Analysing The Political Economy

The Inevitability Of The Next Big Political Crisis

By Rob Woodward: The writing is on the wall for the Tory party. They will be forced into an election in two years (or earlier if they think there is a better chance of reducing the inevitable trouncing). And it’s not about the effectiveness of Keir Starmer – although the electorate is now leaning towards a more centrist Labour government. It’s more about an imploding ideology on the right that will fragment, destroying the entire party – quite possibly taking years to reorganise. And the fallout may well be a political crisis like no other.

The reality of the 2008/09 financial crisis that led to public anger, then Brexit and the resultant political instability is not something simply contained within the British Isles. Instability has been sweeping across Europe and America, especially over the last decade.

There is, however, worse to come if history repeating itself becomes reality – and that is the fall in living standards, which has considerably worse outcomes than you might think.

A report from the Office for National Statistics in 2013 found that real wages had been falling consistently since 2010, the longest such period since at least 1964, when comparable records began. The reality is that that fall has continued. And now UK households are set to experience the largest collapse in living standards since records began, the Bank of England has warned. Household incomes are set to fall by 3.6 per cent in 2022 and 4.3 per cent in 2023.

In 2014, the general secretary of the TUC, Frances O’Grady, said – “Worryingly, average pay rises have been getter weaker in every decade since the 1980s, despite increases in productivity, growth and profits. Unless things change, the 2010s could be the first ever decade of falling wages.

On average, GDP growth per person since 1750 has been 1.5% per year. This means that each generation has been around a third better off than the one before it, on average. However, generational progress in the UK has recently been grinding to a halt. Millennials, now well into their in their late 20s, 30s and knocking on the door of 40 now see that their incomes are barely any higher than “Gen X-ers” (now aged 40 to 56) were at the same age. For those in their 40s, locked out of the housing market and unable to grow their wealth, anger rising with the older generation is now evident.  ‘Generation rent’ – i.e. those aged 18 to 40 are unhappy enough that their attitudes are rapidly changing all across the democratic world.

Onward Research concludes – “Young people today are unhappier, less socially trusting, and more detached from society than young people historically or older people today”. But what that research really shows is something very worrying.

In Britain, the share of young people supporting a “strong leader who does not have to worry about parliament or elections” has doubled in the last 20 years, now standing above 60 per cent. Nearly half of 18-34-year-olds believe military rule would be a good way to run the country, up from 9 per cent in 1999 (READ – Onward Research report HERE).

As you can see from the chart below, UK real wage growth has been falling since around the 1980s. Thatcher’s revolution has come at a very heavy price.

The one very serious point to note from this chart is that the last long depression in living standards (around 25 years – or one generation) in the late 19th century triggered a powerful political shift. The result was later amplified by the two World Wars.



An article in the Financial Times published recently titled – “Voiceless youth should worry the ageing Conservative party,” made a significant point in just one paragraph. ‘You do not have to look hard to guess why young people may be flirting with authoritarianism. The shadow of the financial crisis, student debt, wage stagnation and a never-ending housing crisis all conspire against a feeling of having a stake in society. For as long as liberal democracy fails to address the economic chasm between generations, it is losing.’

A former deputy head of policy at Downing Street says in that same article that leaders need a plan to convince young people of the inherent benefits of democracy. But that’s the problem, isn’t it? We haven’t had leaders working in the national interest for more than a decade as they have been concentrating work on their own narrow interests – power. Since 2010, Britain has experienced nothing but instability, especially since 2015. These so-called ‘leaders’ have been tapping into this national anger and self-inflicted crises – by blaming the EU and immigrants. The result was Brexit. Since then, the OBR has predicted this venture into isolationism and nationalism will cause a loss of  4 per cent in GDP. This will feel like a recession and will hit the young hardest, making everything so much worse.

There is a collective lack of imagination by a political class which makes the overall system of governance susceptible to disastrous shocks – the same shocks surrounding – housing, public health, social care, education and so on. They share a narrow set of ideas about how the world works, which mistakes their own view as the only possible sensible approach. Of course, this is wrong on every level. Slogans appear almost as a propaganda campaign to convince the electorate that we have a ‘Broken Britain,’ that we must be’ Strong and Stable’ and to ‘Take Back Control.’ It’s almost as if the government had the machinery of a ‘nudge (propaganda) unit’ to control how people should think!

The reality is that Britain’s version of capitalism is, in fact, failing – and its effects are unravelling. Productivity has been falling for four decades because Britain’s version of capitalism was invested almost entirely at the ‘services economy’ whilst manufacturing was left to fall behind. That was fine for a while but no longer.

This is why almost all the real wealth in Great Britain is in London and the Southeast and why most of the deprivation and falling standards of living are further north. Data analysts know this – so do politicians. And the current political class have admitted their failures – it’s called ‘levelling-up.’ Doubling down is their modus operandi. They are blaming their economic policy failures on British workers, having branded them the ‘worst idlers in the world.’  You will likely remember the north-south divide – something that the media endlessly used up column inches for in the 80s and 90s. That was neoliberal capitalism failing.

This geographical and skills gap of inequity has led to research defining the north-south divide.

  • Health conditions are generally seen as being worse in the north (though spending on health care is higher).
  • House prices are higher in the south, particularly the South-East.
  • Earnings are higher in the south and east.
  • Government spending per person on drivers of growth such as transport, infrastructure and R&D, which is far higher in the South-East.

Whilst ‘levelling-up’ appears to be exactly what the country requires – it is not affordable. In addition, it is a social disaster waiting to blow. Those in the south and east are not willing to have their wealth drained towards the north to pay for it.

As stated earlier – such is the anger and frustration that nearly half of 18-34-year-olds believe military rule would be a good way to run the country. With a recession now underway and the cost of living crisis driving down living standards – it is not hard to see what might happen in, say, three, five or ten years’ time when the wealth gap widens, poverty accelerates, and the under the 40s really do decide that enough is enough.

If you want proof of exactly how a modern country can decline so quickly – look no further than America – a country often commented on as being on the edge of civil insurrection. Poll after poll now shows that 40% of American voters think civil war is likely within a decade.

The direction of travel, that of political and economic instability, brought on mainly by right-wing factions, has already dealt a devastating blow to Britain. Add in the pandemic, Putin’s war of aggression in Europe and the toxic mix of culture wars, an increasing generational divide and a perma-recession – there seems to be an inevitability about the next big political crisis in Britain. Look no further than the USA.




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