Rising East Essays

Introduction

An earlier essay argued that the current recession cannot be blamed alone on rogue behaviour in the finance sector. The problems within the sector are as much a symptom as the cause of the crisis; structural problems are at the heart of the current malaise in which the British economy finds itself. The growth in importance of financial and business services to the UK economy over recent decades arose from the twin processes of de-industrialisation and financialisation. De-industrialisation refers to the relative and absolute decline of production industries in terms of employment and their relative contribution to the UK’s Gross Domestic Product (GDP) – a decline that may be traced back to the 1960s but which accelerated considerably in the late 1970s and 1980s. Financialisation refers to the increasing role of financial markets, actors and institutions in western economies and the growth in complex intermediating activities over the last thirty years (Dore 2008). The origins of financialisation may be traced back to responses to the crisis of the 1970s; the progressive international removal of controls over capital movement; and changes in domestic legislative frameworks that regulated and separated retail and investment banking. The resolution of the social dimension of the crisis of the 1970s was sought through the political offensive instigated under the Conservative government of Margaret Thatcher, and was achieved alongside a slow and relatively unspectacular pattern of growth in the UK and other western economies over the past30 years. The resolution of the social conflicts that arose in the course of the previous structural crisis of capital occurred at the expense of labour, sharpening inequalities within British society; while the rise of China in the last two decades of the twentieth century and its special economic relationship with the USA, allowed, for a time, the global economy to achieve a pattern of expansion that was ultimately unsustainable.

Through the credit crunch and subsequent international recession, global ‘imbalances’ were revealed and systemic problems surfaced, but throughout this period of the last two years, particularly in the UK, social tensions have been muted and industrial unrest confined to a handful of industries and workplaces. In this and other ways, the current crisis is different to that of the 1970s when a relatively militant working class was blamed for hiking inflation, generating political disorder and creating a squeeze on profitability. Today’s recession may be characterised by the absence of any significant social dimension. The absence of social conflict and political debate is reflected in the narrow differences between the main political parties over the current policies required to address the fall-out from the recession. ‘Cuts now or cuts later’ sums up their respective views as they seek to address the cost to the public purse arising from state intervention to save the financial system from implosion. That current and future forms of state intervention are designed to place the main burden of recovery onto the backs of ordinary people, this being the only way for the UK economy to sustain itself over the long recession, is widely accepted within British society. In short, despite the origins of the crisis in the structural problems of capital, apart from occasionally raucous complaints about wastrel *ankers in the City, there is little appetite for questioning the system or the ways that it seeks to return ‘business as usual’.  

This essay rows against the prevailing tide. It attempts to provide some insights into the inherent and systemic weaknesses of contemporary capital and, in particular, the UK’s current form of capitalism. It does so through a brief review of the analyses offered by two of the most useful contributors to our understanding of the current economic malaise. It then examines the current state of the most successful region of the UK economy over recent years, London, arguing that the dominant, national position of the capital city and its hinterland is, paradoxically, indicative of the weakness of the UK economy as a whole. Finally, the essay concludes with some projections concerning the social consequences of what looks set to be a long recession for London and the UK.

Whilst the UK may have technically (and possibly temporarily) emerged from recession in January 2010, returning to positive GDP growth, it is argued that the steps taken to avert a depression arising from the credit crunch, now form a major barrier to sustained recovery. In particular, what will be revealed is the dependence of major parts (geographically and by industrial sector) of the UK economy on the state and different modes of state investment and intervention. As government spending is reduced in order to address the public borrowing deficit, the underlying weaknesses of the UK economy are coming to the fore, and, if current trends continue, the vast majority of people in Britain will experience a long period of relative austerity. In the past, recessions have been characterised by a phase of destruction and creativity, with capital restoring itself through the creation of new industries and the application of new technologies. Today, capital in Britain has little capacity for either, and the state can no longer cover all the cracks, not even in London.         

