social contracts and fabric is the work of those who wish the UK to fail. Social cohesion is critical to emerge from the clouds. Stirring anarchic rebellion to cause chaos is to do Putin’s work, rather than to repair creaking structures.
Promising and delivering sufficient assistance for the poorest in the nation so that they feel they can keep heads above water securely for the immediate winter will surely calm the current near hysteria, removing the darkest clouds. Charity in the broadest sense will still be needed on the part of all people. Real action on providing the prospect of house owning will surely dispel some dismay among the younger generations. Incentives for middle income England to give them faith that there are future rosier prospects can allay worry. To the extent true leaders emerge, from the Prime Minister to leaders of communities, to business chiefs and heads of institutions, they must surely address the seriousness of immediate real difficulties, but also with optimism lay out a credible way to disperse the dark clouds, even if imperfectly and accepting there will be cost for most people, but in such a way as to create real hope and prospects worth fighting for. In doing so, insularity and introspection will only inhibit, but rather the interdependence of nations and the mega global matters such as Climate Change and Extreme Poverty and the dangers of War must be woven into the long-term plan.
Cheerfulness will help.
