The UK may have avoided a technical recession – two successive quarters of negative growth – in the first half of 2022, but a year from now this will be of little comfort.  This is because – despite the protestations of the US Bidon administration – the downturn in economic activity in the latest (February) growth figures – 0.1 percent, down from 0.8 percent in January – has nothing to do with Putin’s invasion of Ukraine.  Rather, the decline in economic activity is the result, primarily, of a massive global shortfall in energy, with fossil fuel extraction impaired by the lack of investment during the lockdowns, and with oil down some four million barrels a day from its November 2018 peak.

Last autumn, these energy shortages translated into painful spikes in prices, which helped fan the flames of a general inflation resulting from broken supply chains and the rapid spending of two-years’ worth of state pandemic handouts – mostly to corporations and the wealthier half of the population.  Much of the additional demand generated by state spending, however, has already disappeared – in part due to the additional price of almost everything within the economy at a time when wages are failing to keep up.

In this, at least, the inflation of the 2020s is very different to its 1970s cousin.  In those days, wages were protected by a combination of strong trade unions, governments committed to maintaining full-employment, and financial controls that prevented investor-flight.  None of those constraints exists today and are not compensated for by a minimum wage which, if set too high, can only result in fewer jobs.  In a few sectors of the economy – such as HGV haulage last autumn – market forces have driven up wages.  Although even here, employers have preferred to offer golden handshakes rather than an increase in the hourly wage…

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