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The Structural Causes of the Long Recession

In different ways, Graham Turner and Martin Wolf reveal the conditions that gave rise to the credit crunch and the subsequent global recession. Turner’s book No Way to Run an Economy (2009) is his follow-up to the best selling Credit Crunch (2008); its focus is upon the fundamental weaknesses and errors of western policy makers in addressing the early phases of the credit crunch; and through their inertia, how they contributed to turning a financial mess into a global recession. Wolf’s analysis, Fixing Global Finance: how to curb financial crisis in the twenty-first century (2009), waswritten mainly in 2006-7, largely pre-dates the credit crunch and subsequent recession, but very usefully explains how global imbalances in production and consumption, especially in relations between the US, China, the Eurozone and the developing world, generated an international financial system that could not be sustained.  Both books have considerable merits, but both also reflect the difficulties of writing in a period of rapid change in the economy and society. As Wolf himself acknowledges, he almost gave up on his book writing task, given that he was writing on such a ‘fast changing’ subject (Wolf 2009: xv).

Global Imbalances

Wolf’s main concern is financial markets, how they work and how they interact with macroeconomic performance. He argues that the main problem with the international financial order is its failure to generate a sustained and stable net transfer of resources to emerging market economies. He suggests that every time this failure occurs, a major financial crisis emerges. The current crisis which commenced in the US is today’s case in point.  The United States became the ‘world’s spender and borrower of last resort’ because it was the only economy capable of such a role; it helped sustain international growth when other economies in the 1990s, like Japan, were failing but, in turn, by the early twenty first century its unique role was a major contributory factor to the growth in the instability of the world’s global financial system. Some of Wolf’s points are worth elaborating here.

First, Wolf argues that the US economy provided the essential market place for the export-oriented manufacturing nations of the world, especially China and south east Asia, but also parts of the Eurozone, including Germany.  The USA drove up its current account deficit; domestic demand outgrew the USA’s own output; it sucked in imports of consumer goods. At the same time, the USA attracted investment from abroad in order to sustain the financing of its current account deficits. This financing didn’t come from profit-seeking private investors but from foreign governments. Between 2002 and 2007, foreign governments invested $1.64 trillion in the USA (81 percent went into US securities). Foreign governments, thereby financed 48% of the US current account deficit. Their return on this investment was poor, the US dollar tended to fall in value over the early years of the new century, so the USA was able to receive ‘huge quantities of credit quite cheaply and at minimal risk to itself’ (Wolf 2009: 128).

Equally, nations like China were able to build up huge current account surpluses (by 2008, about 12% of GDP) which, according to Wolf, is also disabling to the global economy, since such high savings act as a barrier to efficient development of China’s domestic market economy. It’s better to spend these savings on health, welfare, pensions and infrastructure, Wolf says, in order to develop China’s own economy more efficiently and open it up to investment from other countries in the world.  In summary, Wolf concludes that the ‘global imbalances’ witnessed in the early years of the twenty first century, were more an impediment rather than enabler of real (and more balanced) growth in the international economy; a conclusion at odds with the effusive support lent by many authors to the poorly conceptualised ‘unleashing’ of globalisation and marketisation across the world.

Wolf’s second, notable argument concerns the domestic fortunes of the economies such as the USA and Britain. Consumers in both these countries benefited from developments in financial markets that enabled them to turn illiquid assets, such as homes, into spending (Wolf 2009:120). Many economists (and politicians) in the pre-credit crunch period, regarded this as an ‘optimising’ goal, good for individuals and their respective countries. However, the resultant spending took place in shopping malls and in the rising provision of personal management services (lawyers and so-called knowledge and creative workers): ‘it was not possible to turn this capital into the capacity to earn foreign exchange or repay the country’s liabilities’ (Wolf 2009:120). In a different language to that used by Wolf, it might be argued that this consumer-led model of economic growth does little to enhance a country’s productive capacity. Rather, it is potentially debilitating, since a country that moves some way down this road no longer has the capacity to significantly change the composition of its capital stock without a long period of adjustment and major changes in economic policy (and relative prices between industries). It is precisely this trap that the UK economy fell into.

