The Steep Decline of the British Economy

Many countries have entered long recession in the wake of a banking crisis. Japan, for one, never quite recovered from its crisis in the 1990s, and now it finds itself plunging into yet another deep recession. The situation in Britain is exacerbated by the fact that the country's real estate bubble has burst.

British taxpayers have already had to bail out two banks, the Royal Bank of Scotland and HBOS. Two mortgage lenders have also been nationalized, and the government, like other governments around the world, is considering a plan to guarantee all toxic securities.

In Great Britain, new borrowing will comprise 9 percent of GDP in the coming year. According to the Institute for Fiscal Studies, it will take the United Kingdom until 2030 to bring its national debt back to pre-crisis levels. Some are already referring to London as "Reykjavík on the Thames."

The negative numbers have also weighed heavily on the British pound, which has lost 17 percent of its value as a result of the recession, the currency's sharpest decline since 1992. Major US investor Jim Rogers warns: "I don't like to say it, but I wouldn't invest any more money in Great Britain."

Instead of being the "sick man of Europe" it was in the 1970s, Great Britain, as the Times predicted, is fast becoming the "sick man of the world." The country is firmly in the grip of deep uncertainty.

"We have become a 'fear nation,'" says author Tony Parsons. "Everyone is afraid: the people, the banks, everyone."

A '21st Century Dickensian Society'

Parsons, 55, is sitting in the Café Rouge in London's exclusive Hampstead neighborhood, home to the rich and bohemian alike. More millionaires live in Hampstead than in any other community in the country. Parsons, the author of the bestseller "Man and Boy" and one of these affluent residents, writes about Britain's prosperous middle class. He is familiar with its soul and is an avid consumer himself, as evidenced by the Prada windbreaker hanging on the back of his chair. But, as he points out, this is the first year he has decided not to buy a new BMW X5.

"What is happening now is like the fall of the Berlin Wall," says Parsons. "People look at this ideology and realize that it hasn't worked. We cannot have unregulated capitalism. We cannot tell these people to do as they wish, and hope that a lot of money comes out in the process."

But it's too late now. Parsons says that he has never known of so many people in his social circle who have lost their jobs. "Thatcher had riots in the streets with three million unemployed. Gordon Brown, or David Cameron, will experience the same thing." And those who do have money, like Parsons himself, will soon be pleased about the security guards they have in front of their houses. "We have a Gurkha in our neighborhood, a former elite soldier. Perhaps it'll be like South Africa here soon."

Parsons, who comes from a working-class background, is familiar with poverty. Perhaps this perspective is what makes his vision of the future seem so dark. The picture he paints is one of a country returning, as a result of the crisis, to social divisions that have always been deeper in Britain than elsewhere in Europe.

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