In the mid 1980s, and again during the 1990s, UK unemployment was above 3m. In the 1990s this was a remarkably brief event - unemployment was above 3m for only two months, and back below 2.5m by the end of the following year. But the 1980s unemployment was much more protracted - staying above 3m continuously for 51 months. Unemployment is now rising again - up from a pit of below 1.4m in 2004 to above 1.8m as of the most recent statistics. With recession well underway, we can expect unemployment to rise rapidly through 2009, and it is perfectly plausible that we shall see unemployment go above 3m once again.
If the 2008ff recession is shallow like the 1990s recession, or if it is as short as the government predicts, then perhaps unemployment will represent a shakeout like in the early 1990s, and will fall rapidly from its peak. A GDP loss of only 3% could be turned around quickly. This is not an impossible scenario, but from where we begin it is very much a best case, requiring that banks start lending to one another soon and the economy does not fall into significant and sustained deflation.
A more likely scenario is that we have a recession closer in depth to (though totally different in most other ways from) that of the 1980s - losing perhaps 6% of GDP, peak-to-trough. This would involve more significant unemployment, well into the three millions, and with unemployment perhaps not turned around quickly.
A darker possibility is that financial sector problems worsen, rather than improve, from here, deflation becomes difficult to control, and the scope for government action becomes materially constrained by the failure to set out a credible rectification path. This scenario is not favourite, yet, but the hapless nature of much government response to events has failed to rule it out. If we assume that the UK avoids sovereign default, then this scenario might imply a 10% peak-to-trough fall in GDP (by no means unusual for an economy that has suffered financial sector problems as serious as ours). A GDP fall of this magnitude could lead to truly terrible unemployment - perhaps as much as 5m.
Mass unemployment in the 1980s was associated with major deprivation and other social problems, and there was even some limited rioting, but by and large it was borne with fortitude. One wonders whether people today would be so patient. In the 1980s there were many people in their 40s who had been born just before or during WWII, and had known the deprivations of war or at least those of post-war rationing. Furthermore, society was "warmed up" for the events of the 1980s by a nasty recession in the mid 1970s only a few years before. People had experiences they could draw on - perhaps from their youth, perhaps from the recent past - that equipped them to deal with a period of significant deprivation. Life went on, people went without, and order was more-or-less maintained.
I worry about whether our society is nearly so well equipped. The WWII generation have now retired. The recession of the early 1990s was very shallow, and even that is now almost a human generation past. Our culture has moved on dramatically. I remember a few years back being struck when a friend's wife said to me - "Ah, yes. The Cold War - we learned about that at school." I grew up with parents born in wartime, and I was taught at school to expect to die in a nuclear holocaust. Privations for today's generation are what the I'm a Celebrity participants "endure". Today's twenty- and thirty-somethings have never expected not to be able to have anything material that they really wanted. If they couldn't afford it straight away, they would "slap it on the credit card."
Of course, there have always been pockets of serious deprivation, and doubtless life there will continue or perhaps deteriorate further. But if there is further deterioration, it will not be the shock to those people that it will to the mainstream of today's twenty- and thirty-somethings. Will today's generation cope? Or will they just keep living beyond their means until someone really really says "No - you can't have any more money" and then be at a loss what to do next? And what will they do then, when the borrowing is gone, they are bankrupt and unemployed and have no possibility, ever, of restoring their credit ratings, and their consumption must become simpler and they must learn to save if they want things? Will they just accept it? Or will there be disorder, riots, irrational attacks, protests, vilifcation, xenophobia? Will forced discipline be morally improving to our society (as potentially it might be), or will it damage it further?
Perhaps the government and opposition cannot ask us to prepare ourselves against the more grim scenarios - perhaps warning us against them might seem to make them more likely. But our churches could. Is your church preparing you, psychologically? What other media/institutions might there be to encourage society to face the risk of deprivation with stoicism? Do we have the social fabric left that would allow that to happen? Or is it already too late?