Lastly, Wolf presents a compelling case for the reform of global finance. He argues that the ‘US was as much a victim of decisions made by others as it was the author of its own misfortunes’ (Wolf 2009: 194), and suggests that China and other dynamic economies with huge current account surpluses must develop their own financial systems so that they are able to cope with full integration into the international financial system. They should no longer use restrictions on capital movement and large current account surpluses to protect their own weak financial systems. To achieve this they need, for example, to encourage inward flows of investment and ‘healthy domestic bond offerings in which foreigners can invest with safety’ (Wolf 2009: 175). Naturally, the precursor to this course of action is significant changes in the governance and politics of these nations. For Wolf, ‘global imbalances’ are at the heart of the current crisis, international financial (and political) reform is the solution. It is a difficult and complex task but possible to achieve. Ultimately, the systemic faults are correctable, if only the policy makers make the right decisions.

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Policy Failures and Ignoring Keynes

It is in this respect that Wolf and Turner tend to agree. The sub-title to Turner’s book is ‘why the system failed and how to put it right’. In brief, Turner argues that the policy makers failed to understand the prescriptions set down by Keynes in the 1930s. They used Keynesian language to justify their policy response to the credit crunch, but they did not grasp or implement his prescriptions, particularly at the early stages of the financial crisis in 2007 and early 2008. The fiscal stimulus packages pursued in the US and UK and the resulting policy of quantitative easing, brought about by central banks purchasing or withdrawing government debt, did not in itself guarantee that the resulting increase in the monetary base would lead to increased lending and the re-opening of the credit markets. Indeed, the rise in liquidity simply found its way into the accounts of the banks; while long term borrowing rates remained relatively high, so potential investors were not persuaded to take extra risks in a deflationary setting. The ‘debt trap’ intensified as ‘investors sought liquidity and safety’ (Turner 2009: 77). It was not until the end of 2008 that the US Federal Reserve took decisive action to push interest rates down to near zero. This debt management policy was implemented too late to cut borrowing costs and reduce the rising tide of repossessions; the indecisive approach of the policy makers, especially in the USA, ensured that a financial crisis turned into a full-blown global recession.

According to Turner, the prospects for a relatively quick recovery are poor. Significant levels of government debt now act as a barrier to facilitating recovery; thus debt deflation takes root. As the crisis breaks, a large scale devaluation of speculative capital occurs, further reducing the available credit and feeding a collapse in demand. The reduction in fictitious capital also feeds into the real economy, creating redundant capital in the form of spare capacity. Until this is removed a real recovery is not possible. In developing this analysis, Turner begins to address the underlying structural issues of capitalism and, he draws upon ‘structural’ and Marxist analysis to do so. However, in his final chapter he returns to his favoured theorist, Keynes, and argues that much of post-war economic policy conducted by western governments in the name of ‘Keynesianism’ was not, in fact, the economics of Keynes. Keynes was a monetary economist but the so-called Keynesian policies pursued in the post-war period (to the 1970s) were dominated by fiscal policies designed to control the economy and promote full employment:

‘Keynes was first and foremost a monetary economist concerned with getting interest rates down to check the process of debt deflation. His primary concern was preventing recession through appropriate monetary policies. If policy makers had digested that important lesson today; western governments might not be saddled with such enormous budget deficits which are undermining support for more aggressive quantitative easing. The vast majority of Keynes’s contributions to economic theory have long been ignored’ (Turner 2009:142)

There is much truth in Turner’s claim that the ‘Keynesianism’ pursued by post war governments over the so-called golden years of the ‘mixed economy’, had more to do with the pragmatic creation of social consensus, especially in nations like the UK, than it did with a consistent application of Keynes’s approach to economic policy making. Equally, Turner’s critique of the ineptitude and indecisiveness of contemporary western policy makers, especially those in the USA and Britain, during the early months of the credit crunch, is well-founded. His detailed critique of these ‘policy failings’ is his strength; while his attempt in the later chapters of the book to relate these to the underlying flaws of global capitalism, is, arguably, his weakness. He closes with calls to rein in globalisation, restore capital controls, and modify growth and productivity levels. Paradoxically, his conclusions concerning the desirability and capacity of the world economy to grow are opposite to those of Wolf. Turner argues the case for the limits to growth and for the attainment of the ‘sustainable’, while Wolf calls for the reform of global finance and the removal of imbalances so that the impediments to real international economic growth may be removed.  

