The Guardian view on economic stagnation: a chronic syndrome causing toxic politics
Most people do not measure their wellbeing by monitoring monthly economic indices, nor do they have to be told that gross domestic product fell by 0.3% between September and October to be aware that Britain is in the doldrums. Economists were surprised by a contraction that was steeper than forecast. But a focus on small movements in data – always subject to revision – risks losing sight of the bigger picture.
The economy has stagnated in 2023 and is expected to do the same in 2024. While the rate of inflation has come down, there is still a cost of living crisis. Real wages have barely grown since the 2008 financial crisis. Productivity has been flat over the same period.
Running a balanced fiscal budget, and in the absence of sustained growth, it gets harder for the exchequer to raise revenue in line with rising demand for public services. Even when cash is increased, as with the NHS, it merely pays for catchup after years of austerity. And where budgets are frozen or cut, as in local government and “unprotected” departments, services decay or vanish altogether.
The effect is rising inequality and crime, poorer public health, and other symptoms of civic decline, putting greater pressure on services, which must then be subjected to ever tighter rationing. This is how the economics of stagnation generates toxic politics. A country that is not expanding its collective wealth, still less distributing what it earns fairly, is drawn into a zero-sum game for resources. Young and old, sick and well, employed and out of work, homeowners and renters – different priorities are sharpened into bitter rivalries. The longer an economy stagnates, the more fissiparous its society becomes. This is not the only cause of political malaise in Britain, but it is a significant factor and one that the Conservative government is more inclined to exploit than to fix.
This week’s internecine squabbling over the Rwanda safety bill neatly
illustrates the problem. Westminster’s attention and the prime minister’s political capital were consumed by factional Tory feuding over a policy that costs tens of millions of pounds for no practical gain. The benchmark of success is perhaps one symbolic flight to Kigali before a general election. The scheme is a waste of money; the gruelling parliamentary battle to implement it is a waste of time. Meanwhile, more than 7 million people are on NHS waiting lists in England. School buildings are unsafe and short of teachers. Food poverty is soaring.
The government’s fixation on immigration is a diversion and a delusion. Resentment of foreigners is easily stoked in difficult economic times. But Rishi Sunak is kidding himself if he thinks a desperate, botched anti-migrant crackdown will earn him credit with voters, who are abandoning the Tories because they have systematically downgraded Britain’s quality of life for more than a decade.
This week’s parliamentary theatrics show the Tories deep in denial of the reasons for their unpopularity. In that respect, economic data and opinion polls tell a similar story: stagnation is not just a condition of low growth. It describes the chronic debilitation of politics under a government that is itself the biggest obstacle to renewal.