Double-Dip ahoy

Posted on: 17 February 2011 by Alexander Hay

As recession nears again, we should shed our old illusions

As reality bites, it might be a good time to acknowledge it

The 2008 crash exposed not only how we over-borrowed, over-spent and generally over-did everything during the good times, but also how truly vulnerable we really are. Much of what we take for granted is fragile and passing, and seldom permanent.

That said, If every boom is an illusion and the subsequent crash a sudden jolt of barbed, harsh, objective reality, then we have managed to avoid too much reality so far. Spending on the high street seems robust, house prices haven't fallen that much and Sterling seems to be recovering on the currency markets.

But recent events are about to remind us that the good times really are over. Inflation is now at 4%, requiring a rise in Interest Rates, while youth unemployment has risen beyond 20%. This will damage our economy further still, alongside rumours of another Web bubble and the collapse of neighbouring economies such as Ireland and, perhaps soon, Spain, sucking us down with them.

The Coalition government, meanwhile, proceeds to slash spending with ideological zeal, making even more people unemployed, removing even more income from areas that depend on custom from the public sector and damaging our infrastructure and social fabric in the process. That too will come at a cost.

There is no point blaming capitalism, through. It is simply nature, red in tooth and claw, and so waxes and wanes in brutal symmetry. We can't benefit from it when things are on the up and then turn against it when things go down. We chose a system best suited to our own tawdry instincts.

Yet our humanity must be an ongoing commitment that can survive the swagger of booms as well as the austerity of the busts. Or perhaps we should remember that Adam Smith wrote about not only markets but the importance of personal virtue, something rather lacking during the debt binge of the last decade.

It is, however, our own distorted priorities that have lead us to this. We have put absurdly high house prices ahead of the future prosperity and education of our children, we have let ourselves become too dependent on the financial sector, we consistently elect governments that either hobble public services with inefficiencies or slash them to the bone and it is us who have borrowed and spent and squandered the good times while they lasted.

Now the illusion is gone, perhaps we can admit our own culpability. The bankers did a great deal of damage, but we were only too willing to let them when it seemed the party would never end. Perhaps we can now finally accept that another periodic mirage has faded and, for now, we are granted a moment's clarity - should we want it.

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Alexander Hay

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