I made a slightly facetious start to yesterday's post which I now regret. Johnson had to be taken into intensive care last night as a precaution. I wouldn't wish anything bad on him or anyone else and I hope he pulls through very quickly as I'm sure he will. He remains in an ICU this morning and Raab is deputising for him which should worry us all. The economy looks like it too entered intensive care yesterday.
A slew of bad economic news appeared on The Telegraph's live feed as the day went on. Construction activity was the lowest since 2009 and car sales in March were the worst figures for 20 years. Various companies including Debenhams issued distress signals. JP Morgan's boss Jamie Dimon warned coronavirus will cause a “bad recession” and raised the possibility that the bank could even scrap its dividend if circumstances become extreme enough. Things must be really bad.
In a 23-page letter to investors – his shortest since 2008 apparently – Dimon said:
"At a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008."
Consumer confidence hit a record low, dropping from -9 in mid-March to -34 at the end. It represents the biggest fall since GfK began collecting consumer confidence data in January 1974. This is hardly surprising given that a million people applied for Universal credit at the end of March.
There is no doubt a recession is coming the question is how bad it will be and will it turn into a depression?
Larry Ellison at The Guardian quotes a consultancy, Capital Economics who think we will see a 15-20% drop in GDP in the second quarter of this year. I saw an estimate that it might be 30% somewhere. Ellison, like Dimon thinks it will be between bad and catastrophic and I think he's right. The economy has taken an almighty blow from coronavirus and we don't know if it will get up off the canvas anytime soon.
Ellison thinks it might pave the way for a total rethink of how western economies work, with a Universal Basic Income being one proposal to protect citizens from this kind of shock. I see there is also talk of forgiving of debt which threatens to become unmanageable for many governments and individuals. We are truly in unprecedented times.
Paul Mason has a nice article in Social Europe also arguing that once we are free of coronavirus the world must change in qualitative ways, citing how government debt in the G7 will rise way above the average pre-crisis level of 118%.
Mason also refers to Johnson's Greenwich speech on February 3rd, just a few days after Britain's first confirmed case of COVID-19. It contains what now looks like an extremely hubristic statement about the pandemic:
"And in that context [anemic global growth] , we are starting to hear some bizarre autarkic* rhetoric, when barriers are going up, and when there is a risk that new diseases such as coronavirus will trigger a panic and a desire for market segregation that go beyond what is medically rational to the point of doing real and unnecessary economic damage, then at that moment humanity needs some government somewhere that is willing at least to make the case powerfully for freedom of exchange, some country ready to take off its Clark Kent spectacles and leap into the phone booth and emerge with its cloak flowing as the supercharged champion, of the right of the populations of the earth to buy and sell freely among each other."
*NB: For those like me who don't know what autarkic means - Autarkic countries are those which do not participate in international trade and which do not receive any outside support or aid. i'e North Korea.
Johnson seemed to think that countries were about to use coronavirus as a tool to close off and protect their economies - to go beyond what is "medically rational" and do "unnecessary economic damage". One can see the seeds of complacency and delay here which may eventually cost us and him dearly. He was clearly worried that Brexit would not be the glittering success he hoped for if countries around the world didn't rush to buy British goods and simply put up the shutters. This is where taking back control leads us.
Mason incidentally thinks Johnson's project is dead:
"The whole point of hard Brexit was to deregulate the labour market and reduce social protections and environmental standards, while scapegoating ‘migrants’ and ‘Europe’ for everything that went wrong. It is not clear whether, in the aftermath of the crisis, Johnson will even survive the inevitable public inquiry into the decisions made."
"As for the Greenwich speech, the world it was made in has disappeared. It was always an illusion that the UK could somehow kickstart a second wave of globalisation on its own."
Yet, despite it all Downing Street continues with the line that Brexit is carrying on as normal, a spokesman telling Reuters, “We remain absolutely committed to continuing the negotiations.”
Bear in mind that yesterday was supposed to see the start of the third round of scheduled talks between the UK and the EU. The second round didn't take place and neither will this one. The PM is in intensive care, the country is in lock down but No 10 is still insisting the transition won't be extended. It is now beginning to look and sound comical.
It is anything but.