In reaching their conclusions about the potential for restoring economic growth within western economies, Turner and Wolf reflect a wider debate within contemporary western societies. For Turner, the limits of the ‘free market’ must be understood so that society may secure the benefits of genuine comparative advantage while rejecting the destructive features of globalisation, such as the shifting of capital around the world to secure cheap labour and the utilisation of technologies without due consideration for environmental concerns. Echoes of Turner’s ‘market limits’ argument may be found in Andrew Gamble’s (Gamble 2009) conclusion, in which he calls for international cooperation to introduce a new framework of regulation and new approaches to the development of technologies, in the hope that such measures will ensure that society meets the daunting challenges presented by economic instability and environmental change. In turn, Martin Wolf argues for creating the conditions for a more stable pattern of international growth through the absorption by high income countries of excess savings, and the development within emerging economies of more mature financial systems that obviate the necessity for them to generate huge foreign currency reserves. In this re-balancing, the international financial institutions, such as the IMF, should play an important role (Wolf 2009: 1986-7, 195). Krugman (2008) agrees with Wolf that the structural crisis of capital is solvable without sacrificing ‘global prosperity’, and with Turner that Keynes is more relevant than ever.

These influential authors expose the structural nature of the current international recession but most agree that, whilst it is difficult, it is possible to achieve reforms, providing that policy makers learn important lessons, especially in addressing the underlying causes of global imbalances. Where perhaps they differ is in the importance they attach to global environmental issues and how addressing these may present a limit to international economic growth. In summary, all of these leading economists argue that the effects of the current recession have some distance to run, that some economies are better placed than others to emerge relatively quickly from recession, and that extensive reform to the international financial system and domestic economic policies are required to address global imbalances and the slide toward protectionism. 

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UK Economy: life in the slow lane       

Whilst Britain’s recession officially ended in January 2010, its economy may be characterised as one of those likely to recover slowly. The definition of a recession is for an economy to experience two quarters of negative growth. Britain experienced six quarters (18 months) of negative growth and was one of the last major economies to emerge from recession, shrinking by 4.9% in 2009 – the largest fall in a single year for nearly a century. The influential Institute of Economic and Social Research (NIESR) supports the view that Britain’s recovery will be slow. In its Prospects for the UK economy, published in February 2010, it forecasts ‘expansion at a moderate tempo’ for the economy as a whole because of three main factors: continued weak consumer spending; a fall in government consumption; and the decline in fixed investment.1 In the absence of capital investment, the economy’s growth will rely upon companies slowing the pace of destocking, eventually starting to re-build inventories and, together with net trade increases, GDP is projected to grow by 1.3% in 2011, a truly unremarkable recovery (NIESR: 2012).

Even in the area of employment, where the superficial evidence suggests that unemployment has not grown at the pace that was feared in mid-2009, the NIESR analysis suggests that employment has, in fact, fallen significantly if ‘adjustments in real wages and average hours worked is taken into account’. In practice, this means that real wage levels have been cut and the hours worked reduced, with, in several sectors of the UK economy, part-time or short time working replacing full-time jobs. The NIESR analysis expects unemployment, despite the short term sacrifices made by employees, to rise in future months from its 7.8% level of late 2009 to 9.2% in 2011 (2.9 million). Lastly, the NIESR report on the UK economy’s future prospects points out the difficulties a future government will have in reducing net public sector debt as a percentage of GDP. With sluggish overall growth in the economy, existing government plans for reducing the debt burden are likely to fall well short of their targets unless ‘additional retrenchment’, as NIESR calls it, is undertaken. In short, Britain faces a long recession or period of austerity, especially as public spending cuts bite; meanwhile there appears to be little evidence of private capital investment aimed at creating new sources of wealth and employment.2

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London and the Long Recession

In translating the broad insights offered by some influential economists on the structural nature of the current recession into an assessment of London’s economic future, some preliminary observations are possible.

