hankyoreh

Timo Fleckenstein

Earlier this month, the United Kingdom lifted all remaining domestic COVID restrictions. After more than two long years, the country is braced for living with the virus. Businesses are recovering too, though it is difficult to overlook the pandemic’s impact on high streets across the country, with many shops remaining empty. The economic recovery is not felt everywhere and ordinary people — the most vulnerable in particular — primarily feel the distress of a cost of living crisis the likes of which the country has not seen in decades.

The pandemic exposed and indeed reinforced deep-seated inequalities in society, but it was not until the “recovery” that the UK experienced its sharpest drop in living standards ever recorded — with recording beginning in the 1950s.

Paradoxically, the global economic recovery, which one might have hoped would allow the returning to a “new normal,” is driving an increase in poverty, and is also squeezing those in the middle.

This is caused first and foremost by a massive increase in energy prices — with the wholesale price for gas having increased sixfold in no time — reflecting a surge in energy demand in the face of economic recovery across the globe. This led to a more than 50% increase of the so-called “energy cap,” which regulates the maximum price suppliers can charge domestic customers for electricity and gas. Reviewed every six months, the energy cap is expected to experience a further significant hike in October. Only the extent of the increase is uncertain, but the current war in Ukraine is certainly putting further pressure on energy prices.

Businesses are not protected by the energy cap, and thus have seen even sharper increases in their energy prices. The cost of energy finds its way everywhere: products and services get more expensive, and this is felt painfully in the aisles of supermarkets, where the prices for everyday foods only know one direction. One cannot escape these price increases — whether it is the gas for keeping the house warm, or the food to feed the children. Fuel and food “stress” has become the reality of an ever-growing number of people. Inflation is approaching 8 percent.

The conservative chancellor of the exchequer, though under increasing pressure from both the opposition and his own party, is not currently showing much determination to tackle the looming crisis. After a pandemic that required public funds of unseen scale to prevent the country’s economic collapse, the Treasury sees no financial room — or does not want to see, as some suggest — for meaningful measures that would prevent a social catastrophe.

Schools are preparing themselves for having more hungry children arriving at their gates, and food banks also are getting ready for an even greater demand than that seen during the pandemic. Many municipalities, and especially the voluntary sector, have shown considerable activity in recent years, and many are also stepping up now. Obviously, the welfare state, in the UK and elsewhere, is struggling with the increase in inequality and also the persistence of poverty. Here, innovation at the grassroots level can play an important role, but it won’t be enough.

Instead of the local level “covering” for a struggling welfare state, an effective mixed economy of welfare requires the government to provide sufficient income protection and to support the grassroots in their attempts to help those who struggle the most. It is about different levels working together, rather than working at each level in an isolated manner.

The pandemic has shown the capacity that exists at the local level, certainly, but it would be mistaken to rely on the new grassroots. Instead of an “American-style” volunteer sector that relies on churches and philanthropy (and effectively hoping for the best), an enabling state is needed that supports different welfare producers, and this boosting of the local level might then allow for innovative solutions.

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