Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: http://www.socialistparty.org.uk/issue/518/3724

From The Socialist newspaper, 30 January 2008

Debt and housing slowdown threaten...

Britain's time bomb economy

THE EXTREME volatility in the world's stock markets has not yet led to London city slickers jumping off skyscrapers. But growing fears about the underlying health of the economy prompted one commentator to claim that a forthcoming US recession will be deeper than any since before 1945, while another screamed about a global 'pandemic'.

Robin Clapp

The world economy has reached a decisive turning point. A full-blown recession in the US will have a contagious effect across borders, leading to job losses and falling living standards for millions.

The British economy is particularly exposed to these chill winds, notwithstanding Gordon Brown's assertion that 61 consecutive quarters of growth will insulate Britain. As if anticipating Brown, Karl Marx once remarked "Business is always thoroughly sound and the campaign in full swing, until the collapse suddenly overcomes them".

British capitalism has turned itself into a casino, becoming crushingly dependent on speculation, private equity deals and reckless attitudes towards debt. New Labour's role has been little more than to act as cheer leader for the City's financial orgy.

Debt and housing time bomb, cartoon by The Socialist newspaper

Debt and housing time bomb, cartoon by The Socialist newspaper

Financial services have expanded much faster than the economy as a whole, while manufacturing has continued to flounder. Between 2003 and 2006, finance made up 9.4% of the economy, yet was responsible for 30% of overall GDP growth.

London's foreign exchange markets now account for twice New York's share of trading and last year hosted the most new share issues. The City is therefore very exposed to the credit crunch.

The Northern Rock bank debacle is an illustration of this. Through using the apparently very clever, but now vilified financial instruments thought up in the last decade to artificially expand credit through bundling up and repackaging debt, the owners managed to create Britain's first major run on a bank since the nineteenth century.

Subsequently its bailing out has cost the taxpayer over 54 billion in loans and guarantees. Its future is uncertain, but as the Financial Times' Martin Wolf observed: "No industry has a comparable talent for privatising gains and socialising losses".

Britain has its own subprime time bomb. Credit has been loosened so much that almost 55% of borrowers are using more than 50% of their pre-tax income to service debt - a doubling since the last slowdown. Average household debt, including mortgages, now stands at 56,234 and average personal debt grew by almost 10% last year.

The housing

market faces a series of perils, with 60% of Britain's total wealth now tied up in property of one form or another. Rocketing house prices since 2000 have caused misery for people trying to get on and stay on the housing ladder, but huge bonanzas for the lenders.

But now undisguised panic exists in the commercial property fund market where prices are plunging as a result of rising costs because of the credit crunch. Office prices fell by 4.7% in December, the biggest monthly fall for 20 years.

The buy-to-let sector, accounting for 8% of all mortgages, is also very vulnerable.

With house prices falling, buy-to-let is becoming unattractive unless investors can expect sharply rising rents. Already investors are dumping properties back on to the market in order to secure first-mover advantage.

Britain may not be so different from the US in relation to its exposure to domestic housing contraction. For some time the British property market has looked like a bubble, felt like a bubble and smelt like a bubble.

The homes slowdown could turn into a crash that will impact across the economy. Three months of house price falls have already dented confidence and further falls are expected.

Previous housing booms have all ended with prices plummeting by 30% in real terms. A repeat would spell disaster for those whose borrowing is tied to their house's value. The Royal Institution of Chartered Surveyors warns that 123 people are set to lose their homes every day.

Added to this toxic mixture are a current account deficit that, relative to the size of the economy, is the biggest for 50 years and a budget deficit that swelled to 28 billion in December.

Little wonder then that capitalists are so gloomy and that the FTSE share index has been reflecting concerns about the spreading of stagnation onto the High Street, following poor Christmas sales figures.

Even before unemployment begins to rise significantly, new figures reveal that relative poverty has grown for the first time since Labour took power in 1997, with 12.7 million people living in households with incomes lower than 60% of the median after housing costs.

One fund manager, ruefully looking back at the 'successes' of globalisation over the last decade, conceded last week that "If you have a rampant capitalist state and do not redistribute it at all, you get rich ghettos and ultimately revolution."