First, London’s economy will continue to outperform other UK regions. The disparity in economic performance of the UK regions has been highlighted by commentators for several years. The disparity has widened over the past two decades with London and the East and South East regions performing much better than other regions as measured by Gross Value Added (GVA). GVA is the government’s preferred measure of economic performance. It may measure the contribution to the economy of each individual producer (by household or workplace), industry or sector (NAO 2007). By each of these measures, London out-performs all other regions. The relative advantage of London is reflected, for example, in the GVA of each individual producer by workplace. In London, in 2005, this figure was just over £25,000 per individual compared to around £15,000 or less in all other regions. The relative advantage of London is reflected in the concentration of commerce and industry (especially finance and business services), the rise in London’s resident population since 1989 compared to falling populations experienced in most other major UK cities, and the higher proportion of skilled and professional people within its workforce:3

In 2007, before the recession Inner London’s GVA per head (workforce) stood at over £57,000 pa compared to a UK average of around £19,000 pa – over two and a half times higher than the average for the UK, thus illustrating the performance gap between London and the rest of the UK and the gap between Inner and Outer London’s contribution to the region’s economic performance (Table 1):

The evidence available in early 2010 suggests that London has retained its economic prominence within the UK economy relative to other regions. Though GVA (per head of the workforce) growth rates fell into the negative across all regions in 2007-8, averaging -0.8%, London’s fell by the second lowest (-0.3%). The disparity between London’s economic performance and the other UK regions has been sustained, at least during the early phase of the recession (www.London.gov.uk 2010).  Yet this should not be considered so much as a sign of the region’s success, but perhaps more indicative of the relative decline of the UK economy as a whole in relation to other leading industrial nations – a decline especially notable in the manufacturing sector.

Second, London’s continued prominence within the UK rests significantly upon two key sectors where the share of GVA by industry group is far greater for London than it is for the rest of the UK. The sectors are real estate, renting and associated business activity (counted as one sector), and financial intermediation. Inner London’s performance in these two sectors is considerably stronger than Outer London and the UK average, according to 2006 estimates (Table 2):

London’s finance sector’s capacity to grow has diminished with the credit crunch and recession but it remains the most important centre of financial activity in Europe and is likely to remain so for the immediate future, as a recent World Economic Forum report reveals:

‘On 8 October the World Economic Forum published its Financial Development Report, which showed that the UK “buoyed by the relative strength of its banking and non-banking financial activities, claimed the Index’s top spot from the United States, which slipped to third position behind Australia largely due to poorer financial stability scores and a weakened banking sector”. The report ranks 55 of the world's leading financial systems and capital markets and analyses the drivers of financial system development and economic growth. The index is based on over 120 variables including institutional and business environments; financial stability; and the size and depth of capital markets. The report noted the negative effect of the financial crisis on the UK’s financial stability, observing that “the breadth of factors covered in the report means that countries with high financial instability scores like the United Kingdom and US could still achieve a high relative ranking in the Index due to other strengths”.’ (World Economic Forum 2009)

In short, London’s economy is likely to remain focused upon financial intermediation and business services activities, and retain in the short term its global position despite estimates of more than 40,000 jobs being lost in the City by mid-2009. There is little evidence, however, that London has other significant economic attributes that will enable it to diversify its activities and emerge quickly from recession. The city has a reputation, for example, for being the centre of creative and cultural activities. However, many ‘creative’ jobs in advertising, publishing and marketing are linked directly to the fortunes of the finance sector: 133,000 or 11% of London’s creative jobs are located in the finance sector according to GLA Economics (GLA Economics 2009), and many located outside it are dependent upon the sector for commissions and contracts. In recessionary times these jobs are likely to be severely trimmed as companies seek other, cheaper ways of marketing themselves.

