Britain's economy and government since the financial crisis: a problem of short-termism

There is ever more evidence that Britain is a country running on "borrowed time".


Economic short-termism 

Since the financial crisis, the country has never really recovered. All the figures show an economy that has levels of productivity so bad that they haven't been seen since the 18th century, before the country's industrialisation.
The pretense of a functioning "economy" exists, but it could be argued that all changes to the economy since the financial crisis have simply given the illusion of one. The economy that exists now is one of low productivity, low investment, low skills, low wages, and low security. Put in these terms, it makes one wonder how there's any real growth at all. There is a psychology of systematic short-termism, where many companies' only aim is to make ends meet until the next quarter. There is no thought given to longer-term planning; strategic thinking has gone out of the window.
This psychology has led, on one hand, to bringing down costs in any way possible: from companies like Carillion, who ran their affairs like a huge Ponzi Scheme, to the "casualisation" of the labour market, with the proliferation of zero hours contracts and deliberate underemployment. Meanwhile, the massive use of outsourcing is another way to cut costs, which is endemic in the public and private spheres. In this way, the illusion is created of the economy becoming more "flexible", as Larry Elliott mentioned in the linked article above, where it in fact simply becomes more nakedly exploitative. So the implication is that, since the financial crisis, the only way Britain's economy can stay on its feet is to regress back to 19th-century work practices. Except that the economy is doing so badly on some measures, that it's actually regressed to the 18th century.

And in spite of all these "flexible" measures introduced, services and construction, which make up to 80% of the overall economy, are floundering. With the retail sector going through what experts call a "transition", the effect on the ground is that those companies that are slow to adapt to the rise of internet shopping are simply losing customers at a punishing rate. Again, this is simply a symptom of a lack of strategic planning; something which seems depressingly common.
The irony here is that this has been predicted for years. With the collapse of manufacturing thirty years ago, retail and services have been taking up the slack. Except that now, thirty years on, retail itself seems to going through a similarly-testing period as was once experienced by manufacturing. Having an economy with such a large trade deficit thanks to the chronic lack of exports, Britain's is a consumption-led economy. Governments of the last thirty years have thought that "services are the future" for a country like Britain, which would fill the hole in the labour market left by the collapse of manufacturing.
After thirty years of "borrowed time", technology is beginning to test that theory on the high street, with very visible effects. In short, technology for many companies has been shown to reduce costs, with a need for fewer workers. Likewise, the rise in internet shopping has reduced the need for consumers to physically go to the shops on the high street. This "double whammy" has seen the proliferation of things like "self-service" checkouts and the gradual automisation of warehouse working, and also the closure of more and more high street shops and franchises as the footfall is simply drying up. While governments of the past thought that "services are the future", the "future" has since caught up with the economy. That "borrowed time" in which the economy was able to thrive on services alone, seems to be at an end.

These technological changes have been inevitable, but Britain's economy is poorly set-up to deal with them. For all the reasons mentioned earlier about how its labour market has "restructured" since the financial crisis, Britain's captains of industry have been too short-term in their thinking to consider the effect that these technological changes would have on the insecure and exploited workforce they have created.
As this underpaid and insecure workforce simply has much less money to spend, a "vicious circle" has been set up thanks to institutional short-termism. Workers with less money will consume less; if consumption declines, so do the fortunes of the companies that employ them. Everyone loses out, with the inevitable result being less money in the economy. This is the ultimate price of short-term thinking. It is an economic model that cannot work in the long-term.


Political short-termism

At another level, all the signs are that Britain has a political culture that is intellectually incapable of leading. Sharing all the same signs of malaise and short-termism as industry, the government is literally doing nothing about most of the country's problems, which are simply getting worse through government indolence. All that happens is that difficult decisions are kicked down the road, while the country's infrastructure, institutions and social bonds slowly fall apart.
Short-termism was the ultimate cause of the government's "austerity" agenda. It was politically expedient in 2010 for the government to claim that cutting the deficit was a necessary action, with spending needing to be cut across the board. However, all the economic figures since then have shown how austerity simply makes everyone poorer, including the government.
A government that spends less on government services that are there to improve public conditions is not saving money in the long-term. Companies with strategic thinking understand the importance of investment; government is the same. Governments that cut back on investment in their own population when the economy is doing badly are not helping the economy; they are making it worse. Reducing spending on mental health reduces people's mental health. Reducing spending on those with disabilities reduces how much money those with disabilities have etc. etc.

If the government continually reduces how much money it feeds into the public sector, the ultimate result will be lower tax returns for the government. It is a self-defeating measure. The same has been true of the wider economy, where fewer well-paid jobs in the economy since the financial crisis have simply led to smaller tax returns to the government. The reason why the former Labour government got into such a huge deficit during the financial crisis was largely due to the fact the the economy's collapse resulted into catastrophic collapse in the government's tax receipts from the overall economy. Unemployed workers don't contribute to the tax system. People with less money spend less.

On a different level, while the "transition" the economy seems to be going through could act as a painful "reckoning" on corporate short-termism, Brexit could well act as a "reckoning" on the government's own pathological short-termism.
A referendum on the fate of the entire country was chosen for the short-term political gain with the government's own party. Since then, Theresa May's government has conducted the Brexit process with the sole aim of keeping the governing party together, regardless of its potentially-disastrous effect on the country in the long-term. It has made itself look both ridiculous and obstinate in the face of reality. The government seems not to care about this, as long as it is the EU who can be blamed for any problems later on.

Brexit may well be the ultimate "reckoning" for Britain's broken economy and government. As economic short-termism can only work for so long before time catches up with it, the same is true for the government and Brexit. For the government, time is running out, as the EU keeps reminding it.