Sounds like he's been reading his Marx.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 30 January 2008:

End this market madness

No more school closures!


Education

Teachers' union calls strike ballot on pay

Anti-war protests save teachers

Labour councillors anger parents and tenants


Socialist Party news and analysis

New Labour attacking our vital benefits

Incapacity benefit cuts hit the sick

Hain resigns but stink of sleaze remains


International socialist news and analysis

Jail break from Gaza

Suharto: "One of the 20th century's biggest killers and greatest thieves"

US elections: The Barak Obama mirage


Socialist Party NHS campaign

NHS in crisis


Debt and Housing Feature

Debt and housing slowdown threaten Britain's time bomb economy


Socialist Students

Student elections: Not just a 'beauty contest'!

College students seek socialist ideas

Reality of London students' debt trap

More foo than fight as rockers agree to cross picket line


Marxist analysis: history

How Hitler came to power


Global Warming

Global warming, climate change and human activities - Part 2


Socialist Party workplace news

Burslem postal workers march back to work

Giving the real facts on Burslem strike

National Shop Stewards Network meetings

Police march for pay

PCS suspends strikes


 

Home   |   The Socialist 30 January 2008   |   Join the Socialist Party

Subscribe   |   Donate  




Related links:

Britain:

triangleThe end of the Tories?

triangleNasty party imploding...drive out the Tories

triangleWorkplace news in brief

triangleShocking insight into Isis

triangleThem & Us

Economy:

triangleCapitalism and human progress

triangleGig economy exploiter Uber loses London licence

triangleHackney Socialist Party: Ten years after the economic crash

triangleDefuse the consumer debt time bomb: nationalise the banks!

Debt:

triangleNHS meltdown - fight the Tory cuts

triangleHousing crisis: Corbyn's positive measures blanked by Labour's right

triangleTories wreck our NHS

Housing:

triangleNo more fire deaths - ensure safety now!

triangleEast London summit fails to address housing crisis

Marx:

triangleCentral London: Walk along the steps of Karl Marx

British economy:

triangleRight wing attempts to use single market against Corbyn

Subprime:

triangleCapitalism gambles with our lives

World economy:

triangleBuilding workers' struggle and the forces of international socialism

News and socialist analysis

News and socialist analysis

13/10/17

Labour

The end of the Tories?

11/10/17

Tories

Nasty party imploding...drive out the Tories

11/10/17

Black history

The fight against racial discrimination is tied to fighting against capitalist austerity

11/10/17

Housing

Housing crisis: Corbyn's positive measures blanked by Labour's right

11/10/17

Universal Credit

Major attacks 'Universal Credit', half a million more face poverty

11/10/17

Them & Us

Them & Us

11/10/17

NHS

NHS meltdown - fight the Tory cuts

11/10/17

IMF

IMF helps cause inequality it slams

4/10/17

NHS

Tories wreck our NHS

4/10/17

Workers

Monarch abdicates responsibility to workers

4/10/17

Capitalism

Capitalism and human progress

4/10/17

Trump

Bending the knee v Trump

4/10/17

Tories

The Tories must be driven out

29/9/17

Labour

Labour Party conference: Action against establishment sabotage still needed

27/9/17

Anti-austerity

Anti-austerity opposition needed to seize on Tories' weakness

triangleMore News and socialist analysis articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle13 Oct The end of the Tories?

triangle11 Oct Nasty party imploding...drive out the Tories

triangle11 Oct CWU fights court attempt to stop national strike

triangle11 Oct The fight against racial discrimination is tied to fighting against...

triangle11 Oct Catalonia: Workers can finish what Puigdemont won't

triangle6 Oct Boeing bust-up threatens thousands of skilled jobs

triangle4 Oct The nasty party turns on itself... but the Tories must be driven out

More ...

triangle16 Oct Teesside Socialist Party: After the party conferences

triangle17 Oct London: TUC lobby & rally; and London march

triangle18 Oct Warrington & St Helens Socialist Party: 1917-2017; the October Russian Revolution

triangle18 Oct Hackney Socialist Party: 100 years ago - the Bolshevik-led revolution

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

Archive

Archives:

October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Legal

SP RSS feed RSS

Platform setting: = No platform choice

V2