Finally, London shares with other parts of the UK a significant dependence upon public sector investment and public funding. Employment data reveals this dependence. Whilst Banking, Finance and Insurance accounts for around 1.1 million jobs in London, Public Administration, Education and Health account for a comparable number (1.006 million). Add to this a significant percentage of the voluntary or third sector jobs dependent indirectly upon government funding – around 98,000 jobs were located in this sector in London according to an analysis conducted in 2006 (Clark 2006), the relative dependence of the UK economy on the activities of the state sector is significantly replicated in London. A decline in public expenditure, as government seeks to reduce the public debt as a proportion of GDP, will have a significant impact upon employment levels, particularly in London boroughs where the proportion of public sector jobs exceed the one in five national average (about 20 percent of UK jobs are located in the public sector), reaching around one in three, or 30% of the total borough workforce (by workplace) in boroughs such as Greenwich. The main countervailing measures to modify these underlying trends depend upon state support to sustain social cohesion and relative social stability by, for example, providing training and other job opportunities for the young and long term unemployed, sustaining a much diminished national programme of housing construction, and continued investment in major regeneration-related projects such as London 2012 and Crossrail. These palliatives mainly focus on long neglected infrastructure, modest adjustments to labour supply, and moderate attempts to meet a small proportion of total housing needs. They do not add up to a state driven, systematic recovery programme.   

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Conclusion

London’s relatively strong economic performance compared to other UK regions is indicative of the underlying weaknesses rather than strengths of the UK economy as a whole4. London’s economy relies significantly upon its unique position as a provider of international financial products and business services many of which are directed toward the complex world of global financial intermediation. London is the centre of a comprehensive range of financial markets, especially for ‘fictional’ products and financial instruments. At present, these may be ‘toxic’ or they may represent ‘real’ transactions taking place in another part of the world. London’s role relies heavily upon the reproduction of these representations of value in the world of circulation. Correspondingly, the ‘values’ of these investment products are susceptible to crises arising in other parts of the world, in countries such as Dubai.

The USA has a domestic, productive economy whose activities make a significant impact upon the rest of the world. It is severely damaged by the travails of Wall Street and the finance sector but it has the capacity to recover. By contrast, the fortunes of the City (and its outpost Canary Wharf) have a disproportionate affect on the UK economy as a whole especially in relation to their contribution to the UK’s overseas earnings and the taxation government secures from the financial sector. No other UK industrial sectors are capable of rapidly emerging to assist the finance sector by taking on the burden of this role.

Indeed, if in their longer term responses to the current crisis, as Martin Wolf argues for, the dynamic emerging economies develop more mature finance sectors, London’s international role is likely to significantly diminish relative to other financial centres in the world. Conversely, the relationship between London and the dynamic economies of East Asia and South America may be strengthened in the short term as the latter continues to use the London financial markets, preferring to put off domestic financial reforms that would also have a significant political dimension. Whichever of these scenarios prevail, the future holds the prospect of London’s financial services being restrained in their international growth potential for some years to come; and it is likely that London as an international financial centre will incur either a relatively slow or more rapid decline, the pace being largely dependent upon the performance and governance of the dynamic economies, especially those to the East.

A further dimension to this bleak picture is London’s, especially Outer London’s, relative dependence upon the activities of the state: state investment, state funding and direct and indirect state employment. These have come under increasing pressure arising from the necessity to reduce the public debt burden, a burden that was a necessary consequence of the rescue of the financial sector from implosion. State bail outs to the finance sector, as Turner argues, have created a major barrier to economic recovery that is much greater than that experienced by several other advanced industrial nations. State investment and intervention played a vital role in the UK economy in the period before the credit crunch and subsequent recession; it served to obscure the underlying weaknesses of the UK economy and its over-dependence upon a few key service sectors. Already reductions in planned government spending have begun to reveal the fundamental weaknesses of a national economy and society that, outside the Square Mile and its satellites, has over some time become increasingly reliant on ‘big government’.

