by Jerome a Paris
Mon Dec 10th, 2007 at 07:42:17 AM EST
Well, they don't call it that yet, but hopefully they will soon...
The UK economy is vulnerable
(...) the reliance of the economy on business services and finance for about 30 per cent of output [is] more disturbing. This sector is not just big. The health of its most productive part - the City of London - is intimately linked to the health of global financial markets, and like a star football player whose performance flatters the rest of the team, its growth rate flatters the UK average.
If there is a marked global downturn, led by falls in property and other asset markets, then the UK will suffer disproportionately.
Tapping into the energies of globalisation has made the UK a geared bet on the strength of the world economy*. (...) Those who live by the global economy also die by it.
Remember that in today's econospeak, "the world economy" = the top 0.1% rich. The City of London has made every effort to attract millionaires over, via tax breaks or visas-for-sale and to mint them, via the financialisation of the economy and the accompanying capture of wealth by bankers and fund managers, and to claim the resulting concentration of wealth, as measured in GDP numbers, as a good thing for everybody else too. This has been an attempt (highly successful so far) to ride the Big Asset Bubble of the past 15 years (some would say 25), have a small number of well placed people take a healthy skim off, and claim that as actual value creation. But as it becomes increasingly obvious that the Bubble has run its course, it's going to end, and a lot of the virtual wealth will disappear.
This endgame is what I have labelled the Anglo Disease, in reference to the Dutch disease, whereby an extremely profitable industry (in the Dutch case, oil&gas) cannibalizes the rest of the economy, and leaves it in worse shape when the wealth extraction has run its course.
The big question to come, of course, is who will bear the brunt of the pain to come, ie was the skim virtual, or real, and who gets to keep it, and any residual wealth in the newly depressed economy?
I have explored this concept in various articles (linked to below the fold) and would hope to introduce it to the FT, now that they seem receptive to the reality of an exacerbated downturn in the UK. I propose to use the comments section below to get an LTE sent to them and, as usual, hope for your help in drafting it..