A good bit of the positive economic numbers announced over the last few years by major Western governments, their central banks and the IMF rest on a sort of economic cleansing. I use this term to describe the purposeful doing a way with the negatives: the long term unemployed no longer counted, the failed small businesses who owners give up, and often commit suicide, the impoverished neighborhood sub-economies, the impoverished middle classes, the young who have given up finding employment, and more. All of these have been expelled form the space of “the” economy. I intend this term to resonate with the more familiar and horrifying ethnic cleansing; I mean it to capture a brutal action and condition, even if it is a small share of these economies.
The effect is to redefine “the economy” so it looks like there is growth and we are on our way back to recovery. We might ask, whom does this benefit? Not those who have been expelled, as these are rendered invisible to the statistical and government eye. But it does matter for capital owners, who need ‘healthy” economies so they can invest and make their capital work and therewith deliver profits.
In the meantime, even the rich countries of Europe have a growing, mostly invisible poor and at risk population. (see Table 1). At the end of 2012, Eurostat, the statistical office of the European Union, released updated figures on risk of poverty or social exclusion through 2011. It found that 119.6 million people, or 24.2 percent of the population, in the EU-27 were at risk of poverty, severely materially deprived, or living in households with very low work inten- sity. In that group of twenty-seven countries, 9 percent of the population were severely materially deprived, meaning that they had living conditions constrained by a lack of resources (for example, they were not able to afford to pay their bills, keep their home adequately warm, or take a one-week holiday away from home). The share of those severely materially deprived varied significantly among member states, ranging from 1 percent in Luxembourg and Sweden to 44 percent in Bulgaria and 31 percent in Latvia.
One extreme illustration of this logic comes from Greece, with its devastating economic crisis. It’s worth noting that in early January 2013, the European Central Bank and the IMF announced that Greece’s economy was on the path back to growth, and Moody’s (the credit rating agency) upgraded Greek debt by a point; while this is still low, it meant investors could move back in. What is left out of this evaluation showing a return to some growth is that a significant portion of households, enterprises, and places have been expelled from that economic space that is being measured. The expelled become invisible to formal measurements, and thereby their negative drag on growth rates is neutralized. There is a de facto redefinition of “the economy” when sharp con- tractions are gradually lost to, or overlooked by standard measures. The unemployed who lose everything—jobs, homes, medical insurance—easily fall off the edge of what is defined as “the economy.” So do small shop and factory owners who lose everything and commit suicide.
A similar, investment oriented logic is at work in the case of Spain, another country in deep economic crisis. In April of 2014, Spanish government bonds were the most sought after…for just a few days. The fact of 25% adult unemployment and 65% youth unemployment, of many bankruptcies and deeply impoverished neighborhoods —none of that could alter the fact of investors going for Spanish government bonds. In a world with growing numbers of indebted governments and shrinking economies, any sign of life is worth acting on.
Most recently and a good case to examine this economic cleansing is the announcement by the UK Chancellor:, Geroge Osborne, that the UK had become the fastest growing economy in the EU. The UK is a less devastated economy than Greece and Spain. But what really lies behind these forceful statements about growth and recovery.
What is left out is, first, that GDP per capita is an increasingly problematic way of measuring economic growth. It leaves out a lot, it fails to measure concentration, of benefits, or capture at the top. It is also a measure that suggests distribution of benefits –but it is not measuring actual distribution at all. GDP per capita does not give us a measure of capture at the top or losses at the lower end. It does capture the concentration of gains at the top but then redistributes these across the full range of a country’s individuals’ earnings.
And even with this qualifier, the UK’s growth is actually one of the lowest given a very low starting point. (See graph1) The UK has far slower growth than France, Germany, Japan and the US. Further it is at a far lower level than it was in 2008. Further it leaves out the unemployed who have given up looking for jobs and the young who are not even trying to get a job, firms who have simply died, and neighborhood sub-economies that are shrinking. And pay per capita, even allowing for the enormous wealth gains at the top, is 8% down from 2010—a time of “recovery” from the crisis.
The basic GDP per capita measure also leaves out the fact that more and more British households have growing debts and so does the government. (See Graph 2).
It also leaves out the skewed character of the housing market, a fairly generalized trend across very different countries, but extreme in the case of the UK. It is well known that London is one of the most expensive housing markets. But it is in fact the whole of the UK that has extremely high prices. (See GRAPH 3). An analysis by the Fitch Ratings agency of house prices compared to incomes shows that the London’s property market is the most expensive of a select group of global cities.
CONCLUSION
This economic cleansing amounts to a series of expulsions that take on specific forms in each place, whether in the Global South or in the Global North, East or West. And they take specific contents in diverse domains –economy, society, politics. Indeed they are so specific in each place and domain that it is difficult to see that they might be the surface manifestations of deeper trends that today cut across the familiar divisions. Each of these specific expulsions tends to be studied by a specialized discipline exclusively focused on itself. Thus, to mention just two examples, the experts of long term unemployment in the Global North do not study the displaced in the Global South. And yet, it is possible that at ground level they are one basic response of a system: you are out.
ZNetwork is funded solely through the generosity of its readers.
Donate