Michael Roberts on Conservative Economic Policy and Labour’s Alternative, BTUC, 9 Jan 7.30 Council House

Here is an extract from Michael Roberts’ blog from 13 December. (You can read the whole article at https://thenextrecession.wordpress.com/2019/12/13/get-brexit-done/)

 

What now? The government under Johnson will now move quickly to pass through parliament the legislation necessary for the UK to leave the EU by end of January at the latest. And then the more tortuous process of signing up a trade deal with the EU will begin. That is supposed to be completed by June 2020, unless the UK asks for an extension. Johnson will try to avoid that and he can now make all kinds of concessions to the EU in order to get a deal done without the fear of a backlash from ‘no deal’ Brexiters in his party, as he has a big enough majority to see them off. 
With the Brexit issue likely to be out of the way by this time next year, the British economy, which has been on its knees (stagnation of GDP and investment) is likely to have a short pick-up. With ‘uncertainty’ over, foreign investment may return, house prices recover and with the labour market tightening, wages may even pick up. The Johnson government may even steal some of Labour’s proposals and boost public spending for a short period.
Longer term, the future of the British economy is dismal. All studies show that outside the EU, the British economy will grow slower in real terms than it would have done if it had remained an EU member. The degree of relative loss is estimated at between 4-10% of GDP over the next ten years, depending on the terms of the trade and labour deal with the EU. Also, it is still unclear how much damage there will be to the financial services sector in the City of London. But this is all relative; implying just 0.4-1% off the projected annual growth rate. So, for example, if the UK grew at 2% a year in the EU, it would now grow at about 1.5% a year.
And then there is the joker in the pack: the global economy. The major capitalist economies are growing at the slowest rate since the Great Recession. There may be a temporary truce in the ongoing trade war between the US and China, but it will break out again. And corporate profitability in the US, Europe and Japan is sliding, alongside rising corporate debt. The risk of a new world economic recession is at its highest since 2008. If a new global slump comes, then the mood of the British electorate may change sharply; and the Johnson government’s Brexit bubble will then be pricked.

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