This is revolution - that's why we feel morosite

People will remain uncertain about the economy while traditional jobs are being lost, despite new opportunities

Share
Sooner or later we will have to stop bemoaning the absence of the feel-good factor in economic life, those animal spirits that gave consumers the confidence to spend and spend and which stimulated companies into break-neck takeover programmes during the late Sixties, the Seventies and the Eighties. All that has gone for the foreseeable future. Inflation is over, deflation rules - and with it comes caution and job insecurity.

Conservative politicians delude themselves in thinking that because the unemployment trend has been declining for more than three years, and last week's figures were "good", people are soon going to "feel" better. Maybe. But note how economists refer to these statistics nowadays: they call the series "claimant" unemployment. This tells us there is something funny going on. If only those "claiming" unemployment benefit are counted, who is being left out?

Young school-leavers, 16-and 17-year-olds, are being omitted. They are supposed to be on youth training programmes, but many are not or drop out quickly. By and large these young people are ineligible for unemployment benefit and so disappear from the statistics. Another uncounted group of unemployed people are what are described as the "economically inactive". Typical of this group are those who have gone into early retirement following redundancy. About 17 per cent of all men who become unemployed drop out of the workforce for good.

In other words, the national statistics for unemployment ignore two unfortunate categories: youngsters without skills, and middle-aged people "let go" from companies to which they may have given half a lifetime's service.

Governments naturally think that they can control events. But the slow, crucial changes in economic conditions are like movements in the earth's crust. They are the result of powerful forces operating under the surface. They are international rather than national. In fact, what the French call morosite is rather more intense on the Continent that it is in the UK.

The most pervasive of these trends is deflation. Absence of inflation means that businesses cannot bail themselves out of trouble by raising their prices. Punishment in the market place for letting prices drift above the competition's is swift and brutal. A few days ago in France, for instance, Renault announced its first deficit for 10 years. Management accepted that it had lost sales and market share because Renault cars were too expensive. Manufacturing costs must now be cut by a further 8 per cent per vehicle. This means that Renault's labour force must shrink even faster. This in turn puts Rover here on notice that cost control has to become almost a fetish.

In this way, deflation becomes just as much a reinforcing mechanism as inflation was for many years. In Britain, annual rises in average prices are running at just below 3 per cent. There are no signs of inflation in the US or Japan. In France, consumer prices have actually fallen for three consecutive months. Everybody, everywhere in the world, has become price and cost conscious. In a deflationary era, one may feel virtuous but not carefree.

A second shift is that business thinking has turned against sheer size. This is the significance of the news that British Airways is considering whether to concentrate solely on the core jobs of dealing with customers and flying the aircraft. It would buy in all the other important but essentially peripheral services, such as aircraft maintenance, which it currently provides for itself. The BBC is considering similar plans to strip itself down to the very essence of broadcasting.

The purpose of such measures is to increase management's focus and to eliminate tasks that are now thought to be irrelevant. In addition, using contractors rather than a company's own staff is a way of giving greater play to market place disciplines. And so we have seen the dismantling of the huge industrial groups that were built up in the Sixties, Seventies and Eighties. Giants such as ICI and Courtaulds have divided themselves into separately owned units. The go-go conglomerates of yesteryear, such as Lord Hanson's group, have voluntarily broken themselves up into their constituent companies. In the US, the giant telephone company AT&T has announced similarly far-reaching plans. The results of all these various initiatives are the same: fewer jobs and more intense downward pressure on prices.

A third sea change is that the Nineties are turning out to be the central years of an industrial revolution quite as sweeping and transforming as the coming of the steam engine, or electric power or the internal combustion engine. The linking of computers all over the world to create the Internet is like the first railway age. It changes everything.

The first business casualties are likely to occur in traditional retailing. For instance, the biggest single bookselling operation in the US is now to be found in cyberspace at a Web site rather than in a main street store. And this at a time when only about 5 per cent of households are connected to the Internet. When penetration has doubled, tripled or quadrupled, retailing will look very different. Many traditional jobs will be lost while new opportunities are being created. This process also imparts uncertainty. It's never comfortable living through a revolution. Few people "feel good" while it is going on.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Packaging Operatives

£7 - £8 per hour: Recruitment Genius: An opportunity has arisen for two indivi...

Ashdown Group: Trainee / Graduate Helpdesk Analyst

£20000 per annum: Ashdown Group: A highly reputable business is looking to rec...

Recruitment Genius: Estimator

£28000 per annum: Recruitment Genius: This company is a major supplier of buil...

Recruitment Genius: Software Developer

£28000 - £40000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Read Next
Ukip MEP Janice Atkinson (left) with party leader Nigel Farage  

Hey, Nigel Farage and Kerry Smith – my family are East Enders too and never use that word

Victoria Richards
A screenshot from the trailer for Hatred  

I love violent video games, but you'll never catch me playing Hatred

Alex White
Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas