Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: https://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.

Donate to the Socialist Party

Finance appeal

The coronavirus crisis has laid bare the class character of society in numerous ways. It is making clear to many that it is the working class that keeps society running, not the CEOs of major corporations.

The results of austerity have been graphically demonstrated as public services strain to cope with the crisis.

  • The Socialist Party's material is more vital than ever, so we can continue to report from workers who are fighting for better health and safety measures, against layoffs, for adequate staffing levels, etc.
  • We must be ready for the stormy events ahead and the need to arm workers' movements with a socialist programme - one which puts the health and needs of humanity before the profits of a few.
Inevitably, during the crisis we have not been able to sell the Socialist and raise funds in the ways we normally would.
We therefore urgently appeal to all our viewers to donate to our Fighting Fund.

Please donate here.

All payments are made through a secure server.

My donation

 

Your message: 

 


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:

triangleUK Covid-19 mortality similar to Spanish Flu

triangleBritain's waterways choked with a 'chemical cocktail'

trianglePamphlet: What the Socialist Party stands for

triangleCaerphilly and RCT Socialist Party: Where is Britain going?

triangleHackney & Islington Socialist Party: Britain in 2022

Economy:

triangleNo trust in Tories to keep us safe

triangleTheatre: Yes Yes UCS

triangleObituary - Ethan Bradley 1993-2021

triangleTORY BUDGET CON

Debt:

triangleNUS walkout: Organise to fight for free education on 2 March

triangleTory NHS funding won't fix staff shortage

triangleTV review: Squid Game

Housing:

triangleEviction resistance on the march in Waltham Forest

triangleWaltham Forest: Campaign unites families facing eviction

Recession:

triangleWorld capitalism's terrified strategists abandon austerity - for now

Marx:

triangleChartism: The world's first working-class movement

British economy:

triangleTory Brexit divisions, Corbyn's opportunity

World economy:

triangle'Casino capitalism' - driving another potential financial Armageddon

News and socialist analysis

News and socialist analysis

27/1/22

Birmingham

Former MP colleague of Jeremy Corbyn to stand in Birmingham Erdington by-election

26/1/22

The Socialist

We need a workers' alternative to big business Tories and Labour

26/1/22

Government

News in brief

26/1/22

Protest

Lords reject parts of anti-protest bill

26/1/22

Nationalise

Social care providers put profit before residents' needs - nationalise care now

26/1/22

Tax

Cost of living crisis

19/1/22

NHS

Tories hand cash to private health profiteers

19/1/22

TUSC

Want to fight austerity?

19/1/22

NHS

Tory vaccine sacking threat set to deepen NHS staffing crisis

19/1/22

Socialist

Tories on the ropes - Build a workers' alternative

19/1/22

Covid

No trust in Tories to keep us safe

19/1/22

Vaccine

Employers use vaccine excuse to attack sick pay

19/1/22

Inequality

News in brief

19/1/22

Welfare state

Mutual aid, the welfare state and the fight for a new mass workers' party

13/1/22

Socialist Party

Pamphlet: What the Socialist Party stands for

triangleMore News and socialist analysis articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party
Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

LATEST POSTS

CONTACT US

Phone our national office on 020 8988 8777

Email: [email protected]ialistparty.org.uk

Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206

Regional Socialist Party organisers:

Eastern: 079 8202 1969

East Mids: 077 3797 8057

London: 020 8988 8786

North East: 078 4114 4890

North West 079 5437 6096

South West: 077 5979 6478

Southern: 078 3368 1910

Wales: 077 7221 5281

West Mids: 024 7655 5620

Yorkshire: 078 0983 9793

ABOUT US

ARCHIVE

Alphabetical listing


January 2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999