Despite the rhetoric of neo-liberalism, the state isn’t back because it never went away. What it has to do now, however, is intervene in a different way. It will need to balance policies designed to reduce the public debt with those required to maintain social stability. In this task it may be ‘comforted’ by the differential impact of the recession on different groups in society. Some employees, with relatively low mortgages arising from low interest rates, will weather the storm by cutting back on personal debt and holding on to their jobs. Others will fare much worse, especially those in the public and ‘state-dependent’ sectors, and those who are already on the margins of the job market. For example, the number of people of working age in workless households rose by 500,000 between June 2008 and June 2009 to reach 4.8 million and the inactivity rate amongst UK people of working age rose to 21.3% in December 2009 (over 34% in Newham, East London), a record number of over 8 million people. Unlike the 1930s when many of the workless were visible – shining shoes and in soup kitchen queues – today those most affected by the recession are invisible. For now at least, the social consequences of the current recession are being played out behind closed doors.

Professor Gavin Poynter chairs the London East Research Institute.

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References

• Clark J. (2006) The Voluntary and Community Sector’s Paid Workforce, NCVO Annual Conference, Warwick University, London: NCVO, September 2006, mimeo.
• GLA Economics (2009) London’s Economy Today, London: Mayor’s Office.
• Dore R. (2008) ‘Financialisation of the Global Economy’ in Industrial and Corporate Change, Special Issue Volume 18, Issue 2, pp 1097-1112.
• Gamble A. (2009) The Spectre at the Feast, Basingstoke: Macmillan.
• Krugman P. (2008) The Return of Depression Economics, London: Penguin.
• London.gov.uk (2010) Focus on London
• National Audit Office (2007) Mind the Gap; Tackling Disparities in Regional Economic Performance, London: NAO.
• National Institute for Economic and Social Research (2010) The UK Economy Forecast, London: NIESR.
• Turner G (2009) No Way to Run an Economy, London: Pluto.
• Turner G. (2008) The Credit Crunch, London: Pluto.
• Wolf. M (2009) Fixing Global Finance: how to curb financial crisis in the twenty first century, London: Yale University Press.

Notes

1. 1 Capital investment in manufacturing fell by a third between the fourth quarters of 2008 and 2009, and business investment fell over the same period by 24.1%. See statistics.gov.uk
2. 2 The issues concerning the ‘rebalancing’ of the UK economy and the potential for the rise of new industries in the UK will be addressed in a further essay in this series, as will the discussion concerning ‘economic growth’ and the potential for societies to shift toward more ‘sustainable’ forms of economic development based upon, for example, measures of the quality of life rather than GDP growth. In relation to the latter debate, suffice to suggest here that capitalism is systemically incapable of facilitating such ‘planned’ interventions. See Istvan Meszaros (2008) ‘The Challenge and Burden of Historical Time, Monthly Review Books, chapters 4 and 6.
3. 3 This disparity in overall economic performance, however, cannot hide the fact that parts of London share similar problems of social and economic deprivation with other regions such as the North East of England.
4. 4 The decline of the manufacturing sector in the UK over recent decades is well documented. What remains suffered from the relatively high value of the pound in the pre-recession period and it was not able to take advantage of the fall in the value of the pound since the recession started, partly because of the rapid drop in international demand for manufactured products.
   The companies best able to weather the recession have been those closely linked to the aerospace and defence industries- industries whose demand is counter-cyclical because of the relatively lengthy duration of contracts. The UK government purchased around £16.5 billion of contracts with UK aerospace and defence firms in 2006-7, supporting around 160,000 direct and 145,000 indirect jobs in the sector. See  Business Link Sector Overview, 29 April, 2009:

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